Earnings Call Transcript - XNSE:INDGN 2026-10-30

Operator

Ladies and gentlemen, good day and welcome to Indigen Limited's Q2FY27 earnings conference call. As a reminder, all power spin 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. Abhishek Agarwal, Head Investor Relations. Thank you, and over to you, sir.

Abhishek Agarwal, Head of Investor Relations

Thank you, Moderator. A very good morning to all of you, and thank you for joining us today for Indigene's Earnings Conference Call for the second quarter and half year ended, financial year 2027. Today we have with us Mr. Manish Gupta, Indigene's Chairman and CEO, and Mr. Suhas Prabhu, CFO, to share the highlights of the business and financials for the quarter. I hope you have gone through our results release and the investor presentation which have been uploaded on the website as well as the stock exchange website. The transcript of this call will be available in a week's time on the company's website. Please note that today's discussion will be forward-looking in nature and must be viewed in relation to the risks pertaining to our business. After the end of this call, in case you have any further questions, please feel free to reach out to the investor relations team. I now hand over the call to Manish to make his opening remarks.

Manish Gupta, Chairman

Thank you, Vishayak, and good morning, everyone. Let me start as I usually do with the industry. For the first time in several years, the major signals are pointing the same way at the same time. Capital is back, approvals are at a record pace, the pipeline is large and later stage, and AI has moved onto the operating agenda of almost every large biopharmaceutical company. When these turns turn together, they affect compounds. More funding means more trials, more trials mean more launches, and every launch means content, evidence, and engagement. Let me take you through these four shifts and what each means for Indigene. The first one, capital and lean making our back. Through August, pharma and biotech funding rose about 85% year-on-year to over $69 billion. Biopharma M&A roughly doubled to around $194 billion, and licensing and partnership deal value already exceeded all of 2020-25. Every acquired or newly funded medicine needs a commercial and medical home, and increasingly companies partner for it rather than build it. AI amplifies this. Productivity gains are being redeployed into more content, more personalization, and more channels. And the value accrues to those who own the domain, data, the workflows, and execution. That is the indigene model. The second one, a record approval pace and faster reviews. The U.S. regulator has approved 45 novel medicines so far this year, ahead of the pace of 2023, which was a record year. Priority vouchers are cutting review times for selected medicines from about a year to one and a half to two months. Faster approvals mean regulatory, safety, medical, and launch. Work must be ready in parallel. This is exactly where our capabilities come together. The third one, a pipeline that is larger, later stage, and more complex. About 12,700 molecules are in development globally, more than two and a half times the level of 2015. Growth is stronger, the strongest other in the later stages. Phase two is also up almost 18% and medicines awaiting approval are about 30% the highest on record. These are the launches of the next two to five years. The science is also much more complex. Peptides, Antivariate drug conjugates, mRNA, and cell and gene therapies are growing fastest, and each needs deeper scientific content, medical education, and safety communication. At the same time, more than $40 billion worth of revenue faces patent expiry over the next decade. For us, that translates into demand. In-market, brands must work harder for longer. The next launches must land perfectly, and acquired assets must be integrated fast. The last one is reallocation. Large pharma is restructuring, but this is not the industry spending less. R&D spending remains above historical levels. The industry is spending differently, redirecting savings through restructuring to later stage programs, acquisitions, AI, and commercialization, moving from fixed in-house costs to flexible partner models, and consolidating vendors. That favors a scale integrated partner. We recently, in September, had the 2026 chapter of our Indigene Digital Summit, and in this, we heard the same from our customers in Philadelphia, with more than 120 senior pharma leaders and 40% higher pharma participation than last year. The question had moved from whether AI can work in pharma to how to scale it and with whom. Two themes stood out. Operating models matter more than tools. AI succeeds when workflows are redesigned first and business owns the outcome. The second one is the physician front door is changing. Doctors increasingly find information through AI tools. So, evidence quality and scientific credibility now drive influence. Now, closing the industry view, so if you bring all this stuff together, capital is back, approvals are at record pace, the pipeline is deeper and more complex, and the larger companies are allocating, are reallocating towards flexible partnerships. That means more medicines reaching market, more complexity per medicine, and a premium on partners who combine deep domain depth, technology, and global scale. The industry is moving towards exactly the kind of work Indigene was built to do. With that, let me move to performance for us in this quarter. Q2 was another quarter of consistent progress. Revenues came in at 11 to 3 million, up 39.5% year on year, and 5.6% sequentially. Sorry, that makes five consecutive quarters in which we have grown more than 5% quarter-on-quarter in IANA terms. And what I find most encouraging is how evenly this growth is spread across our client base. Our top five accounts grew 9.2% sequentially in IANA terms, and our top 20 accounts grew about 6.7%. It is still early, but our largest client relationships are starting to move upwards. The work we have been building with these clients is now steadily showing up as revenue. Outside of the top 20, growth continued as well. So our biggest relationships and our newer ones move forward together this quarter. This is the balance we have been building towards. The numbers at each quarter, at each rung of the client base tell the same story. We now serve 107 active clients, 31 more than a year ago. Clients contributing of a million dollar a year rose to 59, up from 54 last quarter. Clients above $10 million now are 30, one more than last quarter. Each of these relationships became small and grew as clients frustrated us with more of their work. Proactivity is also rising alongside. The revenue per employee on a traveling 12-1 basis is USD 79,600. This is up from around USD 69,000 a year ago. We are growing revenue faster than headcount because most of our delivery now runs on our JNI-enabled platforms and more of the work is priced on output and outcomes rather than on time spent. The two reinforce each other. As JNI lifts productivity, output-based pricing lets more of the gains show up in revenue per employee. Let me come to new deal wins, a new