Alldigi Tech Ltd (ALLDIGI) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Alldigi Tech Q2 FY '27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Natarajan Lakshmanan. Thank you, and over to you, sir.
Natarajan Lakshmanan (Alldigi Tech Ltd): Thank you very much. Good morning, everyone. Thank you for joining Alldigi Tech's Q2 FY '27 earnings call. I'd like to start by thanking all the shareholders for their trust, confidence, and the continued support that you give to Alldigi Tech. It keeps us motivated to continue to perform. Today, I'm joined by our CFO, Mr. Manish Aggarwal. We'll begin with an overview of our business performance, operational highlights, and strategic priorities, followed by a detailed review of our financial performance. We'll then be happy to take your questions. I'm pleased to report another quarter of strong financial performance with steady revenue growth, significant improvement in profitability, healthy cash generation, and meaningful progress on our strategic priorities. Beyond the financial results, we continue to strengthen our international business, improve our revenue mix, expand our sales ca- capability, and accelerate our technology-led transformation. I'll take you through some of the key highlights. On the financial performance, for the first half of FY '27, we reported revenue of 303.6 crores, growing 4.2% year-on-year, while EBITDA increased by 20.8% to 87.7 crore. Our EBITDA margin improved to 28.9% for the H1 FY '27, compared with 24.9% in the corresponding period last year. For Q2, revenue stood at 153.3 crores, growing 4% year-on-year,
Natarajan Lakshmanan (Alldigi Tech Ltd): 2% quarter-on-quarter. EBITDA grew approximately 29% year-on-year to 46.3 crores, with margins expanding to 30.2%. PAT increased by approximately 51% year-on-year. Our cash position remains healthy at 127.2 crores as of September '26, while collections for the first half increased by 4.3% year-on-year to 316.9 crores. One of the key highlights has been improving quality of our revenue. International business now contributes approximately 70% of our consolidated revenue, compared with around 64% last year. While revenue growth remains moderate, our profitability continues to grow significantly faster than revenue, reflecting operating leverage and improved business mix, and disciplined cost management. Manish will take you through the detailed financials shortly. On the business performance, I'll start with our Tech & Digital business. Our Tech & Digital business continued its growth momentum, delivering 12.9% year-on-year revenue growth in Q2, with segment margin improving to 43.9%. For the first half, T&D revenue grew 12.4% year-on-year to 82.3 crores. We continue to strengthen our position in the HR and payroll managed services market. During Q2, we processed 51.1 lakh employee records, taking the total for the first half to 101.3 lakh records. We have also added 16.1 crore in new annual contract value during H1 through new customer acquisitions and expansion of services within existing accounts. Our key service delivery metrics, including payroll accuracy, on-time delivery, and query around turn around time, continue to improve year-on-year. On the BPM segment, the segment delivered stable performance with Q2 revenue at 111.6 crores, growing approximately 1% year-on-year. For the first half, BPM revenue stood at 221.3 crores, growing 1.4% year-on-year. International BPM continues to be a key growth driver, growing 12.6% year-on-year in Q2 and now contributing approximately 83% of the BPM revenue, compared with 75% in the corresponding quarter last year. During H1, we secured 66.5 crores of new ACV across new customers and existing customers. Our service delivery performance continues to remain strong, supported by the initiatives we've taken to improve productivity and embed AI into existing customer operations. At the same time, we continue to take deliberate actions to improve the profitability of our domestic BPM portfolio, including exiting structurally low-margin businesses. Our focus remains on profitable and sustainable growth rather than pursuing revenue at expense of margins. Now, coming to the growth engine, an important priority during the first half has been strengthening our sales organization and go-to-market capabilities. We've appointed a new Chief Business Officer for the BPM business. We've expanded our international sales team, and we now have experienced sales leaders from the BPM industry leading the US sales team, and there is an established SMB sales team and an enterprise sales team within the Tech & Digital. We've also expanded our sales capability on the BPM side into Southeast Asia. We also have incorporated a dedicated practice team to strengthen solutioning, presales, and product capabilities. During Q2, we secured new business with an annual contract value of 37.2 crore, growing 86% year-on-year. For H1, our new business ACV reached 82.6 crores, more than doubling compared to the last year. This includes 66.5 crore from BPM and 16.1 crore from Tech & Digital. Our immediate priority is converting these wins into revenue over the coming quarters. Moving on to AI and technology-led transformations, across BPM, we are now moving beyond the traditional delivery, embedding AI across all of our BPM delivery to improve productivity, quality, and customer outcome. On Tech & Digital, we continue to invest in our AI and automation strategy led by technology. Our products, our internal operations, and our end employees of our customers, all of them enjoy the benefits of AI. Moving on to the product strategy, we have in the month of May 2026, we launched Buzzly 2.0
