Digitide Solutions Ltd (DIGITIDE) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (Arihant Capital Markets Limited): Ladies and gentlemen, good day, and welcome to the Digitide Solutions Limited Q2 FY '27 earnings conference call, hosted by Arihant Capital Markets Limited. 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 this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Mr. Riddhesh Kadam from Arihant Capital Markets Limited. Thank you,
Riddhesh Kadam (Arihant Capital Markets Limited): Sir? Hello, and good morning to everyone. On behalf of Arihant Capital Markets, I thank you all for joining into the Q2 FY '27 earnings conference call of Digitide Solutions Ltd. Today from the management, we have Mr. Samir Ahluwalia, CEO; Mr. Hari Govinda Krishnaswamy, CFO; Mr. Rajesh Lachhani, Head - Investor Relations and M&A. So without any further delay, I'll hand over the call to management for their opening remarks. Over to you, sir.
Samir Ahluwalia (Digitide Solutions Ltd): Thank you. Good morning, everyone, and thank you for joining us for Digitide Q2 FY '27 earnings call. I'm Samir Ahluwalia, Group CEO and Executive Director, and I'm joined here on the call with Hari, who's our group CFO, and both of us will walk you through some of the opening remarks today. When we spoke last quarter, we shared an agenda, which was very transparent, built around how the new Digitide will make progress on some of the moves that we laid out. We also shared that the shareholders and investors should judge us by our execution. A quarter later, I'm pleased to share that we have made tangible progress against each of those priorities and moves. The direction is clear that we are taking. The operating model that we promised has been put in place and we are beginning to see early evidence of our actions in the quality of our earnings, the sales momentum that we are creating, and the change in the revenue mix. These three markers are very important as we look at our business going forward, which is the quality of the earnings, the momentum of our sales activities, and the shift in the revenue mix. Let me now start with the quarter in hand. Revenue for Q2 was approximately 760 crores, which was down 2% sequentially. Now this needs to be seen in the context of choices that we have made. As I shared in the last quarter, we are not pursuing revenue for revenue's sake. We have continued to renegotiate contracts and are not shying away to move from businesses that does not meet our return thresholds. Despite the sequential decline, our EBITDA increased to approximately 79 crores, up 2.5% Q-on-Q and the EBITDA margin improved by 45 basis points to 10.4%. Reported PAT increased from 2.9 crores in quarter one to 8.9 crores in quarter two. The important thing here is the shape of our business, which is now beginning to move in the direction that we want. Tech and Digital grew 6.6% year-on-year and is now 244 crores. Our international revenue grew 13.5% year-on-year and is now 323 crores, both of them contributing 32.1 and 42.5 of our revenue respectively. Happy to report that our sales momentum also strengthened meaningfully. Our TCV booked in the quarter increased by 95% sequentially from 205 crores in quarter one to almost 400 crore in quarter two. Another important marker that we are tracking is our AI-led revenue, which also doubled sequentially from 15 crores in quarter one to 30.5 crores in quarter two. All of these are early indicators, but they reinforce our conviction in the path we have chosen. Let me now turn the progress
Samir Ahluwalia (Digitide Solutions Ltd): that we have made in the quarter across the four moves that I outlined in quarter one. First, get unified. The operating model that we laid out in quarter one is now live in the company. We organized our business into five business units, which are supported by a focused go-to-market structure across two corridors. We call them India Plus and International, which are quarterbacked by our global service line practice. That's the team that are responsible for capability development, solutions and partnership alliances. And we've also redefined the KPIs and the roles of our corporate leadership. So, those are the moves and the progress that we have made on the operating model that we shared with you in quarter one. We've cleared we've created clear ownership of who is responsible for growth, who's responsible for service delivery, who's responsible for profitability and cash across the company. The roles are clearly defined, and the scorecards and the performance markers have been clearly laid out. The accountability is fundamental to the company we want to build as we move forward. The second move that we spoke about in the last quarter was strengthening our core. I said the issue with our core BPM business was not about is it relevant or is it not, but it was more about the economics of that business. We would be more disciplined about the account profitability, the pricing, and the efficiency that we deliver at an account level. We are following through. We have continued to reprice contracts and exit low margin business, even where that creates near-term pressure on revenue. At the same time, we are infusing AI into our BPM services with the objective of improving productivity, differentiation, and margins. Third, go west and go digital. Personally and also a representative of the management team, this is where we are very encouraged by the early momentum. We have established dedicated go-to-market engines for International and India Plus, and strengthened our tech and digital propositions around three core areas, which are platforms, data, AI, and cloud. With that focus, our TCV increased 95% sequentially in quarter two. Our International revenue grew 13.5% year-on-year, and our tech and digital revenue grew 6.6%. But perhaps going back to how I started, the most important development under all of this is how we are addressing the impact of AI. We are building our AI business across three layers. Layer one is what we call as AI-infused BPM. Layer two is what we call as our AI-enabled platforms, and layer three is what we call as our AI professional services. Our combination of these three layers has made our AI-led revenue touch 30.5 crores in Q2, which is almost twice the quarter one level. More importantly, the effort that we have put in the AI is now translating into real client use cases on the segments that we want to focus, which are insurance, banking, and healthcare. Our teams are continuing to apply AI across collections, healthcare revenue cycle management, insurance customer operations, among other areas. The last