business. We had a good quarter in terms of deal wins. Nine deal wins with annual contract values about $1 million, including three large deals, one in the $5 million plus range and two in the $3 to $5 million range. Let me start with the enterprise commercial which saw most of the action. In the largest new deal win of this quarter, we won a mandate from our existing top five customers to migrate the content platform in new geographies outside the US. This is an expansion in scope of the mandate we won last quarter to migrate the content platform in the US. While the work commences in Q3, the ramp-up will likely impact Q4 and beyond. First in the $3-5 million range is the one I mentioned in our last call. A top 20 pharma company had bought us in for a change management consulting engagement. Last quarter, we described it then as a sub-million dollar start with a real room to grow. One quarter later, it has become a mandate to set up a global content factory across commercial and medical content for the company's international business. This is the path we want our engagements to follow, earn trust on a focus piece of work, and take out the operating model that comes after it. We are very excited about this opportunity. Finally, the last deal winners from a top 30 global pharma company to manage their global digital content. There we are replacing a large incumbent. This is another deal which has tremendous potential to grow in the future. Coming to the deals in the $1 to $3 million range, we continue the expansion of our GNI-enabled Tectonic model with our largest customer with a deal win for the Canada market. Let me remark on Tectonic for a moment over here. With our largest customer, the Tectonic model was contracted starting with Germany at the end of last fiscal. Last quarter, it extended to Spain. This quarter, the client took it across the Atlantic to Canada. That is three markets in three successive quarters, and the first one outside Europe. While Tectonic wins continue to accumulate with the largest customer, the ramp-up in this case remains slow. However, we continue to invest resources and effort into driving change management and adoption within the customer's operations across all markets where we have won. Beyond Tectonic, our push upstream in the content value chain delivered another success, this time through our Gen AI-led agentic AOR with a top 20 pharma company, where an initial pilot, which we had spoken about earlier, turned into a full-skill engagement north of $1 million. What makes this deal instructive and interesting is how it began. The relationship started with our tectonic offering and evolved into agentic agency of record. I highlight this because it shows our content engagements can now start anywhere in the value chain, strategy, studio, production, and then move upstream or downstream. In fact, the lines are blurring to the point where agentic, AOR, tectonic, and production work, we believe, in the future might not be no longer distinct. We signed four more deals in the one to three million dollar range split evenly between enterprise commercial and enterprise medical segments. Besides these new wins, we also had a successful extension of an ongoing deal. A fast-growing U.S.-based emerging pharma company had partnered with us in Q3 last fiscal to assist them with new product launches. We have signed, we have now signed multiple additional work orders, aggregating 3 million plus to continue assisting them with their launch activities. Taken together this quarter was a testament to Indigen's domain expertise, a validation of our newest solution approach to solving our customer needs across different areas and across different segments and spectrum of customers. Continued win with our JNI-enabled offerings, Tectonic, Agentic Agency of Record, confirmed that our strategy to move upstream has found recognition in the market. It also puts us in the path of broad balance growth, more clients, larger clients, rising productivity. Let me now move to Biofarm acquisition. And the reason I do it, it's on October 1st, Biofarm completed first year as part of Indigene. And it was, of course, a reasonable size acquisition from our perspective. When we announced this acquisition, we had provided two strategic reasons that together we would become a powerful player in data-driven omni-channel and brand activation. You also said the combination would unlock real revenue and cost synergies across a shared client base. One year in, we are making progress on both. We have planned to transition, finance, HR and IT and legal close out the seller's transition services by the end of March. We finished that by the end of February with no disruption to client engagements and strong When we did the deal, as said, this was a team that would be very difficult to hire in the United States. The team is with us and now fully part of Indigene. On cost energy, we have realized around one and a half million in annual savings and we reinvested these savings in growth, most visibly by expanding Bioform's go-to-market team from three to nine people. Now to growth. A year ago, many of you had asked why BioFarm's revenue broadly fat for a few years would change. Our answer was that business had been run primarily for margins with very little support, and Indigene's sales engine, technology, data, and management teams could unlock much more. The early evidence is encouraging. The second tranche of payment requires revenue growth in excess of 15% in calendar year 2026 over 2025. And based on the current trajectory, we expect the payout to be close to maximum amount. A reflection of how will the integration and growth have come about. Just a caveat, we have already provided for this entire amount in our balance sheet. The biggest story is what Biofarm has done for the rest of Indigene. We are including Biofarm's capability in existing and new enterprise omni-channel engagements. Its data and targeting capabilities are now giving us an edge in some of our largest pursuits, which sit in our pipeline right now. Data and AI is a dimension in which long-term value can be created. Tandem brought us over 20 years of proprietary data on how physicians respond to promotions, spanning more than 300 million exposure events and 50 million engagements. It expanded our physician profiles from 1.8 million to over 3.6 million, with much deeper coverage in oncology, rare diseases, and ophthalmology. We have combined Tandem and Invisage in our audience intelligence platform, part of the indigene data universe that forms the data foundation of our AI stack beneath cortex. It is already at work beyond omni-channel in the GenteQR, our AI-led agency model. It powered research using synthetic key opinion leaders, competing in days, what a traditional agency takes months to do. A year ago, we described this combination as more data, more engagement, more brand impact. One year in, we are seeing all three. Firefarm is no longer an acquisition we talk about. It is a capability embedded in how we win. And we believe its biggest contribution to Indigene is still ahead of us. With that, let me request Suhas to take you through the financials in detail. Over to you, Suhas.