Natarajan Lakshmanan (Alldigi Tech Ltd): had called this as Enops and Meridian. We've not changed the name to reflect the company family group name as such. And so, going forward we refer to these products as Alldigi 360 and Alldigi 360 Analytics. On Alldigi 360, this is an entire HCM suit, including payroll, and it has the capabilities in terms of managing core HR, employee self service, time and attendance, leave, payroll, performance, onboarding, helpdesk, reimbursements, and alumni workflows. And this is a SaaS based platform that's capable of managing the SMB customers as well as the enterprise customers. And this is something which we are offering as a technology only outsourcing as well. On Alldigi 360, this is a complete AI analytics which sits on top of our existing solutions. And this is capable of being available as an individual standalone module, where a customer can, you know, continue to use their existing HRIS and use this analytics on top of it. The analytics covers head counts and movements, attrition, payroll cost, pay variance, compliance, attendance, leave trends, overtime, diversity, and custom dashboards. So this is a combination of a custom dashboard that you commonly see in the market and also brings in the AI capability where you can go ahead and modify it according to the needs you have. Moving on, in terms of international growth opportunity, our international expansion remains an important strategic priority. In the US, we have focus on expanding our presence across customer experience, financial services collections, healthcare RCM, insurance as our verticals. We see opportunities to deepen existing customer relationships while pursuing new business through our strengthened sales organization and partner ecosystem. As I mentioned, in Southeast Asia, we're expanding our sales, and we're already seeing initial offshoots in terms of results with good ACV booking that is coming in Q2 and a good projection that we have in the H2, Q3 and Q4. In terms of people service delivery and organization, alongside our commercial and technology investments, we continue to focus on building a high-performing organization. Our service delivery performance remains strong across both the business segments, and we continue to invest in operational excellence, customer satisfaction, and employee engagement. We are encouraged by the positive employee feedback that we receive, and we also continue to encourage employee participation in our CSR activities. We believe that attracting, developing, and retaining the right talent will remain critical as we scale our international operations and technology capabilities. In terms of the priorities for H2, First is to accelerate revenue by converting our sales pipeline into new business wins. Second, sustained profitability improvement through operational efficiencies, automation, and disciplined portfolio management. Third one would be to expand our international business and strengthen our presence in key growth markets. Fourth one is to accelerate AI adoption and scale our technology and product capabilities. Fifth one is to continue strengthening our existing customer relationship, service delivery capabilities while looking at new relationships that we'll establish with the new customers. Our strategy remains focused on deepening client relationships, expanding our global reach, driving efficiencies through technology and AI, building a future-ready, high-performing organization. Our platforms are progressing towards scale, sales channel expanded, and execution disciplined in fact. We believe we are well-positioned to capitalize on the opportunities ahead. I'm also pleased to announce that the Board of Directors of the company have approved a proposal to buy back shares of up to 4.8 lakh equity shares at Rs. 1,000 per share, representing a 48 crore in share consideration subject to applicable approvals. The decision is consistent with our dividend distribution policy to reward shareholders. Given our strong financial position, healthy cash generation, and debt-free balance sheet, the Board considers buyback an appropriate means of returning surplus capital to shareholders. Our commitment to international expansion, technology-led transformation, product development, and profitable growth remains unchanged. We believe this balances shareholder returns with long-term investment needs. To conclude, we are encouraged by our performance in the first half. More importantly, we're building the foundations for the next phase of Alldigi's evolution. With that, I'll now hand over to our CFO, Manish Agarwal, who'll take you through the detailed financial performance of the quarter. Thank you.
Manish Aggarwal (Alldigi Tech Ltd): Thanks, Nat. Greetings everyone, and thank you for your continued interest in Alldigi Tech. Now let me take you through our financial performance for the second quarter
Manish Aggarwal (Alldigi Tech Ltd): and the first half of financial year 2027. Revenues from operations for quarter two financial year 2027 is stood at 153.3 crores, representing a growth of 4% year on year and 2% sequentially. For the first half of 2027, revenue was 303.6 crores, an increase of 4.3% year-on-year basis. While headline growth continued to be moderate, the underlying revenue mix continued to improve, with healthy growth in international BPM and tech and digital, partly offset with our planned reduction in low-margin domestic business. Importantly, international revenue grew 15.1% year-on-year in quarter two, and accounted for approximately 70% of total revenue. Now let me cover the performance of our two business segments. In the BPM segment, Q2 revenue stood at 111.6 crores, growing 1% year-on-year and 1.8% sequentially. Internal International BPM revenue grew strongly by 12.6% year-on-year basis, and now represents approximately 83% of BPM revenue. This growth was partly offset by a 33% year-on-year decline in domestic BPM revenue, reflecting our deliberate strategies of exiting or resizing low-margin engagements. For the first half, BPM revenue stood at 221.3 crores, representing growth of 1.4% year-on-year, with international market continuing to be principal driver of the growth. Now let me come to the tech and digital segment. In the tech and digital segment, Q2 revenue was 41.7 crores, an increase of 12.9% year-on-year basis and 2.7% sequentially. For the first half, tech and digital