Updater Services Ltd (UDS) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, you're connected to the earnings conference call for Updater Services Limited. This call will begin shortly. Please stay connected. Ladies and gentlemen, you're connected to the earnings call for Updater Services Limited. The call will begin shortly. Please stay connected. Thank you.
Moderator: Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '27 Earnings Conference Call for Updater Services 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. Before we begin, a brief disclaimer. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and may involve risks and uncertainties that are difficult to predict. Should you need assistance during the 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. Raghunandana Tangirala, Promoter and CMD of Updater Services Limited. Thank you, and over to you, sir.
Raghunandana Tangirala (Updater Services Ltd): Yeah. Thank you. Good afternoon and warm, warm welcome to Updater Services Limited Q2 and H1 FY '27 earnings. Joining me today are Amitabh Jaipuria, our Senior Executive Director; Mr. Ram Praveen, our Chief Financial Officer; Ms. Elizabeth Jacob, founder and CEO of Athena; Mr. Sunil Munshi, CEO of Denave; and our investor relations advisors, SGA. I hope you all had the chance to review our investor presentation and results, which are also available on the exchange and our website. Let me start with the headline numbers for Q2 FY '27. Consolidated revenue from operations grew by 11% year-on-year to INR 812 crores. EBITDA grew by 37% to INR 43 crores, with a margin improving by 100 basis points to 5.3%. 5.3% profit after tax, profit after tax grew 62% to INR 32 crores. Before I turn to the industry and the business, I would like to share a few developments from the quarter that reflect how we are strengthening our operations. First, to strengthen execution in our IFM business, we have appointed Rajiv Bharadwaj as Chief Operating Officer. Rajiv comes with a very strong credentials, with decades of industry experience. The appointment allows us to separate day-to-day operations management from new business development so that each gets a dedicated leadership focus. Second, as part of our succession planning, Miss Jigyasa Sharma, Executive Director on the UDS Board, has been appointed as CEO designate for our subsidiary, Matrix, from 1st April 2027. She will take over as CEO from the current CEO, Mr. Ravi, who is due to retire. Ravi will continue to be associated with Matrix in Matrix in a new capacity. Third, as part of our ongoing efforts to simplify the group structure, Denave has initiated closure of two small step-down subsidiaries, Denave Europe and Denave Korea. This is not expected to have any material financial impact and it reduces organisational complexity and management overheads. Fourth, in
Raghunandana Tangirala (Updater Services Ltd): Further, ICRA reaffirmed our long-term rating as AA minus with a stable outlook and short-term rating as A1 plus. This reflects our strength in of the balance sheet, the strength of our balance sheet and our net cash position. Let me now turn to the broader industry environment. India's office market continued to be strong with absorption in the first nine months of the calendar year FY calendar year 2026 reaching a record 66 million square feet. Global capability centers remain a key driver of this demand, accounting for a record about 28 million square feet of leasing in the same period. As enterprises expand their office footprint, the need to need for reliable housekeeping, engineering maintenance, workplace management, and integrated facility management increases. This is encouraging for organized IFM providers such as UDS. At the same time, the market is becoming more selective. Customers are increasingly focused on operational efficiency, measurable service outcomes, compliance, and value for money. The labor codes, now in their first year of implementation, have raised the compliance bar for everyone or sorry, for every enterprise that engage contract workers. We believe this favors companies that combine execution capabilities, technology, standardized processes, and strong governance. And this is how UDS has operated from the beginning. Turning to employment trends, the demand environment remains mixed. White collar hiring growth moderated to about 2% year-on-year after a strong August. Sorry, 2% year-on-year in September after a strong August. Hiring in BPO, IT enabled services and GCCs grew by about 4%, while traditional IT and software services remain subdued. In BSS, these hiring cycles are enterprise spending patterns, in BSS, these hiring cycles and enterprise spending patterns influence demand for background verification and certain sales enablement services. In IFM, rising commercial activity and industrial expansion continue to support demand for our outsourced facility services. Industry expanse expansion is something of particular interest for UDS, given our strength in this space. Against this backdrop, our focus remains on building resilience across our portfolio, improving the quality of our revenues, and ensuring that growth translates into sustainable profitability. Now, let me take you to our IFM division. We added seven new significant logos in Q2, taking large logo additions for the first half to 13. This is across manufacturing, commercial real estate, and healthcare. Q2 FY '27, IFM revenue from operations grew 11% year-on-year to 560 crores compared with 503 crores in Q2 FY '26. For H1 '27, IFM revenues stood at about 1,084 crores, up 11% year-on-year. IFM EBITDA for the quarter was about 24 crores with a margin of 4.2% compared with 3.8% in Q2 FY '26. Growth during the quarter was driven by three factors: new client addition across diversified industries; higher volume from large strategic contracts, higher volume from large strategic contracts that have now moved past their ramp-up phase; and deeper wallet share with existing marquee clients. The upfront employee cost we carried on these contracts a year ago have largely normalized, and this is visible in the year-on-year margin