Suhas Prabhu, CFO

Thank you, Manish, and a very good morning to all participants on the call today. Let me start with revenue. Revenue for the second quarter was rupees 11,000 to 23 million, or U.S. dollar 117.5 million. In dollar terms, that is a strong growth of 27.5% year-on-year and 4.4% sequentially. EBITDA came in at rupees 1,873 million, up 32% year-on-year, at a margin of 16.7%. I want to put that figure in context because the more important story is what the quarter absorbed. The second quarter is when our annual wage increase take effect, And this year, the wage hike impacted margins by about 150 basis points. Improved productivity and favorable exchange rates have largely offset this impact. In July, we told you this quarter too would break from the usual pattern, and it has. Beyond EBITDA, other expenses were as anticipated and largely in line with the past quarter. However, interest income was down 44% sequentially from Rs. 237 million to Rs. 134 million. While the invested funds largely remained constant quarter-on-quarter, the markdown in our mutual fund portfolio NMEs due to the increase in interest rates towards the end of the quarter compressed the near-term yields. The quarter-on-quarter impact of lower yields impacted PPT by about 90 basis points and PAT by about 70 basis points. Coming back, the annual wage hike is already in the base. The impact of productivity workforce transformation initiatives combined with operating leverage is anticipated to have a favorable impact on EBITDA in the coming two quarters. Looking ahead, we also expect some of this quarter's pressures below the EBITDA line to ease. Amortization charge will reduce in quarter three and beyond. We anticipate yields to increase with the higher interest rates prevailing, combined with a conscious shift in the investment portfolio towards a higher allocation to head to maturity instruments which reduce volatility. Taken together, these should impact PBT positively, aggregating up to 90 to 95 basis points. This would help our back margin expand faster than our EBITDA margin in the coming quarters. Profit before tax was Rs. 1474 million. With the effective tax rate steady at 23.8%, Profit after tax came in at rupees 1,123 million, or 10%, also up 10% from a year ago. Coming to the business mix, the business mix was steady, with enterprise commercial contributing about 71% of our revenue, and enterprise medical 25%, followed by others at 4%. By geography, North America continued to be the highest contributor, accounting for 74%, followed by Europe at 23%, and the rest of the world, 3%. Our largest customer today represents 7.8% of revenue, and our top 10 together make up 49%. Let me delve a little deeper in two of our larger relationships since you'll see the movement in the aggregate numbers. Revenue from our largest customers likely eased this quarter as the tectonic engagements that we signed with them are ramping up more gradually, though the scope we contracted keeps expanding. The contracted business, as Manish described, keeps growing, and as execution catches up, we expect revenue from this client to return to an upward path. Separately, one customer moved from the $25 million plus cohort to slightly below. This customer had moved into the $25 million plus cohort two quarters ago, and the drop is a small variation in the quarter-on-quarter volumes. We believe this is a temporary drop given that the largest win this quarter, The $5 million plus win that Manish mentioned is with this customer, and as the deal ramps up, we expect the customer to get back into the $25 million plus cohort in the coming two or three quarters. Despite these two movements, our top 20 accounts grew 6.7% sequentially in INR terms and shows strong growth in our top 20 accounts beyond the two that I already spoke about. Coming to the DSOs, the DSO's net of unearned and unbilled revenue was slightly higher at 69 days, up two days, and cash and investments stood strong at rupees 13,896 million. With that, let me close with the margin path. Our outlook remains unchanged. We continue on the path to quarterly EBITDA margins of 19% plus by the fourth quarter of this year. Three things give us confidence. First, this year's wait cycle is now fully in the pace. Second, the outcome-linked omni-channel contract with one of our large customers has progressed positively in the first two quarters. Third, we have deal wins during the quarter, as well as a healthy pipeline going into H2. As they scale, the go-to-market and delivery investments that we highlighted in the past and we made ahead of time begin to pay off. And as all of this play out, margin growth in H2 is likely to outpace the revenue growth as we exit quarter four. With that, let me pass it back to Manish for the outlook. Over to you, Manish.

