Route Mobile Ltd

NSE:ROUTE

Earnings Call Analysis

Route Mobile Reports Strong Growth with Positive Future Outlook

Route Mobile achieved a significant milestone in Q2 FY '25, reporting a revenue increase of 9.7% year-over-year to INR 1,134 million. Billable transactions soared to 40.5 billion, the highest ever. Profit after tax surged by 21.1% to INR 1,070 million, driven by strong operational efficiencies, with an EBITDA margin now projected at 13% for the fiscal year. The company anticipates continued momentum thanks to new strategic partnerships and the upcoming festive season, which they believe will bolster demand. With a record cash conversion of 78%, Route Mobile is well-positioned for sustainable growth, maintaining a guidance of 18% to 22% revenue increase moving forward.

Strong Revenue Growth Amid Seasonality

Route Mobile has reported a remarkable revenue growth trajectory, marked by a 9.7% increase in Q2 FY '25, amounting to INR 1,134 million, up from INR 1,014 million the previous year. This growth is a testament to the company's resilience, especially given the traditional seasonality of its operations. The first half of FY '25 showcased a robust revenue growth of 11.9% year-on-year, reflecting effective strategic partnerships and expanding market share, with India accounting for a significant 51% of total revenue.

Record Billable Transactions and Cash Conversion

The company reached an impressive milestone of processing 40.5 billion billable transactions in Q2 FY '25, the highest quarterly volume to date. This represents a dramatic increase from 31.3 billion transactions in the same quarter last year and 37.1 billion in the previous quarter. Furthermore, Route Mobile demonstrated excellent cash management, achieving a cash conversion rate from EBITDA of 78%. This strong cash flow positions the company favorably for future investments and shareholder returns, including announced interim dividends of INR 6 per share.

Impacts of Geopolitical Challenges and Infrastructure Issues

Despite the impressive figures, the revenue growth faced headwinds due to geopolitical issues in Europe affecting messaging revenue, and a temporary setback from infrastructure upgrades in August, which impacted International Long-Distance (ILD) revenue. Both issues appear to be resolved, allowing the company to focus on growth in the upcoming festive season.

Commitment to Future Growth and Strategic Initiatives

Management is optimistic about meeting its growth guidance for H2 FY '25, anticipating a continued push due to the festive season and a series of strategic initiatives. This includes participation in a significant Request For Proposal (RFP) alongside large deals with Proximus, Infosys, and Microsoft, aimed at capturing further market share and enhancing service offerings. Notably, Route Mobile is also actively leveraging synergies from its partnerships with TeleSign to bolster its service portfolio.

Profitability Metrics Facing Marginal Pressure

While the company has witnessed growth, key profitability metrics showed mixed results. The gross profit margin saw a slight decline from 21.2% to 21.1% due to related party transactions at lower margins. EBITDA reported a growth of 5.5% year-on-year, reaching INR 1,352 million. The EBITDA margin improved sequentially from 11.2% to 12.1%. The effective tax rate for the quarter was noted at 23%, adding another layer of consideration for profitability.

Guidance and Expectations for the Second Half of FY '25

Route Mobile is maintaining a robust guidance for the second half, aspiring to achieve revenue growth that could reach up to 13% EBITDA margin. The management indicated confidence in hitting sequential growth rates of over 10%, buoyed by historical trends and upcoming festivals driving domestic volume increases. The anticipated synergy realization with TeleSign is also projected to contribute positively to the overall growth trajectory.

Prospective Market Trends and Technology Integration

Looking ahead, Route Mobile is well-positioned to capitalize on emerging technologies and market shifts, particularly in GenAI applications that could enhance customer service functionalities. Additionally, the company is focusing on optimizing its product offerings through integration with RCS and WhatsApp, setting the stage for potential substantial revenue growth from these new avenues.

Earnings Call Transcript 2025-Q2

[Operator]

Good evening, ladies and gentlemen. I am Sejal Tripathi, your moderator for this conference. Welcome to the conference call of Route Mobile Limited, arranged by Concept Investor Relations to discuss its Q2 and H1 FY '25 results.

We have with us today, Mr. Rajdip Kumar Gupta, Managing Director and CEO; Mr. Gautam Badalia, Group Chief Strategy Officer and Chief Investor Relations Officer; and Mr. Suresh Jankar, Chief Financial Officer.

[Operator Instructions] Before we begin, I would like to remind you that some of the statements made in today's earnings call may be forward-looking in nature and may involve certain risks and uncertainties. Kindly refer to Slide #2 of the presentation for a detailed disclaimer. Please note that this conference is being recorded.

I now hand the conference over to Mr. Rajdip Kumar Gupta. Thank you, and over to you, sir.

