R Systems International Limited (RSYSTEMS) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the R-Systems Q3 FY2026 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. I now hand the conference over to Mr. Giriraj. Thank you whenever to you, sir.

Thank you, Ikra. Good morning, everyone, and welcome to R-System 23-2026, earning conference call. Before we begin, on behalf of the entire R-System team, I would like to wish all of you and your family a very happy and prosperous Diwali. May this special season bring happiness and good health and continue success to everyone. As our system follows, the calendar year as its financial year, the July to September period, represents the third quarter of 2026. Today, we have with us Mr. Nitesh Pansel, managing director and CEO of our system, Mr. Ngan Sardana, CEO of our system. We have shared the investor presentation yesterday evening and have also uploaded it on the company website and have stopped listening to the website. We hope you have had an opportunity to review it. We will begin the call with the opening remarks from Nitesh on the company's performance, followed by a financial reviewer from Nunn. Nitesh will share his closing remarks, after which we will open the floor for the Q&A session. Before I hand over the call, let me read out the customer disclaimer on behalf of the company. Investors are cautioned that this presentation and discussion during the call may contain certain forward-looking statements that involve risk and uncertainties. Actual results, performance, or achievement could differ literally from those expressed or implied in such forward-looking statements. The company will take no obligation to publicly update or devise any forward-looking statement, whether as a result of new information, future event, or otherwise. With that, I will now hand over a call to Nitesh for his opening remarks. Thank you, and over to you, sir.