Raghunandana Tangirala (Updater Services Ltd): One. Industrial and manufacturing customers remain our largest market, together accounting for about a third of the IFM services, IFM revenues. We also see good opportunities across commercial real estate, healthcare, logistics, and commercial facilities. Our client relationships remain longstanding, with about 95% retention over a multi-year window. The leadership change I mentioned earlier is designed specifically for this business, with Rajiv overseeing operations, and Saravanan, who was earlier our COO, is to focus on growth. We now have a dedicated attention on both operations and service delivery, as well as client acquisition. Technology remains central to how we run IFM. We continue to deploy digital work workforce platforms, AI-enabled workforce management, and predictive maintenance tools across client sites. These help us optimize manpower deployment, improve service quality, and protect margins. Our priorities for the rest of the year remain unchanged from what we had mentioned earlier. We aim to improve client-level profitability, shift the mix towards higher margin technical services such as MEP, energy management, and technical AMCs, and continue to win integrated, outcoming mandates. We remain confident of delivering healthy growth in IFM, supported by increasing outsourcing penetration and opportunities across industry across industries manufacturing, infrastructure, and commercial real estate. Turning to Global Flight Handling, the aviation envir- environment was softer this quarter. Domestic passenger traffic witnessed a year-on-year decline in July-August, primarily due to airline capacity adjustments, continued disruption arising from the West Asian crisis. We also continue to build this higher-value side of this business to Global School of Aviation, including security training and regulatory certification programs. These revenue streams are less sensitive to short-term air traffic cycles. With the festive and winter travel season ahead, we expect activity to improve in the second half, though the operating environment in aviation remains uncertain. Moving to Avon, the core mailroom management business and integrated support service business continue to be on its growth path. With revenue growing 4% year-on-year in Q2, Avon is steadily increasing the share of higher margin, value-added services, including enterprise transport and workplace support solutions, which we expect to improve both revenue quality and profitability through FY '27. The past issues is also moving forward, faster resolution with the possibility of some recoveries. I would now like to hand over this call to Mr. Amudha for an update on our BSS segment.
Amitabh Jaipuria (Updater Services Ltd): Thank you, Raghu, and good afternoon, everyone. I will give you a brief overview of the BSS segment, and then hand over to Elizabeth Jacob for Athena, followed by Sunil Munshi for Denave, and then I'll come back for a small update on our Matrix subsidiary and that particular business. The simplification of our BSS structure with Denave, Athena, and Matrix now reporting directly to the senior leadership team is beginning to show results. Over the past two quarters, we have seen faster decisions, tighter cost control, and clearer accountability for outcomes in each business. The objective is to build businesses that are more agile, more technology-enabled, more customer focused, and better positioned to deliver sustainable profitability. The closure of Denave's European and Korean step-down entities is also a part of the same simplification effort. We have also simplified Denave's internal operating and leadership structures. We added four new significant logos in BSS during the quarter. BSS revenue from operations for Q2 FY '27 stood at 267 crores compared with 240
Amitabh Jaipuria (Updater Services Ltd): crores in Q2 FY26, which is a growth of 11%. EBITDA for the segment was about 21 crores, more than 62% higher than last year, with margin improving from 5.3% to 7.7%. For the first half, BSS revenue was at 520 crores, up 9% year-on-year, with EBITDA of about 40 crores, a growth of 37%. The margin percentage also improved to about 7.6% compared with 6% in H1 of FY26. I want to highlight that the margin improvement has come alongside growth and not at the cost of it. Every one of our BSS businesses contributed to this, whether to new client wins, better delivery, or lower cost to serve. Sales enablement through Denave and Athena is now about 3/4 of the total BSS revenue, with the balance coming from Matrix, Avon and Global. By sector, IT, IT-enabled services contribute to about 31% of BSS revenue and BFSI about 12%, with the rest spread across many other segments such as retail, consumer, manufacturing, aviation and other industries. This spread matters because the demand drivers for each business are different and when one end market slows down, as traditional IT hiring has, for example, the others give us balance. The common thread across our BSS businesses remains technology-led transformation. Clients are no longer buying headcount, they are increasingly buying outcomes, productivity, and measurable return on their investments. Our investments in AI platforms, Agentic AI solutions and automations are aimed squarely at that shift and we are slowly seeing them translate into wins and better unit economics. Our focus remains on ensuring that revenue growth is accompanied by an improvement in profitability. We are continuing to simplify processes, optimize costs, improve business productivity, and deploy technology more effectively across our operating companies. While headwinds do continue in some of our BSS businesses and margin percentages may see some may see some impact in the second half of the year, overall, we expect the BSS segment to deliver good results for the year as compared to the last year and build on the foundations of the first half of this year. With that, I will hand over to Elizabeth. Elizabeth, over to you for Athena.