[Rajdip Kumar Gupta, executive]

Thank you. Good evening, everyone. Season's greeting to all of you and your respective families. I'm pleased to say that Route Mobile has achieved its revenue to date, even though Q2 is typically a slower period for us. With the months of July and August being holidays in many parts of the world, we usually see a decent activity. However, despite the seasonal challenges and the ongoing geopolitical issues, we have delivered approximately 10% revenue growth and over 20% PAT growth year-on-year basis.

Looking ahead, with the festive season approaching, we expect to see a strong increase in revenue and expanded margins, and we remain confident in meeting our guidance for the year. In terms of business momentum, we had some solid deal wins this past quarter, along with continued progress in realizing synergies with Proximus group. Here are a few key highlights. We signed a significant deal in September with global e-commerce company to cover multiple regions. Traffic has already started and will ramp up over the time. Proximus and Infosys form the long-term strategic partnership, which combines Route Mobile's CPaaS solution, TeleSign DI services and BICS offering with Infosys Digital Services.

This partnership following the Microsoft deal strongly validates our group synergies. We're also working on several other long-term partnerships that we believe will drive significant value for Route Mobile. Beyond this group synergies, we have laid out a clear roadmap. We are already receiving additional traffic from TeleSign on routes where Route Mobile offers a clear advantage in pricing and quality.

Our cross-selling efforts are well underway, and we anticipate revenue momentum to follow shortly. We have launched our shared service initiative this past quarter and expect to see rapid progress in this area. We also continue to lead in the metro ticketing space and with a new development for Maharashtra Metro. Additionally, we have implemented a WhatsApp-based utility communication service for IRCTC. Our new product revenue are showing strong growth, up by 32% year-on-year basis.

A few other highlights since Q1 FY '25. Route Mobile was named Solutions Partner of the Year 2024 at the Meta WhatsApp Business Summit in India. Proximus Opal successfully completes its Offer for Sale to meet minimum public shareholding criteria. This attracted strong interest from long-only funds, and we are grateful to our investors for their continued trust. We will remain focused on delivering value for all our stakeholders. Lastly, based on our strong performance in the past half of FY '25, I'm pleased to announce that Board of Directors has recommended an interim dividend of INR 6 per share.

With that, I will hand it over to Gautam to go over to the financial highlights. Over to you, Gautam.

[Gautam Badalia, executive]

Thank you. Thank you, Rajdip. Good afternoon, everyone. Season's greetings to all of you. We have already uploaded our quarterly earnings presentation on our website as well as the stock exchange's website. I hope you had a chance to go through the presentation. I'll quickly summarize our financial and operating performance during Q2 FY '25 and H1 FY '25 before opening the floor for Q&A.

The quarter gone by has been a good quarter considering the seasonality of our business. It is our best quarterly revenue till date and with festive season ahead of us coupled with incremental synergy benefits, we are reasonably confident of meeting our guidance for the year. Our revenue growth in Q2 FY '25 was impacted marginally due to 2 reasons: continued weakness in [ Mr ] messaging owing to geopolitical issues in Continental Europe and our ILD revenue in India was impacted for a few days in August, mainly due to our firewall software upgrade as well as there was an infrastructure issue with the virtual machines at the cloud host. Things have completely normalized since then. For H1 FY '25 versus H1 FY '24, we also had a significant currency impact owing to naira's devaluation, which is the Nigerian currency.

Now talking about a few growth levers. So we had a few growth levers that should pave a strong runway for us over the medium term. The one that Rajdip talked about winning a large e-commerce deal, as mentioned by Rajdip, which should ramp up gradually. Then we are also working with strategic partners like Infosys to accelerate our sales recycle. And very recently, we've also participated in a very large global RFP as part of the Proximus group synergy. So if that RFP were to fructify that should add a significant layer of growth for the coming years.

The key highlights for H1 FY '25 has been the strong cash conversion from EBITDA, which panned out to be 78%. In terms of key business metrics in volume terms, we processed 40.5 billion billable transactions in Q2 FY '25, which is again the highest quarterly billable volumes processed by us till date. Billable transactions increased from 31.3 billion in Q2 FY '24 and 37.1 billion in Q1 FY '25 to 40.5 billion in Q2 FY '25. Average realization per billable transactions marginally decreased from INR 29.7 in Q1 FY '25 to INR 27.5 Q2 FY '25, owing to increase in domestic volumes in India and partly due to the ILD revenue impact as stated above.

In terms of geography, India continues to be our largest market by termination, accounting for 51% of our revenue by termination. You may refer to Slide 11 for the same. We continue to witness a very strong momentum on the next-generation products, which grew by 32% on a Y-o-Y basis as referred in Slide 9 of the presentation.