Thank you, Giri, and good morning, everyone. Thank you for joining our call. Like I've always said, it's a pleasure for me to be doing these calls and getting your questions. Like Giri said, we've circulated the presentation in advance, so those who are referring to the presentation, I will mention the slide number from time to time. Otherwise, any which way, I'll provide the commentary on how the quarter has been. So, beginning with slide number four for the financial performance of the third quarter ended September, we closed with a strong revenue of 615.2 crore rupees of $64.4 million, which reflects a 23.4% year-over-year increase for 2.2% quarter-over-quarter. The adjusted EBITDA stood at 124.4 crore rupees, or $13 million, which is at an all-time high of 20.2 percent as a percentage of revenue, and records a year-over-year growth of 47.4 percent, or a quarter-over-quarter growth of 3.1 percent. The adjustments, as we have maintained, are largely related to RSU costs or any other non-recording items, which is then carried forward into net profits, which stands at 66.5 crore rupees or $6.9 million, which is a 10.8 percent of revenue or 53.1 percent growth year-over-year, which results in adjusted EPS of 5.6 rupees. Which is a 56% growth over the last year. If you look at the performance over the last eight quarters, this is seven continuous quarters of growth that we have delivered as an organization, while not just maintaining but improving our margin performance in a very sustainable manner. If you look at the margin bridge, of course, currency... Helped quite a bit, adding about 7 crore rupees to the net EBITDA increase. A slight dip in operating margin comes largely from the higher hiring costs, et cetera, of AI talent, as a very large part of the revenues that we are now getting is influenced or leading or led by AI. Moving to slide number five, if I look at, because this is three quarters ending, so this is a Jan to September 26 performance compared to Jan to September 25, revenues for the three quarters ending stood at 1,791.7 crores or $190.7 million, which is a year-over-year increase of 27.7 percent. Corresponding adjusted EBITDA stood at 360.9 crore rupees, or $38.4 million, as a percentage of revenue at 20.1%, and 49.7% increase here over here. Corresponding adjusted net profits stood at 205.1 crore rupees, or $21.8 million. which is adjusted net profit of 11.5%, an increase of 54% over the previous year, and three-quarter adjusted EPS of 17.3 Indian rupees, or a growth of 53.8%. And this, you know, EBITDA bridge, of course, makes things clearer in terms of that we are As we have increased our revenues, it has contributed to the margins as well as got gains due to the currency amounting towards 78 crore rupees, leading to the three quarters adjusted a bit of 60.9 crore rupees. Providing a comparative on slide number six, for those who you are referring to the slides, if we just look at it, this is a quarter-on-quarter comparison with the same quarter last year and then with the previous quarter. Revenue stood at 615.2 crore rupees compared to 498.6 crores in the same quarter last year, which is 23.4% increase, or 601.7 crore rupees in the last quarter, which is a 2.2% increase. Adjusted a bit of 124.4 crores, which is compared to 84.4 crore rupees in the same quarter last year, which is a 47.4% increase, or 120.7 crore rupees in the previous quarter, which is Q2 of 26, which is a 3.1% increase. They adjusted a bit of percentage corresponding to it as 20.2% compared to 16.9% in the same quarter last year. I just said net profit stood at 66.5 crores compared to 43.4 crores in the same quarter last year, which is a 53.1% increase, or 62.9 crores previous quarter, which is 5.7% increase. And the basic EPS, adjusted basic EPS stood at 5.6 rupees compared to 3.7 in the same portal last year, which is 53% increase, or 5.3 rupees last quarter, which is a 5.7% increase. Similar analysis on a nine-month basis. It can continue to slide number seven. Where our nine-month revenue comes to 1,007 and 91.7 crore rupees in 2026, which was 1,403.1 crore rupees in the same period last year, which is a 27.7% growth year over year. Corresponding adjusted EBITDA stands at 60.9 crore rupees or 20.1% for the nine months this year, compared to 241 crore rupees or 17.2% in the corresponding nine months previous year, which is a 49.7% increase year over year. Adjusted net profit of 205.1 crores compared to 133.2 crores for the nine months last year, which is a 54% increase, and adjusted basic EPS of 17.3 rupees compared to 11.3 rupees for the same period last year, which is a 53.8% increase. Coming to our operating metrics, you know, on slide number eight, revenue distribution by geography, no major change. America has continued to contribute over 70 percent at 70.6 percent. APAC has grown slightly from 15.3 to 16 percent. Europe correspondingly has slightly fallen down. It's just adjustment of numbers across the geographies from 9.7 to 9.4. And Middle East and Africa, which contributed 3.6, has grown to about 4%. So broad distribution remains the same. Quarterly changes happen because of, you know, a project here or a project there. Similarly, on a client concentration perspective, our top 10 clients continue to contribute 24.4% of our revenues. Our top client continues to be in the 5.8%, which is the 5.8% to 6% bracket. Top three clients provide 11.9%, and top five, 16.8%. Again, no major change in that distribution. We have picked up on utilization as we started winning more and more AI and data for AI transformation projects. As you would remember, two quarters ago, we had talked about consciously building capacity and bench for our data for AI and AI projects, which we had done. And that bench has, you know, obviously become useful and utilized for us in this quarter. But having said that, what that means is we will further invest in expanding that team, maybe add to a little bit of bench on that so that we can continue to win and serve more and more projects in those spaces. But as the company's strategy, you know, we've continued to maintain our utilization above 80, Which we believe is healthy and for us, you know, a great place to be in order to deliver sustained margin performance. On the DSO front, it's pretty much the same. We maintained 55 days of built DSO, and then combined with unbuilt about 76 days, which is similar to a pretty standard from previous bunch of quarters. Coming to slide number nine, talking about some of the key wins, and this has clearly been a quarter of where we've seen our quality of wins go up and our AI strategy beginning to play out in terms of the nature of deals that we see in the market. The first one is a leading European telecom player who asked us to modernize their mission-critical telecom services as part of creating a next-gen network transformation initiative. And this will basically require us to modernize and transition a lot of their legacy applications to modern cloud-based architectures, improve scalability, operational efficiency, service reliability, et cetera, and doing it very fast using AI in order to kind of enable faster innovation for their services. The second one is where we have collaborated with a world-leading global management consulting firm in the Middle East to deliver a data lake house for a leading housing and real estate organization in the Middle East. This engagement will help establish a unified enterprise-grade data foundation that accelerates AI adoption. So this is all our data for AI-readiness offerings that are coming into play. And that enhances data-driven decision-making and unlocks scalable business value through advanced analytics, machine learning, and agentic AI for the client organization. The third one that we're talking about is where we work with a large financial services provider in Saudi, where we are building a Nugent-based core lending platform. This is where AI or automation is getting into the core of the business. Where we have built the solution architecture, created the digital transformation roadmap. We are doing the application development, tech modernization services, all of which where the engagement spans across innovation, engineering, platform operations, enhanced digital customer experience, et cetera, to provide scalability, resilience, and continuity of business critical lending services across both physical and digital channels. The fourth one is very interesting, where we are working with a large global entertainment and games, both manufacturing and distribution type of company. We are helping them use Salesforce to transform their commercial and customer-facing operations, and with this initiative, they'll be able to unify their key business processes, enhance data visibility, deliver seamless experiences across sales, service, and partner channels, and eventually, with that unified data layer, be ready for more and more AI into their products. And last but not the least, we're working with a large insurance service provider where we are building their host-to-host band connectivity solutions to deliver straight-through processing, intelligent payment orchestration, automated file processing, treasury workflows, operational resilience and efficiency, and maintaining, of course, because it is a regulated industry, governance and regulation across their entire payment ecosystem. All in all, high-quality wins with decent penetration into the core of the businesses of the clients, and these are great leading indicators that, obviously, we are very excited about. Moving to the next slide, the trailing 12-month ACV of bookings, as we have been sharing for the last few quarters, we continued our momentum on bookings quarter over quarter, maintaining this quarter again. We have $82.9 million in TTM ACV of bookings, and this is while changing the business mix significantly with... Not just AI and SDLC, but seeing modernization as well as agentic AI, business ops, types of wins come through. I think with that, I'll hand over to Nand to talk through the detailed financials before I come back to sum up and provide a bit of qualitative commentary and then take the questions. Nand, over to you. Thank you, Ritesh.