Manish Gupta, Chairman

Thank you, Subhas. Before we open the line for questions, let me close with where we believe we are headed. While we do not provide formal guidance, I want to restate two goals we had set for ourselves and discuss with you all. First, organic growth rate better than FY26. With our biggest relationships and our newer ones moving forward together, as we did this quarter. That is the balance we've been building towards. The second one was our quarterly window margins packed in our historical range by Q4, as Sohas mentioned. As our go-to-market investments and successes and deal wins get into full-scale execution reflecting in the revenue through this period. Our focus for the rest of the year is clear. Working on these two objectives, both are underway, and they keep us firmly on track for our FY27 goals, while building a strong foundation for FY28. Looking further ahead, our enterprise commercial business is entering an important new phase. Five years ago, we set out to move upstream in the commercialization value chain by fundamentally changing how pharma approaches content from strategy and creation to production and deployment. We have since built the pieces required to make that vision real. Tectonic and Agentic AOR and Omnichannel have expanded our presence upstream and downstream, supported by capabilities, actually supported by technology built organically, a lot of capabilities that were built organically and through acquisitions, such as Cult Health, MGL, and Cake, and very recently BioPharm. We are bringing together Invisage and Tandem into a strong audience intelligence capability and integrating that data with industry-specific platforms, contextualized workflows, and AI embedded throughout the way we work. It has taken time to build this model because we are defining a market, not simply entering one. But now we believe we are, now we believe we are in important information points. Things can be, can increasingly enter our ecosystem anywhere, from strategy to creative to production, and expand, and expand across the value chain. Over time, we believe the distinctions between agentic AOR, tectonic, and production will matter less. The destination is one integrated AI-led content model spanning the entire commercialization value chain. That is where we intend to keep investing, and we see this as an important growth opportunity for the next few years. To sum it up, where we stand, exactly a year ago, on the same call, we told you we are making deliberate ahead of the curve investments. Last quarter, we told you we were genuinely confident how they would pay off. Today, that confidence is turning into evidence. Stronger industry demand is moving from testing to scale. A broader and deeper client base, an acquisition that is delivering, a second half where growth and margins come together. The building blocks are in place. The momentum is real, and we believe the best is still ahead of us. With that, let me hand over to the moderator to open the line for questions. Thank you so much.

Operator

Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask questions may please press star and 1 on their touchtone phone. If you wish to withdraw yourself from the question kit, you may press star and 2. File spits are requested to use only handsets while asking our questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. You may please press star and want to ask questions. The first question is from the line of Vinay Menon from Monarch Capital. Please go ahead.

Vinay Menon, Analyst — Monarch Capital

Hi, thank you for the opportunity and congratulations on a great set of numbers. A couple of questions from my end. If you can just mention the run rate for Tectonic, which you view on a quarter-on-quarter basis, that would be helpful.

Suhas Prabhu, CFO

Suhas, do you want to take this? Sure. Good morning, Gavin. Thanks for your question. So, Tectonic has grown from a run rate of about $1 million a quarter to $1.7 million this quarter. And the contracts, as we mentioned, have actually crossed a level of more than $2 million a quarter as we look ahead.

Vinay Menon, Analyst — Monarch Capital

I'm sorry.