With this backdrop, let me walk you through our financial performance. In terms of Q2 FY '21 -- Q2 FY '25 performance, revenue from operations grew by 9.7% from INR 1,014 million in Q2 FY '24 to INR 1,134 million in Q2 FY '25. Gross profit margin declined marginally from 21.2% to 21.1% due to the related party transactions, which happens at a lower gross margin. Reported EBITDA grew by 5.5% Y-o-Y from INR 1,281 million in Q2 FY '24 to INR 1,352 million in Q2 FY '25. There was a sequential growth of 9.3% during the same period. EBITDA margin expanded from 11.2% in Q1 FY '25 to 12.1% in Q2 FY '25. The increase in finance cost was primarily due to the full quarter impact of a loan availed during the month of June 2025.

Effective tax rate for the quarter was 23%. Profit after tax grew by 21.1% Y-o-Y from INR 884 million in Q2 FY '24 to INR 1,070 million in Q2 FY '25 as compared to crore 812 million in Q1 FY '25. PAT for Q2 FY '25 includes exceptional item gain of INR 62.8 million, which is net of the fair value gain on the contingent consideration and recognition of impairment loss of goodwill pertaining to MRM. PAT margin was 9.6% in Q2 FY '25 as against 7.4% in Q1 FY '25. We onboarded 56 new employees, and 45 employees left us during the quarter gone by. For H1 FY '25, revenue from operations grew by 11.9% from INR 19,819 million in H1 FY '24 to INR 22,168 million in H1 FY '25.

In terms of certain KPIs, billable transactions increased from crore 60.8 billion in H1 FY '24 to 77.6 billion in H1 FY '25. We had a net revenue retention of 105%. You may refer to Slide 13 of the earnings presentation. We added over 300-plus new customers in H1 FY '25 across all products. Gross profit margin increased marginally from 21.3% in H1 FY '24 to 21.4% in H1 FY '25. EBITDA grew by 6.1% on a Y-o-Y basis. EBITDA margin contracted marginally from 12.9% in H1 FY '24 to 12.2% in H1 FY '25. Effective tax rate for H1 FY '25 was 22% as against 16% for H1 FY '24. Profit after tax grew by 4.5%. PAT margin declined from 9.1% to 8.5%.

Cash and cash equivalent stood at the end of the quarter at INR 11,145 million, and net cash was INR 5,836 million as on September 30, 2024. Average receivable days stood at 79 days and average payable days stood at 69 days. Cash flow conversion in H1 FY '25 was very strong at 78%.

With these highlights, we open the floor for Q&A.

[Operator]

[Operator Instructions] The first question is from the line of Amit Chandra from HDFC Securities.

[Amit Chandra, analyst]

Sir, my first question is on the margin guidance that you said that you are maintaining the margin guidance, but the ask rate for the second half is quite steep. So considering we have a festive season in quarter 3, what -- apart from that, what gives us the confidence to achieve more than 10% sequential growth rate for the next 2 quarters? Is it the [ VI ] deal, which is already in the base? So apart from that, which other deals will start to contribute? Or is it you're seeing revival in the base business? And also in terms of the synergies that you mentioned that you have seen some synergies coming from TeleSign. If you can throw some light. Are we in the early stages of the synergies? Or we can see that to be a major contributor to the growth going forward?

[Rajdip Kumar Gupta, executive]

Amit, Rajdip here. So as we -- as I stated in my statement also, like, we are very much confident that we will keep the guidance, which we have given to the market. Looking at the current run rate for this quarter also, I think we believe that we will achieve the numbers, which we have guided. Business, this being a festive season, will definitely add value to our revenue. As far as the synergy is concerned, we are working very closely with TeleSign as we speak. And as Gautam has mentioned, there is 1 large RFP, which has now been floated, and we have been invited to participate in that RFP. There are multiple deals like Infosys as well as the Microsoft deal, kind of deals are already in pipeline. So we are very much confident about our guidance, and we are working towards that, and we will definitely try to achieve that. And we believe that we will achieve that.

Gautam, do you want to add anything to this?

[Gautam Badalia, executive]

Yes. So just adding to what Rajdip said, I think historically, I mean, seasonality has always played out. I mean, typically, it's 45%, 47% H1 and balance, I mean, it happens to be H2. So if that were to play out, I think we should be, I think, in that touching distance of the guidance that we have given. And a lot of this growth that we are talking about should come without any adjoining overhead cost. I mean, so that is the operating leverage, I mean, should play out, and that should lead to the margin expansion.

So in the past, I think we have been able to kind of deliver significant -- I mean, expansion on EBITDA margins during H2. So I think some of those things, as Rajdip mentioned, I think the run rate today, I think, for this quarter, seems very, very promising. And hence, we are reasonably confident that we should be able to kind of get -- meet the guidance that we have committed.