Good morning to all. This presentation gives detail of quarter 3 performance. For those referring to investor presentation, slide number 13. Revenue for the quarter was rupees 615.2 crores or $64.4 million as against rupees 601.7 crore or $63.6 million last quarter and rupees 498.6 crore that is $57.2 million in the same quarter last year. This is year-event growth of 23.4%. This is on account of volume growth as supported by rupee depreciation. We have started witnessing the results from our investment in cloud AI and automation in terms of larger conversion, which is supporting sustainable revenue growth. The gross margin was 38.6% compared to 39.2% last quarter and 35.5% in the same quarter last year. Quarterly margins have decreased due to change in revenue mix, slight change, lower utilization in Europe due to holiday season as offset by rupee requisition. SG&A expenses have decreased by Rs. 2.2 crore from Rs. 115.3 crore in last quarter to Rs. 113 crore this quarter. This is primarily due to support count optimization.

The adjusted EBITDA was 20.2% as against 20.1% last quarter and 16.9% the same quarter last year.

The company has been able to report robust margins percentage through operational leverages and favorable exchange aid. We have started getting the fruits of our investment in AI. The RSU cost under management incentive plan is Rs. 3.2 crores compared to 6.2 crores in last quarter. The reduction is due to reduction in counts to whom RSU had been issued. Avidah net of RSU expense is 19.7% compared to 19% last quarter. Getting down to depreciation and amortization, the total expense was Rs. 22.9 crore compared to Rs. 22 crore last quarter. This includes Rs. 10.6 crore for intangible capitalized on account of past acquisition. Non-recrearing expenses are on account of severance payment for certain abundant positions and redundant positions. The interest expense is Rs. 9.6 crore compared to Rs. 9.5 crore last quarter. Other income was Rs. 53 lakhs compared to negative Rs. 87 lakhs in last quarter. During the first quarter of the year, the company adopted hedge accounting for its forward covers. Overall, we had an exchange loss of Rs. 2.1 crore, which is almost same as last quarter. Further, the other income comprised of interest income of Rs. 1.2 crore this quarter compared to Rs. 78 lakhs last quarter. As at quarter, and we had forward cover-off. 46.75 million dollars with average rate of 95.79. Our tax expense was rupees 23.9 crore this quarter as against rupees 24.9 crore last quarter. Our effective tax rate is around 27%. Our normal effective rate, as I have said in earlier, also is between 28 to 29%. Net profit after tax was Rs. 64.2 crores or $6.7 million compared to $55.6 crores or $5.9 million last quarter. Basic EPS for the quarter was Rs. 5.42 compared to Rs. 4.69. Adjusted EPS for the quarter is Rs. 5.6 as compared to Rs. 5.3 last quarter. With that, let me hand over back to Nitesh for his last slide.

Yeah, thank you. Yeah, coming to the – summing up how the quarter has been and looking ahead, what the trends are telling us. First and foremost, I'm very happy with how Execo, our AI studio, and our library of reusable industry templates and the agent frameworks have been received by the market. It has strengthened our position across the key markets in industry verticals, and that is reflected in the quality of recent wins and the pipeline that is building up. A number of clients are moving from experimentation to production-grade deployments. Which, of course, helps us because these are our clients and they're moving into production. And our focus on building the scaled enterprise-grade AI solutions leveraging Execo with these successful productive implementations helping clients achieve measurable business outcomes. So we are now beginning to see clients achieve ROIs and clearly move more strongly towards adopting AI. In terms of trends that we see shaping not just the remaining part of this quarter, but the year to come, AI PDLC, which is the AI in product development lifecycle, is fast replacing the SDLC as it used to be, the software development lifecycle across the board. Client organizations want to adopt AI PDLC. They are struggling in some manner to change their entire organization to embed AI PDLC in their ways of working. And a lot of them are turning towards people like us, like RSI, to set up the tools, the trainings, bring in the best practices, and run parallel AI pods in order to be the catalyst to be able to enable that change. And this is happening across HQs and GCCs taken together. The engineering velocity parameters that we have launched into the market, bringing AI EV as a terminology, has continued to be a key differentiator. It will continue to remain so. Foreign enterprises were focused on achieving return on investment from AI initiatives. I think more and more organizations are looking at engineering velocity as a key vector. Legacy modernization continues to be a very large total addressable market, a large TAM across legacy codebases, across large data states, and large reporting landscapes. We have continued to see those wins, and we believe that market is just beginning to kind of open up to the possibilities. We had a lot of interactions with private equity operating partners, and one of the trends, as it seems emerging for us based on our discussions, is that most of the PE guys are inclined towards using more custom AI development and implementations for bringing agentic transformation into their portcodes, Rather than adopting or buying vertical AI platform solutions, which claim to solve for the industry. So we believe these are trends which we are observing, which we obviously are taking note of and will help us, you know, shape our offerings and the narratives in the market to take advantage of the market in the coming quarters and year. With that, I will finish this presentation and talking about the results and be open for Q&A. Looking forward to it.

Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. 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 Anmol Garg from Gram Capital. Please go ahead.

Yeah, thanks for the opportunity. I have a couple of questions I want to understand. Number one is, over the last few quarters, has a portfolio or particularly, let's say, the next new wins has seen a shift from pure play OPD kind of work to, you know, deals more towards operations data or more holistic IT services kind of work. Have we seen that kind of trend?

Ian, thanks for joining and your question. There is a shift, for sure, because the traditional product development work definitely is, I wouldn't say shrinking, but, you know, is delayed for two reasons. Number one, a lot of tech companies, once again, are in the layoff mode, and their investments in AI infrastructure, et cetera, is causing them to do that. But also, they are large adopters of AI PDLCs themselves. But having said that, the positive shift that we are seeing in our business mix is, and especially in the NN, is more towards data readiness for AI. We are seeing more shift towards also agentic implementations and, of course, modernization, which is different from the traditional product development asks to set up a pod with a bunch of Java engineers or testers, et cetera. It is a very different kind of work where we are actually... Helping companies transform their data landscapes, modernize stuff, or build the agentic system with accountability to deliver, whether we do it on fixed price, outcome base, et cetera, those are commercial terms. But definitely there has been a shift.

Understood, understood. Very clear. Just one second question is, you know, we are seeing a lot of pressure in high-tech vertical, like you also indicated, and some of our peers have also indicated that our indication is that productivity ask here is, you know, one of the highest. So, in our existing portfolio, which still, you know, remains cute towards high-tech, are we seeing that kind of pressure, particularly when particularly for the book that is going for renewals?

Thank you. Because of our work, which is largely project-driven, we haven't seen the ask come back in terms of productivity as being highest. But having said that, the pressure is there. These are companies who are themselves adopting AI in PDLC. They understand that they can gain significant productivity gains over there. And our approach, and I've talked about it in the last couple of quarters as well, our approach has been to proactively reach out for new projects and new work with these clients with an enhanced productivity commitment. So our newer estimates that we submit to them, the way we work with them is AI enabled with a lot of engineering velocity put in, with a lot of reusable agents that we have built, which actually enable us to deliver 2x or sometimes even more than 2x productivity to our clients. Having said that, we have also been successful in shifting our focus slightly from purely tech-based clients to also enterprises, and that's beginning to play out. That's where we're seeing a lot of modernization and agent AI play come in for us.

Understood, understood. And just one last thing that I wanted to understand is on our TT and ACV, what we declare kind of flattish from last three quarters. Now, I understand that we are now signing towards different kind of deals, then particularly OPD, so that makes the division different. However, considering that the flat, there is still, you know, the ACV has been kind of flattish, do you see that we'll still be able to accelerate growth from here? And maybe if you can guide for that, what kind of growth that we may expect over the next one or two years?

So with the observations, right, I mean, our TTM ACB win has been flattish, and you're absolutely right in also saying that this is despite a significant change in the mix. So now we are getting this ACV with lesser number of deals, and also these deals are far more transformative in nature, and this is, you know, you're kind of changing the tires as the vehicle is moving, and we are learning the motion in terms of how to expand these deal sizes and how to make them more longer duration while they can actually be delivered very quickly using AI. So while that is happening, good news is all the leading indicators tell us that we're winning, and we're winning enough to not have a negative impact with the change of the mix. Also, the positive news is that the pipeline is, you know, better quality. But in order to create growth, we will have to win more. I mean, that's a given. So we will have to increase this. Having said that in the near term, we believe because of the shorter duration of these ACVs, while it's called an ACV, you know, sometimes these can be delivered in three months and four months. So there's a shorter revenue realization cycle. So that can give us a little bit of the revenue density is higher. And hence, you know, we can we can see that reflected in the results as we as we build on it. Clearly, you know, we avoid putting a guidance in place, so I would not go down the path of providing the guidance on that. But I think the leading indicators give us high conviction that we are moving in the right direction.