Manish Gupta, Chairman

Please proceed, sir. Yeah, but if I just elaborate a bit more on that, Vinay, as I mentioned, we were talking about tectonic. It is still very relevant. But today we are seeing these in agentic AOR, a combination of tectonic, a bunch of things, right? And as I mentioned, the lines are blurring and enabled by AI, of course, things are changing fast. We continue to be on top of these. The good news is today we are winning from all sides, right? The highest side of agentic AOR, the lowest side of content production, and the middle of on the tectonic thing. And any company working very actively with AI would vouch that things are changing fast. So you've got to be on top of it, and we are.

Vinay Menon, Analyst — Monarch Capital

And on the receivables part, I just seen that the unbuilt revenue has jumped. Is this also on account of more outcome-based kind of revenue which we are expecting in H2 and and could this be the trend going ahead with with the change in the way we kind of look at the business?

Suhas Prabhu, CFO

And again, I mean I this is typically a quarter where we also see slight delays in customer confirmations given that it is summer time both in Europe and the US where we derive most of our businesses from. Last year, the same quarter was actually above the trend, so to say, but we believe going into quarter three and quarter four, we would see the AR and the unbilled, more importantly, coming back to what we see normally. Of course, outcome based contracts do have milestone payments and billing and payments, and therefore, there would be some timing related variance is unlike monthly billing that you would see on plain vanilla time and material contracts, but we do not anticipate that to be materially different from what we have seen, and therefore, the net DSOs, as you see, We are varying only by two days, from 67 days to 69 days, and therefore, we don't anticipate this to be materially different.

Vinay Menon, Analyst — Monarch Capital

Okay, that is. And one last question is that, you know, we've seen, you know, at the Frontier Labs, especially Anthropics, you know, announced supply partnerships with pharma companies where they are working on drug discovery. Now, is this like, are we also looking to partner with like a frontier model or is this, is this some kind of a threat to even our model of working?

Manish Gupta, Chairman

You don't see that as a threat to our model of working. We are partnering with a lot, we actually have put a dedicated partnership team in place in the US and India and are partnering with multiple players in the tech broader ecosystem. There's definitely the Frontier Labs, but also many other tech providers, right? When I say tech providers, I'm talking about the technology companies, right? And we believe that it's going to be important for the Frontier models and all these companies for the last mile. And really, as I said, the theme even in the Indigenous Summit was that you've got to redesign the workflows, the skill sets, right? The technology is the easier part over here, and that's where a company like us fits in. So, most of the technology companies will have to partner with companies like us. So, it's an amazing opportunity for us. Okay.

Vinay Menon, Analyst — Monarch Capital

Okay. Thank you. Thank you. That's all my questions, and all the best. Thank you.

Operator

Thank you. We'll take the next question from the line of Rolene Nandu from Idlibai's Public Alternators. Please go ahead.

Rohit Nanda, Analyst — Elara Advisors

Yeah. Hi, Manish and Suhas. A couple of questions from my end. On the tectonic, right, you mentioned the ramp-up at your largest client end is slightly slower while the scope of work increases. So could you help us understand why is that the case that, you know, both are happening at the same time where the ramp-up is slower, but the scope is increasing? And in that, on Tectonic, since you said that the lines are blurring, right, as to how you win the deal or engage with the client, how do we then think about an ROI on some of the investments that we have made specifically on Tectonic?

Manish Gupta, Chairman

We don't, we made some investments in Tectonic, but Tectonic is not a standalone business unit or whatever it is, right? So, I will not measure ROI on tectonics standalone, right? A $2 million kind of a thing, measuring ROI on that standalone does not even make sense. And the reason we did it is not for the $2 million thing. But we are moving upstream, right, from what we are doing on content and various other things. Now, what we see, two things. One is that it was moving a bit upstream, but we also have proof points are moving at the high, at upstream at the highest end, which is the agentic EOR concepting, right? We have cracked that and we have won deals in that space. So the entire value chain, how do we capture? That's the important thing for us, right? And we were, of course, we'll be measuring ROI at that level. And we are very bullish of what we are seeing over there. Now, coming to the client per se, why is this happening? Here are the dynamics that play out. There's a central team, right, and executive leadership which wants to drive more centralization. That gets reflected in the signed orders, right? But now local geographies and every therapeutic areas have brand teams, right, Which have been working on a decentralized model for a very long period of time. Getting that organizational dynamics right in these very, very large companies takes time. And given it's a new area, and we've seen this in the past, 15 years back or 10 years back, the same customer when they started the journey with us, it was not a linear path, right? And hence, we are not worried. We see the change management takes time. And the central teams and the brand teams, this dynamic will play out, right? Over time, change management will settle, and things will progress in the way of more centralization. But that dynamic is playing out right now, and hence you see this divergence.