[Amit Chandra, analyst]

Okay. Sir, in terms of the VI deal, you mentioned that there were some headwinds in terms of some of the issues with the like upgradation and with some of the like AWS issues. So ex of that, what is the current run rate? And also where we are in the journey in terms of hitting a steady state, in which we were earlier -- the full potential of the deal was INR 100 million, which is INR 800 crores. But still we are just like half of that in terms of the full potential. So when we expect to hit the full potential in that deal?

[Gautam Badalia, executive]

So the infrastructure issue was, I think, for a few days. I mean, it's about 7 days impact, I think, in terms of the ILD revenue, but everything is kind of working now. I mean we have the sale with Amazon. I think everything has been worked at scale, I mean, from a platform standpoint. So there is no concern whatsoever on that. And from a VI deal standpoint, I think we are on track in terms of the values that we [ committed ]. And we believe, I mean, we'll be able to subsume the entire commitment, I mean, during the course of this year.

[Amit Chandra, analyst]

Okay. And in this quarter, we had a volume jump. So I assume that the ILD volumes were mostly stable to on the positive side, but there was a sharp drop in the realization. So is there a change in mix, which has caused that or...

[Gautam Badalia, executive]

So the ILD volume was marginally impacted, as I said, I mean because of those 7 days. So to that extent, I think there was a little bit of an impact on the ILD volume growth. But the domestic volumes had ramped up. So -- and it's because of the mix, I mean, it got skewed more towards domestic versus ILD. And hence, I mean, the realizations kind of had kind of a little bit of an impact.

[Operator]

The next question is from the line of Nikhil Choudhary from Nuvama Wealth Management.

[Nikhil Choudhary, analyst]

My first question is regarding the growth. In the last 2 quarters, the incremental revenue, which we have added, is approximately INR 100 crores, right, in the first half of FY '25. This is broadly in line with what you have guided in terms of revenue synergy plus Vodafone Idea deal. So can you help us understand that in the first half, we haven't seen much growth in organic revenue with this 2 in base in first half FY '25, what gives you confidence of such a high single-digit kind of growth to achieve lower end of guidance that too when Mr Messaging, which forms, if I'm not wrong 15%, 20% of our revenue, having its own challenges.

[Gautam Badalia, executive]

So Nikhil, I think we have registered almost -- in H1 you are talking about, right?

[Nikhil Choudhary, analyst]

Yes, yes.

[Gautam Badalia, executive]

So H1, I think we had almost 11.9% growth, right?

[Nikhil Choudhary, analyst]

So my point was, Gautam, good part of it should be -- should have come from a revenue synergy as well as Vodafone Idea deal. So ex of those 2 deals, which both are now in H1 base, how you will be able to drive the growth with then...

[Gautam Badalia, executive]

No, no. So I think -- so let me clarify a few things here, Nikhil. I think what is happening is -- so TeleSign was already kind of part of our organic revenue, right? So whatever incremental revenue that you have got, I think, from TeleSign during the course of last quarter, that could be attributed to the synergy, but a large part of the TeleSign revenue for H1, I mean, pans out to be part of our organic growth organic revenue, so to say.

And from a Vodafone -- Vodafone essentially, I mean, the deal is where they are the suppliers. So we are actually monetizing their infrastructure with the customers. So whatever growth that you're seeing is actually coming from customers where we are getting the benefit of the pricing and quality because of the commitment that we have with VI and exclusivity that we have in the network because of the firewall.

[Nikhil Choudhary, analyst]

Okay, Gautam. But just continuing with the thesis of what will happen in the second half, where at least Vodafone Idea will be in base and Mr Messaging continue to impact our -- continue to drag on revenue growth.

[Gautam Badalia, executive]

Sorry, I didn't get your query.

[Nikhil Choudhary, analyst]

So next 2 quarters required run rate to achieve lower end of our annual guidance is at least high single digit, right? That means we have to grow on a Q-on-Q basis despite of Vodafone Idea deal in our base, right? So no more benefit from Vodafone Idea deal? So where do you think we will get such a high Q-on-Q kind of growth despite of...

[Rajdip Kumar Gupta, executive]

Nikhil, Rajdip here. If you see our numbers also, our domestic volume is also growing. We have -- because of the festive season because of some of the large e-commerce companies using a platform, we have seen a huge amount of growth in this quarter, in fact, in this month. And because of the festivity -- festive season, we've seen lots of other brands also using our platform very aggressively as far as ILD is concerned, plus the domestic traffic concerned. So we do see a lot of growth will come from the existing customer. At the same time, we already signed a few large customers, whose traffic have already started coming to our platform.