Understood, understood. And just from data point, what is the organic growth for this quarter?

We, again, you know, we do not separate it out, but like I mentioned last time, you know, together with Novigo, we are kind of moving lock and step, while Novigo, you know, has, you know, because of the Middle East, you know, war going on, there is a certain amount of attentiveness over there, But they have managed to deliver growth largely in line with us. So, you know, without... Separating things out, you can, you know, directionally assume that we are lock and step.

Thanks. Thanks, Nukesh, for answering my question and all the very best.

Thank you. Next question is from the line of Sandeep Shah from Ekuro Securities. Please go ahead.

Yeah, thanks. Thanks, Kodi-chan. Sir, just wanted to understand. Two queues of the calendar year, two queues of the calendar year are generally seasonally strong quarters. However, in both quarters, we have delivered closure to a 100% queue-on-queue growth. So whether this quarter's growth was in line with your expectation or lower than expectation? And we may enter a seasonally soft period going forward. So the reason why I'm asking is, sir, if I skip out the Rovigo acquisition, based on my estimate, the organic growth is still hovering around mid-single digit to closure to that plus or minus with one or two percentage point. So when do you expect this organic growth rate to accelerate? The first question is about that.

So, Sandeep, fairly right in saying that both the quarters we've delivered, QoQ basis, you know, it's about 2.2%, so not really one, but, yeah, in that range, low single-digit range growth. And this is along with the change in mix. If you ask me, was it in line with my expectation or slightly lower or better? It has been slightly lower than expectation, but then it is, you know, we're talking about a quarter, and given that we did a bunch of these AI agentic workflows and business ops kind of deals, you know, deal closure time has been longer than anticipated, so some of the deals got shifted to next quarter and so on. So I wouldn't, you know, I'm not even a bit disappointed by that simply because we have seen the pipeline conversion take place even if it took a slightly longer route. And hence, you know, some of those adjustments to quarterly expectations do take place. For the growth to turn to double digits, well, you know, the industry keeps coming back with newer surprises. We still believe that we've got all the ingredients in place and the kind of market reception we are seeing with whatever we have forayed into, both in terms of whatever we did earlier with AI PDLC, then we did with modernization, And now we are doing with AI-based business ops or agentic flows. I think we have got all the right ingredients and emotions currently in the market to help us get there, and, you know, we are delivering, and your estimates are, you know, as good as anybody's in terms of if organically you're seeing high single-digit kind of a percentage. So, it's still better than industry average, not really to our ambition, and we do want to get to double-digit growth, and we'll get there.

Okay, fair enough. And, sir, we are also catching a lot of churn and restructuring in the sales and marketing team, delivery team, practice heads, and all that. So, just a related question to previous participants. When do you expect these investments will lead to better ACV for a new business, which we disclosed? Because for the last three quarters, it has been a stagnant. So do you believe the new changes which we might have done in the leadership, especially on change in marketing, will lead to better results?

So, Sandeep, one, I just want to correct that there's not been a lot of churn or change here. We hired a chief revenue officer two quarters ago, and that is it, right? I mean, we haven't really, our leadership team has been stable, and we have actually, what we have achieved in the last bunch of quarters with all the new capabilities and our market motions as a result of This team getting embedded in and working towards it. Having said that, we are obviously refreshing some of our feet on the ground, go-to-market people, because like I was answering earlier, we are also actively pivoting from higher reliance on pure tech ecosystem to moving more towards enterprises, and hence we need people who are capable of selling an enterprise motion. Novico Acquisition helped us in that case. We built a bunch of enterprise motions, and now we are taking it to the market. So it is a, you know, it's a continuous thing in motion, and I definitely believe that this will start showing, you know, results, both in terms of ACB wins and revenue numbers in the quarters to come.

It lasts me if I can squeeze. Sir, even some of the very large system integrators globally in India are announcing their intent to enter into small and medium-sized enterprises. So, do you believe heightened competition is happening in an AI-led product development lifecycle? Second, if you can give us some color about the AI revenue scale which we have currently. And last, looking at the results in the Middle East Africa segment, which we reported, it looks like NoviGo might have done better than the company average. So is it fair to assume the worst related to geopolitical issue in NoviGo's large DPI?