Rohit Nanda, Analyst — Elara Advisors

Sure, that's very clear, Manish. Thank you so much. And also, you know, based on your answer, right, You mentioned that you have won a significant deal on the Gen AI-enabled transformation and upstream engagement as well. And you also mentioned you have cracked that Gen AI, you are right, which is a step upward on the upstream journey than what a tectonic would have done. So could you give me some more contours of this particular deal? What is the JNAI element in this, and how difficult it would be for some of the large frontier models to get into a similar domain or win similar kind of a deal from your friends?

Manish Gupta, Chairman

And we have spoken about this in one of our earlier calls. If I'm not wrong, this happened in our Q4 call. That's when we had done a pilot with one of our customers, where we challenged the customer who was working with the agency for one of their launches to continue to work with the agency, but do a parallel pilot with us, right, for concepting, which means that how are they going to do it? So launched a new molecule, what positioning to take, what doctor segments to go after, right, what messages, what creatives, and when I say messages, I'm talking about the scientific messages. Now this entails looking at the clinical data of this molecule, the clinical data and claims, right, the computing molecules are making the entire space from a therapeutic perspective, and then coming out with the right scientific messages, the right creatives, the right physician profiles. It's that typically agencies take a couple of months to get this done, right? And obviously, it's a fairly expensive process, very iterative process, large team involved from agency side. We had a discussion with the client that we would do this with you in few-day workshops using our agentic approach. We, of course, we did a bunch of things from them and had to come prepared for this. We did that, and the client was even saying that if you get it 60% to 70% of what agencies We will be very happy. And what they saw after a couple of days was much better than what an agency would do, right? In three-day workshops. We did that. And after some point of time, we were called back to essentially handle a bunch of things for this molecule, right? We became the primary agency. And as we speak, we have the next level of meeting set up right now to see how we can work with this company at a much more enterprise level using this approach. So that's one. And this is one thing which has evolved over the last six months. Our teams are busy doing a lot of these workshops and discussions with multiple clients right now. As you can see, this is first in the industry and nobody's close. Right. And that's what we're taking to the industry today. Right. And let me be also realistic. It's a change of approach how to do things. And of course, it will take its own time. Now, your question about frontier models, there are lots and lots of nuances, right, of how pharma marketing is done, right? We have, what we did in three days took almost two to three years to build for us, right? The nuances of how pharma marketers, creative folks, some of the medical directors think, right? Our experts sitting with some of the folks in the agencies, which we had acquired, creating knowledge engineering graphs internally, using Cortex, then building all that stuff into the workflows and agents. So, it was a very fairly long process, which required a lot of nuanced understanding, and of course, designing the workflows, the agents, right, the checks and balances. It's fairly elaborate.

Rohit Nanda, Analyst — Elara Advisors

Thank you so much. Just one last question, right, from my side. This engagement model that you mentioned in your slide, 60% plus of the revenue is based on outcome aligned. What is the cap to this number based on whatever impact you are investing in and how you see the industry moving, which you mentioned at the beginning of the call? What is the, you know, theoretical cap that one can put on this number? How much more can it grow? It'd be 80-90% of our revenue for years time?

Manish Gupta, Chairman

It's a difficult question to answer, right? There would be some level of FT layer, which will be primarily, now in our case, most of that is not FT is offshore, right? In a location like India, but if these will be experts, as I mentioned earlier, omnichannel orchestrators, brand liaisons, brand managers, right, or regulatory experts in different markets across the world who become the custodians, right, an orchestrator to manage a lot of the work which are being done at scale using AI enabled workflows, right. Now, a lot of AI-enabled workflows can grow. How much exactly? I won't hazard a guess over there right now, right? There is a lot of work to be done. But Suhas, you want to take an attempt to add more color to this?

Suhas Prabhu, CFO

Sure, Manish. And, yeah, while it's difficult to guess where it would cap, what we can mention is that most of our wins in the current quarter have been output or outcome-based rather than FTE-based contracts, but for one. And, you know, that gives us confidence that this number would keep treading upwards. And we are also making a focused effort to convert our pure FTE contracts into a hybrid contract with a mix of outcome-based as we head into the renewal cycles for these contracts. So, we believe that this will keep moving upwards here.

Rohit Nanda, Analyst — Elara Advisors

Thanks, Manish and Shubhas, and all the very best. Thanks, Raleigh.

Operator

Thank you. A reminder to all the participants that you may please press star and want to ask questions. The next question is from the line of Renga Varshini, K from Wealthified. Please go ahead.

Ranga Varshini, Analyst — Kotak Institutional Equities

Good morning, sir. Congratulations on the good set of numbers. My first question is on the tectonic side. Which geographies are you targeting for its expansion, and how do you see the opportunity shaping up across these markets? That's my first question, sir.