So based on those like numbers, we believe that we are on a right track. And there are definitely some synergies. We are working with the TeleSign also. As Gautam mentioned, the entire synergy was not there in entire H1. The entire synergy will be there in this H2 for sure, where TeleSign and Route Mobile worked very closely to get more traffic from TeleSign.

[Nikhil Choudhary, analyst]

Can you give me just color on Mr Messaging. What's the update there? What are our plans going ahead?

[Gautam Badalia, executive]

So Mr Messaging, I think, right now, they are kind of grappling with a little bit of issues around some of the markets, I mean, which were strong markets for them. But having said that, I think the basis, I mean, the clients that they're talking to, I mean, some of the deal wins that they have, I mean they are already kind of alluding to a decent growth, I think, coming through in Q3. And at the same time, I think we, as a team, are now working together in terms of integrating and optimizing a lot of cost, I mean, within the Route Mobile umbrella. So some of those, I think, benefits will start to kind of play out from this quarter along with, I mean, some amount of growth also coming back into the Mr Messaging revenue numbers.

[Operator]

The next question is from the line of Dipesh from Emkay Global.

[Dipesh Mehta, analyst]

A couple of questions. First of all, I just want to get a sense about new products. Now WhatsApp has already done some price increases, utility message and all those stuff. So if you can provide that sense and RCS also from a monetization perspective. So if you can give some broad overview about how this new product things is playing out because it has some kind of implication on our base business also. And second thing is how we are participating in overall growth opportunity?

Second question is about some of the large deals which you announced in partnership with Proximus group, Microsoft, Infosys. And I think one of the large global RFP, I think, in earlier your prepared remarks, you mentioned. So if you can provide some sense what would be the role of Route? And what will be the role of parent? And how one should understand the overall dynamics?

And last question is about gross margin. Now I understand because of ILD loss of revenue, it could have implication on revenue, but it ideally should benefit your gross margin. Now if I look, gross margin is still down despite some benefit of exchange in favor of domestic traffic. So if you can help us understand how one should look gross margin from medium-term perspective?

[Gautam Badalia, executive]

Sure. So I'll answer the gross margin query first. So I mean, because of the related party transaction, I mean, this full quarter, I mean, we recorded the entire throughput between TeleSign, BICS and Route Mobile as a related party, which was kind of indexed at a lower gross margin than the portfolio margin. So if you adjust for that, I mean there would be a gross margin expansion that would play out. Coming to, I think, WhatsApp -- I think on WhatsApp, we have seen almost a 20%-plus kind of a volume increase on a quarter-on-quarter basis. And on a Y-o-Y basis, you've increased -- you witnessed about 100% kind of pricing -- volume increase, I mean on a Y-o-Y basis. So you're right, I think WhatsApp has kind of reduced the pricing, I mean, for some of these utility messaging and stuff. So that had a little bit of a negative kind of an impact on the revenue...

[Rajdip Kumar Gupta, executive]

It has just been done, I think at starting of the month. It's not been implemented last quarter. I think maybe the beginning of the last month. But I think -- apart from that, I think there's another question related to -- can you just repeat the second question, Dipesh.

[Dipesh Mehta, analyst]

Yes. So overall, let's say, WhatsApp because of pricing raises, RCS is also where monetization has started to pick up. So I just want to get a broad sense about these new product portfolio...

[Rajdip Kumar Gupta, executive]

Let me just clear -- let's go one by one, Dipesh. It's better like you ask 1 question and we answer 1 question, and then you go to the next question, that's better for our clarity. So in terms of RCS [indiscernible] some of the use cases, which we have deployed with our customers, are completely based on a conversational base. We are not focusing as a company to try to build the traffic, which is promotional type of traffic. We really want to build use cases, which will solve the customer problem, whether it's your metro ticketing options, which we have built for various metros in India. And I think we have deployed conversational commerce kind of solution also where people can buy ticket using their WhatsApp as well.

So we are focused and [indiscernible] completely going to be on the use cases where we can build use cases, where we can actually solve customer problems and typically, on the conversation side. We will not get into those promotional kind of activity through RCS or even for WhatsApp. And for I think promotional for RCS and WhatsApp is not the right channel to do a promotion on that. And we prefer -- SMS is the right channel to do promotions on that. So that's our strategy as of now, and we will continue to follow this because we really want to build a sticky business for the long term, where we try to solve customer problems through our solutions.

[Dipesh Mehta, analyst]

No, I understand. So let's say, if I look overall ecosystem perspective, new product for us is somewhere around INR 78-odd crores. And as a percentage, if one looks at it, it is still in single-digit kind of thing, somewhere around 7-odd percentage. It is inching up, but it -- pace of that increase is fairly moderate. That is what I try to understand. Now partly because of price changes, obviously, has implication despite 100% volume growth Y-o-Y, revenue growth might be lower than that number. So if you can provide some sense apart from these 2 channels, what other areas where you are seeing promising signs of growth in this new product side?