Samir Ahluwalia (Digitide Solutions Ltd): The fourth one was go all out. Now this move is about expanding the opportunity available to Digitide through building, partnering, and where relevant, acquiring. That was the framework that we laid out in our last quarter. We call it BPA. During Q2, we advanced the partnership agenda through strategic alliances with AWS and Anthropic. We continue to scale our GCC offering using a build-operate-transfer model. In this quarter, we signed a sizable BOT mandate as well, which is getting delivered from our Philippines office. These are important additions to our capability and how we are taking our solutions to the customers. Looking ahead, as we enter H2 of FY '27, our priorities are becoming even more sharper. First, continue to scale our go-to-market engine with the new leadership and capabilities that we have put in place. Second, accelerate AI across the enterprise, both within our operations and in the solutions we take to clients. Third, continue to right size our cost structures and portfolio to drive sustained improvement in margins. And the last one, bring much greater discipline to working capital and receivable collections. We clearly have a lot of work ahead of us, but compared to where we started from and we stood 3 months ago, we have a clearer organization, much stronger accountability, improving sales momentum, and a sharper view of where we will compete and how we will win. H1 was about putting the foundations in place. H2 is all about converting those foundations into execution, profitable growth, and stronger cash generation. With that, I will hand over to Hari, our CFO, to walk you through our financial performance in greater detail.
Hari Govinda Krishnaswamy (Digitide Solutions Ltd): Mr. CFO. Thank you, Sameer. Good morning, everyone. Since this is my first earnings call as Group CFO of Digitide, let me start by outlining the financial lens through which I look at the business. My priorities are clear: 1: improve the quality of earnings; 2: sustain the working capital discipline; 3: execute high-impact cost optimization initiatives; 4: ensure that capital is deployed with a clear focus on returns. Turning to Q2, our consolidated revenue was INR760 crores, down 2% sequentially. As Sameer mentioned, our focus is not simply on the absolute level of revenue, but increasing on the quality of that revenue and its ability to translate into earnings and cash. We made progress on profitability during the quarter. EBITDA increased 2.5% sequentially to INR79 crores, despite the lower revenue base, and EBITDA margin expanded by 45 basis points to 10.4%. Reported PAT tripled from INR2.9 crores in Q1 to INR8.9 crores in Q2 with no exceptional items during the quarter. At the segment level, while tech and digital market margins expanded by 315 basis points from 8% to 11.1%, this was partially offset by BPM, where margins slightly declined to 13.6%. Overall, segment EBITDA margins expanded by 55 basis points to 12.8%. Our objective from here is to sustain this direction through tighter account-level profitability, cost discipline, and an improving business mix. For H1 FY '27, consolidated revenue stood at INR1,535 crores, representing year-on-year growth of 2.3%,
Hari Govinda Krishnaswamy (Digitide Solutions Ltd): Operating cash flow has improved from 40 crores to 51 crores, year-on-year increase of 27.5%. Billed plus unbilled DSOs stood at approximately 84 days in Q2 compared to 82 days in Q1. While the improvement in profitability is encouraging, the efforts that we are putting on improving the cash conversion will result into better DSO in H2. We closed the quarter with net cash of approximately 76 crores. We are also not shying away from taking certain tough calls on the cost structure of the company, the effect of which will be visible in H2. The proposed buyback decision by Allsec will help improve the liquidity in Digitide standalones, while improving the tax expenses for the shareholders of Allsec including Digitide. Our balance sheet gives us financial flexibility, but our objective is to compliment that strength with stronger and more consistent cash generation from the underlying businesses. Priorities for H2: As I look at the second half, my financial priorities are centered around three outcomes. First, is earnings quality. We will remain focused on pricing, account profitability and underlying cost structure by executing high impact cost optimization initiatives in H1 to improve margins, with a clear focus on translating revenue into sustainable margins. Second, is cash conversion. We need stronger conversion of earnings into cash supported by tighter working capital management and greater discipline around collections. Third, is returns. As we invest behind Digitide growth agenda, we will remain disciplined around capital allocation and execute investments through the lens of strategic fit, returns and long-term value creation. With that, I'll hand over the call back to the moderator for Q&A. Thanks a lot.
Moderator (Arihant Capital Markets Limited): Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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 Manthan Patel from Patel Investments. Please go ahead.
Manthan Patel (Patel Investments): Hello? Hello, am I audible?
Samir Ahluwalia (Digitide Solutions Ltd): Yes, Manthan Patel, we can hear you. Yes. Yeah, we can hear you. Please.
Manthan Patel (Patel Investments): Sir, my first question is regarding the capital allocation. Like since last seven or eight quarters, we have been speaking about acquisitions and all, but till date, there has there hasn't been any update regarding that and our net cash levels are also going down like we are we are draining cash. So, any update about that, sir?
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