Manish Gupta, Chairman

Tectonic, at least right now, what we see, most of our demand is, of course, the United States, North America, I would say, And some of the large European markets, right? Spain, Germany, UK, those are places they have won, and it would be in those large geographies.

Ranga Varshini, Analyst — Kotak Institutional Equities

Understood, sir. My second question is, we are seeing large players like TCS expanding into Lifetime through their platform TCS ad, Advanced Dark Discovery, which overlaps with our EMS segment offering. So, how do you see competition from IT companies, and what plans do we have going forward?

Manish Gupta, Chairman

We are right now fairly involved in the market and broad coverage. In our transparency, we don't see IT too much, at least in the kind of deals we compete on. Of course, IT companies are there more on the CIO side. We are selling to marketing folks, chief marketing officers, chief medical officers. That's a place where we continue to get more strategic, more traction, right? And some of the discussions I had on various things, we don't see how IT companies playing there. At least we don't see them today at all. That's not a segment we worry about too much. As I mentioned earlier, the place from a competitive perspective, the sectors which we compete with are agencies and CROs, which are much more domain-focused.

Ranga Varshini, Analyst — Kotak Institutional Equities

Understood, sir. Thank you very much. All the very best.

Operator

Thank you. The next question is from the line of Satish from Kotec Institutional Equities. Please go ahead.

Satish, Analyst — Kotak Institutional Equities

Hi, Manish and Swaz. Congrats on excellence, Satish. A couple of questions. First is regarding the 10 million ACV deal which is entirely outcome based, I mean, is there any contribution, I mean, significant contribution of the deal already in the revenue numbers and will it fully ramp up in the next quarter? And the second is if you look at the growth composition this quarter across service lines, enterprise medical was on the weaker side, whereas commercial was strong. So, will commercial continue to grow faster than medical in the coming quarters and what explains the stronger than other segment and, you know, can that grow at company average in the future?

Manish Gupta, Chairman

So, I'll let Swas also talk about this, but the $10 million deal, some small amount has been recognized this quarter, but most of our contributions are still ahead of us, right? So, we are fairly comfortable on what is going to recognize and larger portion is going to be recognized in H2. That's one piece. So, you want to add on anything to this and any other part?

Suhas Prabhu, CFO

Sure, and Satish, we believe that our quarter four is when any two up on this contract would show up, Given that it's a full year threshold that we have to meet and beat on the outcomes to be able to be certain on the full revenue recognition. And this being a calendar year recognition, it would be February or March by the time we get the data locked and the customer confirmation. And therefore, our quarter four is when we anticipate this to show up more meaningfully.

Satish, Analyst — Kotak Institutional Equities

Can you do the second part of the question, right, Mr. Yeah, second part of the question was regarding service line growth in which medical was on the weaker side and we saw strong growth in other segment. So, the question was that whether the growth in other segment is Is it because of volatility or you know will it go and line at company average in the future? And second is you know will the strength in commercial you know continue to you know make it grow faster than medical in the future?

Manish Gupta, Chairman

Actually you're right now the reality is we are seeing a lot of action on commercial side, right? So not in and we continue to make significant investments in medical as well, But for the next let's call it few quarters, we might see higher growth rates in commercial. And on other swath, I'll let you step in, other income, other segment.

Suhas Prabhu, CFO

Let me just to elaborate, Satish, even the current quarter of the quarter two deal wins are a A little more skewed towards commercial, though we saw two million dollar plus deal closures in medical, therefore we anticipate over the next couple of quarters or so that commercial will outpace the growth in medical. Medical coming off a very strong growth base in relative terms in the past quarters, but we continue to see a good A number of deals in the pipeline in medical as well, and therefore we remain positive that that would also follow the trend that we are seeing in the commercial. Coming to the others segment, of course, it's a small base as you know, and we had announced a deal in December quarter, Which was a relatively large deal contributing to the clinical segment, which is part of the others segment. While the deal went live a couple of quarters ago, the ramp up happened in the month of August and therefore we saw a meaningful uplift in Relative terms in the other segment and that would get fully annualized in the quarter three which will see a bit more uptake in the others segment due to the the large contract that we had mentioned we closed in December. I hope that explains. Yeah, thank you.

Satish, Analyst — Kotak Institutional Equities

Got that. Thanks for your responses. I'll get back in the queue for further questions.

Operator

Thank you. The next question is from the line of Divyansh Agarwal from Ionic Asset Managers. Please go ahead.