[Gautam Badalia, executive]

So there is a difference...

[Rajdip Kumar Gupta, executive]

I think -- go ahead, Gautam.

[Gautam Badalia, executive]

Yes, Rajdip. So Dipesh, I think one thing where we have kind of extensively worked with the [indiscernible]

[Operator]

Mr. Gautam, sir, we are not able to hear you.

[Gautam Badalia, executive]

Am I audible now?

[Operator]

Yes, sir.

[Gautam Badalia, executive]

Yes, yes. So what I'm saying is one thing we have kind of indexed ourselves, I mean, on the cross-selling synergies with the group is we have kind of mobilized I mean the sales teams across group to start powering the sales of the new products, especially the WhatsApp business messaging and all these IT messaging...

[Rajdip Kumar Gupta, executive]

There is a problem, I think. We can't hear you clearly.

[Gautam Badalia, executive]

Okay.

[Operator]

Sir, I'll connect you again.

[Rajdip Kumar Gupta, executive]

Dipesh, to answer your question, what Gautam is trying to highlight out here. So we, as one team at -- between TeleSign and Route Mobile, we have started working very closely with sales team present in all different regions, especially Asia. I think you might be aware that there are multiple events we are doing jointly with TeleSign in Indonesia, in Singapore, in Malaysia and now in Middle East and Europe also. So this is also giving a lot of traction with the customers who are actually using TeleSign products either on BI or SMS. And I think we are reaching out to all the customers, which has been served by TeleSign to offer our e-mail and WhatsApp and RCS service through our platform. I hope I'm able to answer your question.

[Dipesh Mehta, analyst]

Understand. And last thing, if you can give some sense about progress on some of these large deals. One deal, which you said around large e-com, 10 destination kind of deal, where we are in that because the earlier quarter, I think progress was slower, whether you are seeing any material uptick there and Microsoft, Infosys, even large global RFP, which you highlighted?

[Rajdip Kumar Gupta, executive]

Yes. So I think we have -- as I mentioned, at the beginning, we are very much integrated with this large e-commerce company. They have started using a platform. The ramp-up started, already started, and we do see the huge potential coming from this customer. In terms of large RFP, if you see this large RFP is the customer base globally. They're looking out for termination globally. And probably Asia, Africa and Middle East is where Route Mobile will provide the entire connectivity to large -- being part of this large RFP. So I think whether it's TeleSign or Route Mobile, we believe that our connectivity in the emerging countries will pan out as a clear advantage to Route Mobile, and that is exactly where we are very excited about this RFP.

[Dipesh Mehta, analyst]

Understand. Rajdip, related question about all this put together is about gross margin because of related party transaction. Gross margin, I think even in this quarter, it has implication on gross margin. Considering some of these large partnership deal, do you think your gross margin likely to remain under pressure in medium term?

[Rajdip Kumar Gupta, executive]

No, no, not at all. Not at all because these are direct deals, and I don't see there's any impact because of that. So that I can assure you.

[Dipesh Mehta, analyst]

Okay. So broadly, where we are currently operating somewhere around low 20s is sustainable kind of gross margin?

[Rajdip Kumar Gupta, executive]

Yes, indeed.

[Operator]

The next question is from the line of Saumil Shah from Paris Investments.

[Unknown Analyst]

What is our EBITDA guidance for this financial year? Sorry, I missed the opening remarks.

[Gautam Badalia, executive]

It's around 13%.

[Unknown Analyst]

Around 13%. And for the first half, I think we are less than 12%. So for the remaining half...

[Gautam Badalia, executive]

We are around 12.2%. So we've kind of guided that 13%.

[Unknown Analyst]

For the first half, we're at 12.2%?

[Gautam Badalia, executive]

Yes, 12.2% is on a reported basis. Adjusted basis is 11.9%.

[Unknown Analyst]

Okay. Okay. So for the remaining half, we need to go about 13% EBITDA margin. Is this doable?

[Gautam Badalia, executive]

Yes. So the fact is, I mean, if because -- I mean, H2 happens to be very strong. So the incremental throughput that we get, I mean, in terms of revenue and gross more profit, directly flows to EBITDA because, I mean, the ad joining overhead costs, I mean a largely fixed in nature. So there is a high operating leverage in the business.

[Unknown Analyst]

Okay. Okay. And so when we grow our revenues by 18%, 20% this year, in terms of bottom line, can we grow at a similar rate of 18%, 20%?