Elizabeth Jacob (Athena): Thank you, Amitabh. Good afternoon, everyone. I am pleased to share Athena's progress during the second quarter of financial year '27. The customer engagement industry continues to evolve with experimentation around AI. Enterprises no longer evaluate engagement partners on cost alone. They are increasingly prioritizing customer experience, speed of response, conversion rates, and measurable business outcomes. This is where Athena is focusing its capabilities along with its own pilots and experiments around AI. For Q2 Q2 financial year '27 Athena reported revenue of INR 29 crores with EBITDA of INR 5.5 crores and an EBITDA margin of 19%. PAT was INR 3 crores, up 24% year-on-year. Performance for the quarter was in line with our internal plans and margins were sustained with an upward trend. We had no client losses during the quarter, which is important after the client attrition we went through in the earlier year due to their own restructuring. The quarter also benefited from the two new client contracts that started in July, each with an initial tenure of two years. Together, these mark a cautious return to growth for Athena. We've also signed two new clients in the BFSI sector in October. These will ramp up gradually and start contributing to revenue from the up from the quarter upcoming quarter. On Agentic AI, our efforts are now slowly translating into revenue. Both of our Agentic AI deployments are live and generating revenue. The first for a BFSI company supports outbound lead generation. The second for an industrial company runs service campaigns that capture customer feedback on its offerings. Together, they show that our Agentic AI solutions can be used across different industries and use cases. Both deployments come out of a proof-of-concept pilots that we had completed last year and moving them into paid, live programs within a few months is an important reaffirmation of our work in this space. We are also working with several existing clients to expand
Elizabeth Jacob (Athena): tion of our AI-based solutions. These programs typically take two or three months to get approved, and our pipeline gives us confidence that they will translate into meaningful business over the coming quarters. For us, agentic AI is not a replacement for our core services, but an addition to them. It allows us to offer clients a blended model where AI handles high-volume repetitive interactions, and our team focuses on conversations that need human judgment. It is also allowing us to tap into markets that we were absent from earlier, such as service calls. Diversification beyond BFSI remains a strategic priority. We continue to build our presence in real estate, retail, consumer products, manufacturing, and other emerging sectors. This broadens our addressable market and reduces concentration risk. BFSI concentration has already come down from 85% in financial year '25 to 80% in financial year '26, and the new sector wins will help us continue that trend, even as BFSI remains as an important and profitable part of our business. At the same time, demand for omnichannel engagement across voice, email, chat, and messaging continues to grow and our technology-led delivery model positions us well to capture it. Looking ahead, we are on track to deliver on our plans for the year. We will stay focused on converting our pipeline, ramping up a new client, expanding into newer industries, and building AI into more of our service delivery. Thank you, and I will now hand over to to Sunil Munshi, CEO of Denave. Sunil, over to you.
Sunil Munshi (Denave): Thank you, Elizabeth. And, good afternoon, everyone. I am pleased to share Denave's performance for second quarter of FY '27. While enterprises, especially in technology and IT firms, remain circumspect in their discretionary spending, however, the we see that they are increasingly linking sales and marketing budgets to measurable outcomes, such as qualified pipelines, sales conversions, revenues, so on and and so forth. This plays to Denave's strength, especially as a technology-enabled revenue execution partner. For Q2 FY '27, Denave reported revenue of INR175 crores, up 17% Y-o-Y. EBITDA stood at INR10 crores, up 110% year-on-year, with an EBITDA margin of 5.6%, compared with 3.2% in Q2 FY '26. PAT stood at INR8.5 crores, up 160% Y-o-Y. Growth in the quarter came from both demand gen and field marketing services. In Q1, we had flagged margin pressures in demand gen. In Q2, the the business that business has done better, because much of our demand gen server revenues is tied to client outcomes, better delivery supported by our AI tools earned us higher outcome-linked incomes. The demand gen business continues to face headwinds and uncertainty, but we are positioning ourselves for long-term success. Field marketing services, at the same time, kept growing steadily. Our technology services did well, and continued cost discipline has supported the margin growth. Field marketing services continued to gain wider acceptance among clients, reflecting growing demand for integrated sales and marketing solutions. As we discussed in Q1, the businesses operates this business operates at lower margins than demand gen, but, however, it brings us recurring engagements, deepens our relationships with large enterprise clients, and give us more opportunities to cross-sell our digital and other demand gen offerings. IntelliBank, our proprietary AI-led sales intelligence platform, is central to all this. It brings intent, enterprise, technology, and engagement data together into one view of each target account, so that sales team can focus on the accounts which are most likely to convert. It maps the key decision-makers within each account, recommends the next be- best action, and generates outreach content, such as call scripts, personalized email sequences, so on and and so forth. This product is continuing to show promise, and we continue to invest and focus in it. We also ran several AI pilots with demand gen clients, and are now scaling this digital workforce model across the demand gen sales life cycle.
Sunil Munshi (Denave): In practical terms, what this means is that AI agents take take on research, qualification, and follow-up tasks, while our people focus on high-value conversations that connect the pipelines into revenue. This improves conversion for clients and improves productivity for us. And this shift towards AI enablement, outcome-based sales engagement is structural, and Denave is getting well-positioned for it. With that, I'll hand it the call back to Mr. Amitabh Jaipuria for an update on Matrix.
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