There is a lot of questions, Sandeep. Let me try and cover them one-by-one. Increased competition, I'm sorry, there's a lot of feedback on the line. Okay, so in terms of increased competition, Yeah, I mean, it is obviously bound to happen if the entire narrative around the world is around AI and AI is leveling the field, it is increasing the competition. And so is it giving us newer avenues to play into? It can't be that we start playing in their space and they will not play in ours, right? And it's not just larger size, but it also is, you know, AI born or Silicon Valley born, AI native platform companies, and then there are the open-weight players and frontier model players and all. So competition is intensifying, and we will essentially win on the strengths that we bring to the table, which we have talked about earlier. And I think, like I said, you know, our early indicators tell us that we are doing the right things. The whole AI revenue as we track, you know, and we will probably, you know, once we have three, four quarters of data, we'll start reporting, but we are getting towards a place where we believe we are now well over 35% of our overall revenues coming through AI, which is a combination of AI PDLC and all the agent tech and machine learning work that we do. The Middle East segment, you know, like I said, it's not material change from quarter to quarter. They continue to grow in tandem with us, and I don't think the crisis is over yet because there is no certainty, and I believe that the midterm election results in the U.S. will have something to do with it. Either it will... Stabilize or further destabilize the situation, and we'll all have to just keep our fingers crossed and watch out. But despite that, I think our teams have continued to work on the ground and deliver to the clients, and the clients have continued to keep in touch with us and provide us business and business extensions as needed.

Thank you very much. All the best.

Thanks, Ambeep.

Thank you. Next question is from the line of Vinay Menon from Munaf Capital. Please go ahead.

Hi, sir. Thank you for the opportunity. A couple of questions. One is in terms of the base, you know, now from Q4 onwards, NoviGo's numbers will start coming into the base. So how do we look at growth going ahead in terms of, you know, in terms of dollar terms? Are we looking to accelerate in from like one and a half percent? And there's one some color on that.

Thank you. Yes, it will be part of base, and for all practical purposes, we count it together even today, and all the work that we're doing is in order to accelerate from that 1.5% to get to a secular 3% or more, 3% to 4%, so that we can get into the double-digit year-over-year growth range. So, yeah, I mean, that's our endeavor. That's what we are working towards, and we quite, you know, we have conviction that we will get there.

And in terms of renewals, because, you know, as you understand that renewals are around the corner, what kind of trend are we seeing? Are we seeing clients looking for some, you know, like, you know, productivity gains being passed on in terms of prices? And we typically have like an 85-90% renewal rate. What are we expecting for 27?

So, I will once again just remind everyone, and I know you know this already, our business is not sustain and maintain services kind of thing. So, renewals for us is essentially about winning new projects, right? And like I've stated multiple times earlier, when we are bidding for new projects, we are obviously offering our clients AI PDLC along with our Optima AI agents and other things. I think essentially our proposition to the clients is extremely attractive, very heavy on AI, and extremely good in terms of productivity gains that they already get. It's not a discount task. It's not a productivity ask because it's not compared to what they were paying yesterday for the same service, right, because they paid something for a project. Now they're paying something for a project, right? So, it is, for us, renewals is winning every project every time, and like you said, you know, we have maintained 85-plus percent renewal rate, winning more projects from the same clients, and we continue to see that.

In terms of growth going ahead, like, is it going to be more wallet share gains, or are we looking at more in terms of the new deals? Where do you think the growth is going to come from?

So, wallet share gains certainly in our larger accounts will happen because those are places where we were earlier doing PD work and now we're doing transformation work, and that does give us additional wallet. But also from a net new perspective, opening enterprise logos, the new time that we're going after, both in terms of data as well as modernization. I think those are the avenues that we are looking at, which will contribute to our heightened growth posture.

Okay, and one last question. In terms of margins, you know, last two years, margin improvement has been, you know, quite good, you know, from a 13-14% EBIT to almost 19-20%. At what point are we looking to kind of max out and then maybe focus? Where do you feel like this could kind of, you know, in the long run, where could we end up or is there more left to kind of go?

No, I think from my perspective, even three quarters ago, we had said that we would like to maintain our margins at about high 18s, right, 18.6, 18.7, which I think is the most sustainable and respectable margin in the industry. We did not know of how much the currency will move, and quite a lot of currency movement benefit has come to us. We have carefully maintained the currency movement as a margin uplift so that we don't end up consuming that and later have a dip in the margin, right? So we have not consumed the currency changes and put them into investments, et cetera, but we continue to invest, and we think that whatever we make over high 18s will give us enough cushion to continue to invest in our AI journey as we move forward. Okay.

Thank you, sir. Thank you and all the best to the team. Thank you.

Thank you. Next question is from the line of Aditya from AK Investment. Please go ahead.

Thanks for the opportunity. Firstly, my question to Nitish is, what are the top priorities for us going for next year?