[Gautam Badalia, executive]

It should be -- I mean, the only caveat is think tax rates have increased. So that's the only caveat. I mean, to that extent, I mean, maybe it may be a little muted.

[Unknown Analyst]

Okay. Okay. Because the current tax rate would be about in the range of 20%?

[Gautam Badalia, executive]

Yes. So it's around 22%, 23%.

[Unknown Analyst]

Okay. Okay. And sir, last question, what is the other income of INR 32 crores for this quarter?

[Gautam Badalia, executive]

Sorry, come again?

[Unknown Analyst]

There is another income of INR 32 crores for this quarter.

[Gautam Badalia, executive]

Large part of that is -- I mean so that's interest income. And also, I mean, there is ForEx gain. So we are largely -- I mean, emanating from translation. So there is -- I mean these are the 2 large components there.

[Unknown Analyst]

Okay. Okay. So this is not a recurrent income for the remaining quarters?

[Gautam Badalia, executive]

No, no, no.

[Operator]

The next question is from the line of Yash [ Dehlani ] from Maximal Capital.

[Unknown Analyst]

Sir, firstly, on the effective tax rate, like you alluded earlier as well. So our tax rate now since the mix will shift toward [indiscernible] Middle East also will be levying tax. So for full year basis and going ahead, we foresee tax rate to settle between moderate what rate around?

[Gautam Badalia, executive]

Yes, it should be between 20% to 22%.

[Unknown Analyst]

So current tax rate is something that will stay.

[Gautam Badalia, executive]

By around 22%. That's correct.

[Unknown Analyst]

Okay. And sir, one more question. The large RFP, which we were depending on. So this -- our whole guidance of 18% to 22% growth this year and the future projection of FY '28 $1 billion in earnings. Our guidance depends on this particular RFP? Or it will still stay even if we somehow not able to...

[Rajdip Kumar Gupta, executive]

So this RFP does not -- I think for net H2, we should not consider in RFP because it will take some time to integrate. But for 3 to 4 years down the line, they said any kind of guidance, that will definitely be part of the guidance.

[Unknown Analyst]

Okay. Okay. And sir, a broad question on the growth which we are projecting, say, CPaaS industry is actually not growing the industry per se. So in this, the growth -- the higher growth, which we are guiding on, part of which will coming -- will be coming from synergy benefit and part of which should come -- should be coming from the organic business which we have. So what is the organic growth, which apart from synergy benefit we are projecting on your [indiscernible] in your internal estimates?

[Gautam Badalia, executive]

No. So we are not trying to kind of break that into 2 buckets. Essentially, I mean, the thought process of this deal, I mean, this partnership was to kind of truly global company access to all the enterprises globally. So I mean from that standpoint, we are looking at this whole bucket. I mean TeleSign continues to be an existing client. So I mean all the revenues that we are able to garner from them, I mean, happens to be organic revenue. So from an organic growth standpoint, I think we kind of reassure, I mean the guidance that we have given for this. And I think over the next 3 years, we can -- so we are working along with the group on a lot of these synergies, where we also have a lot of inherent strength in emerging markets. So a lot of that will also play out in terms of the organic growth strategy that we have planned.

[Unknown Analyst]

Okay. And we are confident on achieving this target because of better half to a stronger half 2 than half 1.

[Gautam Badalia, executive]

Yes, H2 happens to be strong and historically, but for last year, where because there were a few headwinds. I mean historically, it has always been like 45/55 or 47/53 in terms of the split between H1 and H2.

[Unknown Analyst]

More or less, to achieve lower band of guidance, we will have to grow by 22% to 24% at least.

[Gautam Badalia, executive]

That's correct.

[Operator]

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

[Jyoti Singh, analyst]

Yes. Sir, my question is basically on the GenAI side. And does we expect GenAI-based services to start contributing meaningful to the revenue as earlier I saw a few of the posts that are talking a big move in AI. So if you can guide us.

[Rajdip Kumar Gupta, executive]

Jyoti, yes, indeed, there are multiple use cases, especially on customer support. Our team especially have bought, what is called, [indiscernible] and our entire ominchannel stack has GenAI capabilities, and we are solving some of the problem of our customers through our GenAI. So we are very much aligned with the progress in this space, and we are using the technology to help our customers to have a better outcome.

[Jyoti Singh, analyst]

And sir, any meaningful revenue that we are expecting?

[Rajdip Kumar Gupta, executive]

So Jyoti, it'll be add-on services to the customer right now, and we are just facing multiple things from GenAI with our customer right now. We cannot quantify at this point of time. Probably in the next few quarters, we may give some kind of like numbers to that.

[Operator]

[Operator Instructions] The next question is from the line of Arvind Arora from Enam Capital.