Speaker 11

Yeah, hi. Firstly, congratulations on a good set of numbers. Sir, just maybe on the EBITDA margin, while, you know, we obviously have laid our plans to, you know, try and reach about 19% by the end of this year, Could you just give us a margin walkthrough, like while we mentioned it for Q2, you know, on a quarter-on-quarter basis, how the margins panned out? So if you could give us a small walkthrough on how we see the margins from current of 16.7% go to about 18-19%. Just a small walkthrough, if you can. So, Ash, would you take this? Sure. Thanks, Diniyansh, for your question.

Suhas Prabhu, CFO

We have, as you rightly pointed out, provided a walk on the quarter one to quarter two margins, and while we don't give any specific guidance going forward, I would request you to look at the walk between quarter one and quarter two and the factors favoring which will continue going forward as we anticipate, It being the productivity and workforce transformation, which in the last quarter contributed approximately 85 basis points uplift to the margin and the favorable exchange rate. Now, the exchange rate is difficult to call, but having said that we book a significant portion of our forex exposure for the coming two quarters ahead at any given point in time, about 75% of the two quarter ahead Exposure is already hedged and therefore we are fairly confident that favorable exchange as well as continuing impact of our workforce transformation and the operating leverage as we continue the growth will continue to add positively to the EBITDA margin, both in Q3 and more significantly in Q4, Given that, we also mentioned the uplift in the $10 million outcome-based contract that we anticipate in quarter four.

Speaker 11

Got it, sir. And secondly, on the clients, obviously, while we mentioned that, you know, one of our clients at $25 million plus, you know, could you just, while obviously you have given us an explanation, but could you give us some color? Has there been any re-talks or re-negotiations to maybe start, you know, another leg of business with them or have we like completely sort of maybe, you know, moved on and we are going towards more other client acquisitions in different categories?

Manish Gupta, Chairman

Not really. We mentioned the last quarter of this client and this quarter also one of the deals I spoke about in the $5 to $10 million range, right? Uh, is, uh, with this client, uh, revenue recognition for this will, the client will start, uh, uh, again, uh, I said probably a little bit on Q3, but more importantly in Q4. Uh, so we're very confident that this client will get back to, uh, the $25 million plus. It was just a variation in volumes, which have happened, uh, recently, which has caused the dip. And it was just above 25, right? And then slipping just a tad below 25 has created the degree shift. But it's in the same ballpark with this in our order book right now and got to be executed in the next two, three quarters. We get there soon.

Speaker 11

Perfect. Thank you so much, sir, for answering the questions and all the best for our second half. Thank you. Thank you.

Operator

Thank you. The next question is from the line of Ankur Pant from IIFL. Please go ahead.

Ankur Pant, Analyst — IIFL

Hi, thank you for taking my questions, and congrats on a good set of numbers. My question is, and the cadence heading into 2H. So, 3Q has historically been a good quarter for Indigen as well. And now with 2Q on a solid base, growth, deal wind being strong. So do we expect that in 2H, so for 3Q, the growth will continue to remain or sustain momentum that we have seen in 2Q and further spike up with the ramp up of the $10 million ACV deal in 4Q? Is that the correct understanding as we head into 2H?

Manish Gupta, Chairman

So I, we don't give guidance and especially quarter on quarter, right? This part, all we can say is, I'm going to go back to some of the things we said. We feel, we believe that this year should be organically a stronger year than last year. H2, we believe, would be stronger than H1, right? So, we are fairly confident of H2 given where we sit today.

Ankur Pant, Analyst — IIFL

Sure. And just on the margin front as well, so is it fair to say that earlier we were expecting the $10 million deal to ramp up in 3Q, and now we expect it in 4Q, so the bigger margin jump that we were expecting would come in 4Q? Is that the right way to look at it?

Suhas Prabhu, CFO

So, what we had mentioned was that the revenue recognition would start post two and a half quarters of the project going live, which it has, because the contract started in January. But given that it's an outcome-based contract, there will be a revenue recognition curve, which we believe would result in Q4, being where the revenue would peak. And therefore, that would also have a meaningful impact on the margin as we exit Q4.

Ankur Pant, Analyst — IIFL

Thank you. Thank you. Thank you, Manish. Thank you, Suhaj. All the time.

Operator

Thank you. Thank you, sir. Please and gentlemen, that was the last question. I will now hand the conference back to Mr. Abhishek Kharwal for closing comments. Thank you and over to you, sir.

Abhishek Agarwal, Head of Investor Relations

Thank you once again for your active participation and continued interest in Beijing. We look forward to your participation in the earnings call and such opportunities going forward. I appreciate all your questions once again. Thank you all and have a good day.

Operator

Thank you, members of the management. Thank you, sir. On behalf of Indigent Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.