Aditya, thanks for the question. Top priorities for us continue to be, obviously, profitable growth, but also strategically bringing that in the direction where the motion that we started this year as becoming an AI-first company can actually be embedded in what we do and our revenue mix and the client feedback starts reflecting the same.

And also, how much currently, I mean, enterprise is very small, right? Now, we want to focus on enterprises. Then, what kind of projects are we looking at? I mean, because the consolidated margin should be get impacted when we are taking any enterprise account? Or what is the thought process behind that? And where do we see next year enterprise or in two to three years? How much of the revenue should come from enterprise? What are you envisaging about?

Yeah, great question. Enterprises is a new motion for us, and we are looking at slowly increasing the revenue mix from enterprises. In two to three years, in order to really make it meaningful, we would assume that we should at least have 25, anything above 25, 25 to 35 percent revenue coming from the enterprises so that we are reasonably de-risked from the TMT side of things. From a profitability perspective, our leading indicators say that we do not have a huge profitability gap in that because when we are selling to enterprises who are far more used to buying on fixed price and gearing towards outcome-based, I think we have the levers to be able to not just retain but sometimes even demand better margins. versus, you know, the tech sector, which has been extremely used to just buying on a time and material basis. So we do not know how it will play out, but that's what we are currently seeing.

Currently, what is the percentage we have on overall revenue for enterprise?

I think it would just be a guess on my part because I don't think we have started tracking it separately, but we probably are about 15-ish.

Okay. And nextly, since it's been a good time spent in our system, I just wanted to ask, what is your vision for the company that you would be happy with the growth rates, I mean, going forward? Because we are very agile and we are very small relative to the larger companies. So, the agility to build AI or to enhance our AI systems, and I think, what kind of growth rates are you? Happy with going forward. I mean, what is the vision for you in this company?

Yeah, so, you know, for me, which is also, you know, to a large extent what all investors want, and we have a very large investor, a very large private equity investor also and what they want. I think all of us are pretty much, you know, unified in that vision to see that we should create sustainable double-digit growth rates. We also have to be aware of the fact that the industry average growth rates in the last years or this year hasn't been anywhere in that range. While we are delivering, you know, high single digits, we have a small bridge to cross over. But clearly, you know, the industry also is, you know, there are changes happening every quarter in the industry. But short answer to your question, yeah, you know, we have to get to – we not only have to be better than the industry, but get to essentially double-digit growth rates in the near future.

And also, since we wanted to focus on the enterprise and sales division, right, do you think that should we go after an acquisition so that it gives us a booster to that customer and client, and then we can showcase our capabilities to them, and we can get the much larger it is going for? What is your thought on acquisition also? Because we are very open in being Blackstone as our promoters, right?

Yeah, I mean, we've always been open to acquisitions, you know, inorganic growth is a core part of the strategy, and we did, right? I mean, it's been less than three quarters, or just three quarters, actually, since we acquired Novico. So, we continue to acquire whenever there is the right opportunity in front of us. And which will enable us to further enhance our strategic motion or give us better standing in the market or better capability to deliver. So we are open to that, and if you had any particular company in mind or something, then separately on a one-on-one, do definitely suggest, and we'll, you know, we are always scanning the market and looking at whatever comes up.

Okay, okay. All the best. Thank you.

Thank you. Next question is from the line of Ashish Das from Systematics Group. Please go ahead.

Thank you for the opportunity. So, my question is around your outlook across your vertical. So, what I see BFFI continues to deliver growth as well as to portal sequencing. I just wanted to understand the drivers for the growth and what's the medium outlook for this vertical. Also, on one year-on-year basis, if you look at healthcare and manufacturing are dragging your throat. So, what are the headwinds in those fighting? Thank you.

Ashish, um... Good observation on BFSI, and, you know, we believe that BFSI is also leading the AI adoption and spending on AI in building their core platforms, et cetera, across industries. And with our increased focus towards enterprises, you know, we've seen that to become a lead vertical for us in penetrating. And you would have seen in our deal announcements, et cetera, as well in the last couple of quarters, we've consistently had at least one or two BFFI deals that got announced. So that, you know, it all goes in tandem as we have stepped up to focus on enterprises. The FSI sector has been a first mover in adopting a lot of the modern technologies, including AI. I think we are kind of taking advantage of that, and our propositions are resounding or resonating with them for which we are winning those deals. So we believe that will continue to be the case. Healthcare and manufacturing are equally important, more healthcare focused for us than manufacturing, but, you know, some temporary blips here or there, which are largely related to project sending or whatever else. But it's a strong space, and I think our motion into, you know, Agentec RCM are doing a lot of machine learning and AI activity for variables, et cetera. In fact, you know, we recently won the award for best AI implementation in the healthcare space. And that was for wearable, not a wearable, a diagnostic device, which is able to detect peripheral arterial disease using artificial intelligence, which was the devices built by the OEM, the data, et cetera, the algorithms are built by us. And so I think that continues. Going forward, we believe our enterprise motion will obviously increase in the BFSI healthcare space, and we'll continue to see the benefits of that. North America growth, I'm not... I mean, if I understand your question right, I think you're reflecting on a 0.4% change in North America percentage quarter over quarter, which is, like I always say, you know, given the small dollar value, I mean, reasonably small dollar value in a quarter, a project here or a project there can make that quarterly shift. There's no structural change. We are winning deals in North America, larger deals. It's our largest market, and we believe that we'll continue to operate at probably the highest growth rate in North America than others, and with their adoption of AI, I think we also see that that will probably lead the growth for us.