[Unknown Analyst]

So my question is with regards to the synergy benefit that we are drawing due to the arrangement with the Proximus group. So is there any saving in the cost part due to these arrangements?

[Gautam Badalia, executive]

Sorry, can you repeat your query? Is there any?

[Unknown Analyst]

Is there any saving in the cost, like as we are talking synergy and the benefit. So we are talking on the top line. But is there any cost sharing part also where we will get a reduction in per transaction cost due to this arrangement with Proximus group?

[Gautam Badalia, executive]

No, not yet. Some of those things I think are being assessed, but nothing of that sort has kind of played out.

[Operator]

The next question is from the line of Ashok Shah from Investec Group.

[Unknown Analyst]

Sir, regarding this dividend distribution and further CapEx or the money to be deployed in the business, can you throw some light?

[Gautam Badalia, executive]

Yes. So I think from a guidance standpoint, we have kind of given a guidance of distributing up to 20% of the PAT as dividend. I mean so the dividend distribution is in line with the guidance that we have given. And from a CapEx standpoint, I mean, but for the research and the product development, I mean, we don't have any significant CapEx. I mean we are largely -- I mean, more an asset-light kind of business model. So per se, there isn't any significant CapEx required for the business.

[Unknown Analyst]

So how the cash should be -- would be deployed or it will be invested in [indiscernible]

[Gautam Badalia, executive]

Sorry, sorry, I didn't get your query.

[Unknown Analyst]

Sir, you told that there is no CapEx to be involved. So how the cash generated will be invested in future?

[Gautam Badalia, executive]

Yes, yes. So I think we have a dividend distribution policy. And on top of that, I mean, we keep looking at kind of opportunities where we can augment the capabilities of the platform. I mean so we keep looking for some of those opportunities. And when we find -- I mean, appropriate kind of fit from our product and our vision standpoint, I mean, we would like to kind of do maybe a few tuck-in acquisitions.

[Rajdip Kumar Gupta, executive]

Just to add out there, we already have a decent size R&D team and like new product team. We have already been working on new products and the new technologies. So I think we already invested, and I think we will continue to invest in those areas as well.

[Operator]

The next question is from the line of Dipesh from Emkay Global.

[Dipesh Mehta, analyst]

Yes. Just I think in your prepared remarks, you said weakness in MRM and ILD revenue, I think 7-odd days because of certain reasons, revenue growth was impacted. Can you provide more detail around it? And what was the total quantum because of these sectors?

[Gautam Badalia, executive]

Yes. So I think on the ILD side, I think the impact was about close to $3 million for about 7 days of revenue impact. And on the Mr Messaging side, I think we had seen -- I mean, weakness on a Q-o-Q basis to the tune of about INR 19-odd crores.

[Operator]

The next question is from the line of Devraj, who is an individual investor.

[Unknown Attendee]

So I had a question or 2, but I think the question on the allocation of capital has already been answered, but I just want to understand the future trajectory of the debt that the company is taking on because we've really ramped up on the debt, right? And I understand some of the compulsion as I have been following this company for a while. What's going to be the future trajectory on the debt that the company plans to take on?

[Gautam Badalia, executive]

Yes. So I think what we are embarking on is leveraging the strengths of the group. So I mean, just to kind of give you a color, I mean, so BICS has one of the largest infrastructure, I mean, in terms of the telecom infrastructure. I mean -- so they enable a lot of the voice cost, I mean, over 50% of world's voice traffic, I mean terminates on this BICS platform. So we're going to use the strength of BICS globally. Then we are going to use the digital identity strength of TeleSign. I mean, so they have kind of really evolved in terms of rendering more security to every digital transaction. So -- and at this point in time, as we speak, we are doing few sandbox testing, I mean, even in India with the regulators and few large banks.

So that would be the wrapper on every digital transaction. So -- and on top of that, we would kind of power our CPaaS platform with all the digital transactions for an enterprise. So we would be a one-stop solution provider for the entire digital journey of any enterprise to their consumer. In any form and shape, I mean, we'll be able to kind of power a very secure digital transaction seamlessly over the infrastructure layer of the group. So that's the thought process, I think that we are embarking on.

[Rajdip Kumar Gupta, executive]

I think just to add to this, I think our entire platform, like now we have TeleSign and BICS as a company and maybe the TeleSign as a company has access of entire platform of ours, and we can take this entire platform to European countries and the U.S.-based customer. That is another big trend we believe in coming quarters down the line, where we can see lots of sales coming from this part of the world to Route Mobile portfolio.

[Operator]

Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Mr. Gautam Badalia for closing comments.

[Gautam Badalia, executive]

We thank you all for your participation. In case you may have any additional queries or clarifications, feel free to reach out to us. We'll be more than happy to answer any questions.

[Operator]

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