revenue grew 12.4% on year-on-year basis, to 82.3 crores. We processed 101.3 lakh employee records during the first half of 2027, reflecting continued operational momentum and growing scale of our payroll and HR services platform. In Q2 alone, employee records processed increased 7.2% year-on-year basis to 51.1 lakh. Now moving to profitability, our Q2 EBITDA stood at 46.3 crores, growing 28.5% year-on-year basis and 12% sequentially. EBITDA margin expanded to 30.2% compared to 24.4% in Q2 last year, and 27.5% in the preceding quarter. For the first half, EBITDA increased 28-- 20.8% year-on-year basis to 87.7 crores, with EBITDA margin improving to 28.9% from 24.9% in the half-- first half of financial year '26. The improvement in profitability was driven by a better revenue mix, the reduction of low margin domestic BPM work, operating efficiencies, and continued cost discipline. While quarterly margin may be influenced by business mix, currency movements, and the timing of the client ramp, the structural driver of the margin improvements remained intact. In the BPM segment, quarter two segment margin stood at 17.5 crores, with a segment margin improving to 15.6%, compared to 11.6% in Q2 last quarter, and 11.9% in the preceding quarter. For the first half, BPM segment margin was 30.5 crores with a margin of approximately 13.8%. The improvement reflects the rising share of international revenue, portfolio actions in the domestic BPM, pricing initiatives, and operating efficiencies. In the tech and digital, quarter two segment margin was 18.3 crores, representing a strong segment margin of 43.9%. For the first half, segment profit stood at 35.7 crores, with a segment margin remaining healthy at approximately 43.4%. This performance was supported by higher volumes, a favorable international mix, and operating leverage from our technology platform. Now coming to the bottom line, PAT for quarter two 2027 stood at 26.6 crores, increasing by 50.9% year-on-year basis and 46.7% sequentially. The PAT margin expanded to 17.3%, compared to 12% in the quarter two of last year and 12.1% in quarter one of 2027. For the first half, PAT increased 37.5% on a year-on-year basis to 44.7 crores, compared to 32.5 crores in H1 of financial year 2026.
Manish Aggarwal (Alldigi Tech Ltd): an expansion of approximately 350 basis points. Now coming to the cash generation, cash generation in the organization remains healthy. Operating cash flow for quarter two was 37.1 crores translating to an OCF to EBITDA conversion of approximately 80%. For the first half, operating cash flow increased 31.3% on a year-on-year basis to 70.2 crores, its conversion remaining healthy around the same 80% of EBITDA. DSO improved by 3 days on a year-on-year basis, reflecting our continued focus on collections, receivable aging and working capital discipline. Cash and liquid funds stood at 127.2 crores at the end of September 2026. The sequential reduction largely reflects the dividend paid during the quarter while the underlying business continue to generate healthy cash flows. Now to conclude, quarter two was a quarter of profitable growth. Although, reported revenue continue to reflect the plan- planned reduction in the BPM domestic BPM business, international BPM and the second, digital, delivered healthy growth. The improvement in the venue quality, operating efficiency and business mix resulted in an EBITDA growth signi- significantly faster than the revenue, alongside strong PAT growth and healthy cash conversion. With that, I conclude the financial highlights and hand the session back to the moderator for the question-and-answer session.
Moderator: Thank you very much. We will now begin with a question-and-answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Harsh Kundnani from InCred Alpha. Please go ahead.
Harsh Kundnani (InCred Alpha): Yeah, hi. Thanks for this. And congratulations to Nat and team for excellent set of numbers. Just couple of small questions. So, employee cost in this quarter, just wanted to understand the divergence between the headcount and employee cost. Because this quarter we have seen a sharp reduction in employee cost by about 7% sequentially, whereas employee headcount has not, you know, gone down by a commensurate number. So, just wanted to understand, you know, the divergence between the two.
Manish Aggarwal (Alldigi Tech Ltd): Yeah, thank you, Harsh. Manish here. I'll take this question. Yes, you are right. Our, you know, employee cost reflects a reduction of about 5 CR on a quarter-on-quarter basis while the headline, you know, decrease in the employee count is not to that extent. There are a couple of reasons of this, you know. One is the operating efficiencies by, you know, by the replacement cost of the resources that we are hiring. We have been very, very clear as to what rate we need to hire the new resources. That is leading to the saving while you don't see the the the degrowth in the headcount. Now the second is the location mix that is also playing a factor here, wherein we have significantly optimized our resources in Manila location, which is a high cost territory for us, while in India, you know, the resources continue to be the same. The third key aspect is also the retiral benefits. As we continue to optimize our resources and continue to revalue our retiral benefits, there has been some true-up benefit on account of that as well. And fourth, as we continue to optimize our resources, we will see the full impact of the reduction of the resources happening in the quarter three, because that reduction also started in the mid of you know, quarter two. And by exit, we have reduced quite a lot resources in that way. So, you will see the full impact of the reduction coming in the quarter three.
Harsh Kundnani (InCred Alpha): Understood. This is helpful. So, just wanted to understand how should we you know, just understand the headcount and employee cost going forward in the next few quarters?
74 more turns of this transcript: log in to Stocksigma to read the full call.