Yeah, understood. My second question is, what I observed that your number of on-site employees have grown quarter on quarter. And so, just wanted to understand, do you see any demand is picking up in certain geographies or your hiring has picked up in on-site locations?

It's a simple correlation of, you know, if you're doing more AI projects, you need some FDEs, and FDE deployment becomes important because if you're doing transformation, you've got to sit with the business and understand the business and be able to implement it by putting agentic ecosystem in place. Some FDEs will have to make it work. So it's a clear outcome of how we have shifted in our positioning and the kind of offerings. And we're building our FD talent and building that capability mostly on-site in North America. Perfect.

And my third question is on margin side. So what I think you have done good execution on the margin that I agree. Last quarter, you mentioned that you would make higher investments on AI sales. And marketing, but what I see, though you mentioned that currency is helping you, so SG&A as a percentage of revenue has declined. Also, eShop expenses, that RSU expenses have also declined. So, I just want to understand the outlook, like how SG&A expenses would be there in medium term as well as up.

So ESOP expenses, you know, largely have stabilized and will stay at this level, you know, what declined because maybe a couple of people who were granted RSUs left, and then, you know, more recent hires have not been given RSUs until, of course, we give them a year, they prove themselves, et cetera. So that's a more or less stable thing. SDNA, I think Nanjit observed in his remarks, as we've become an AI-first organization, we've also implemented AI as a customer zero for a lot of our operations. We are ourselves using agent tech operations internally, and that has led to a certain amount of optimization in our GNA side, whether it's finance or HR or other things. And hence, the total SG&A looks down, whereas our, you know, sales hiring is picking up, and we are hiring more people for enterprise sales and other things. So, you know, again, it's a quarterly movement based on when somebody was added or not added. But overall, we believe we are doing well with our SDNA, and we will be able to maintain. Maintain that percentage spend as a percentage of revenue and continue to work with it.

Okay. Just my last question, one observation was that the other financial liabilities have increased to $68 crore from $136 crore as of December 2025. So what is the reason, if you can highlight that?

I'll let Nanda answer it, but I'm assuming this is largely because of the cost of debentures, which we've taken. But, Nanjeev, what exact line item can you look at?

Yeah, let me just, you're saying other financial liabilities, just give me one sec. That is just 5 trillion trees, right?

So, I can see 268 crore, and in December, it was 136 crore, right?

Just a minute. Oh, that's because of that, you know, this acquisition, Novigo acquisition. So, some of that thing is coming, you know, as minority interest. So, that is the amount coming there. No, no, no, sorry, sorry, sorry, sorry, sorry, sorry, just a minute. It's 136 to 268 crore. Total house and use the other than micro. They're talking about 70 crore or this 136 crore? Oh, sorry, it's interim dividend, yeah, yeah, yeah, yeah. It's interim dividend on 96 crore, which was declared on September 30th, put in that, you know, this bank account. The payment is done on October 16th. So, you know, so we, that is the dividend paper, yeah, 96 crore. Okay, great. Thank you.

Thank you.

I will have to leave. Yeah, I think we are almost done. So, Nikesh has an urgent client meeting, so we'd like to conclude the call.

All right, so we will take that as the last question, and I would now hand the conference over to Mr. Misesh for closing call.

Well, thank you, and thanks, everyone, for joining in, and thank you for all the questions, which give us a lot of insight and also, you know, ideas on what we can be doing better. But, you know, there hasn't been a more turbulent time or more exciting time in the industry, and, you know, I'm always on the excitement side to look at the opportunities and the possibilities it opens up. And we are, like I said, during the call, we have high conviction that our strategies are beginning to play out, and we're seeing right kind of leading indicators, and we'll continue to work through it and hopefully be able to show them as good lagging indicators as well in the time to come. Thank you so much for joining in, and looking forward to connecting with all of you in the next call. Thank you, everybody.

Thank you very much. On behalf of our systems, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.