KFINTECH — earnings call

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Prepared remarks

MR. VIVEK MATHUR CFO · MR. AMIT MURARKA HEAD INVESTOR RELATIONS

MR. AMIT MURARKA HEAD INVESTOR RELATIONS

Moderator · Conference Operator

MR. ABHIJEET SAKHARE

KOTAK SECURITIES · LIMITED

LIMITED KFin Technologies Limited May 08, 2023

Moderator · Conference Operator

Ladies and gentlemen, good morning and welcome to the KFin Technologies Q4FY23 Earnings Conference Call hosted by Kotak Securities Limited.

As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.

Should you need assistance during 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. Abhijeet Sakhare from Kotak Securities Limited.

Thank you and over to you.

MR. VIVEK MATHUR CFO · MR. AMIT MURARKA HEAD INVESTOR RELATIONS

Thanks, Sreekanth.

On the financial performance of the company, as you would see that overall revenue for the year has gone up by 12.6%.

It was backed by moderate growth of about 7.7% in domestic mutual fund revenue.

Issuer solutions grew at 28%.

International and other investor solutions growth was about 35%.

However, quarter-on-quarter, you would see a downfall of 2.7% that's largely driven by a movement in equity AUM, and the overall domestic mutual fund clients did not have much of NFOs during the quarter, as well as for the year, as compared to the industry.

But we see that this is momentary as NFOs will continue to come out in the market from our clients in the current year.

Issuer solutions had good corporate actions in Q3 as compared to Q4, so there is a marginal dip because of that as well.

However, on the expense side, we witnessed growth of about 20% year- on-year because of higher salaries for our IT folks, IT team in the first two quarters.

And we quickly acted in terms of optimizing our expenses in the balanced two quarters.

And if you see, quarter-on-quarter expenses for Q4 over Q3 has come down by about 6.8%, and other expenses have come down by 9.2%.

So, overall EBITDA went up by 3.9% quarter-on-quarter.

We ended the EBITDA margin at 41.4% for the year, and for the quarter it was 45.8%.

So, we believe that the trajectory in terms of our ability to optimize expenses if there are headwinds on revenue is demonstrated what we have done in the last two quarters, and we will continue to do that in the coming year as well.

So, EBITDA margins are well within the range of 40% to 45% that we believe is sustainable.

41.4% is within that range.

Last year was 45%.

And PAT margin and overall profit after tax has gone up.

There is a healthy growth of 31.8% year-on-year, while on quarter-on-quarter it is 6.8%.

So, overall return on equity is at 25.8%, and we are sitting on cash and cash equivalents of about INR310 crores, which we believe is sufficient as we look for organic and inorganic growth.

And diluted EPS has gone up by 23% year-on-year.

Happy to take questions now.

KFin Technologies Limited May 08, 2023

Moderator · Conference Operator

Thank you.

Our first question comes from the line of Pranuj Shah from JPMorgan.

Please go ahead.

Pranuj Shah

Hello.

Yes, thank you for the opportunity and congrats on the quarter.

So, three questions from my side.

First is, on the international AUM, I understand you mentioned that year-over-year the impact was largely due to MTM, but even quarter-on-quarter there has been some pressure.

So, is there anything that you're seeing from a flow perspective that is impacting this, both on the AIFs Management and the international solutions?

And second, related to that is your take rate essentially for the international business has increased.

So, can we expect further such increases going ahead and what would be the trajectory here?

I have another question.

I will just come back on after these two.

Sreekanth Nadella

Thank you.

So, on the international AUM, I had commented about an overall year-on-year dip in the mark-to-market of the AUM.

So, KFintech, the overall AUM that we were managing, let me just give you the specifics.

We were managing an overall AUM of INR64,000 crores in the previous year, which had dipped to INR55,000 crores to INR56,000 crores in the current year.

That dip was largely on account of mark-to-market is what I had called out.

However, that had not resulted in any revenue dip.

So, we continue to have flat revenue for the previous year.

This is in the context of the way our commercials are structured for international are different from that of India.

So, while the mark-to-market was the primary reason, we have started seeing green shoots in April already.

So, the overall AUM has a potential to grow, not just because of the current markets to move up, but also some of the transitions which have concluded in the previous year will start adding the AUM into this year.

The second question in terms of the take rate for the international and the alternatives, so we have added clientele across the stack, whether it is the international business in Southeast Asia, even into the West in the form of Canada, etcetera, and into alternatives.

We believe the market in both these particular geographies, as well as the investment class, is quite substantially large and this potentially is the tip of the iceberg.

So, I find it currently gives us the confidence to believe that we would be able to repeat the performance, probably even better it as the time goes.

Pranuj Shah

Okay, so you do think that this yields currently at a cap rate at 5 basis points, but this can move up going ahead also?

Sreekanth Nadella

It is possible, yes.

Pranuj Shah

Got it.

Thanks a lot.

My second question is on SEBI regulations, which as per news reports, they might charge AMCs to pay brokerages out of that Tier.

So, do you see this as a headwind to your potential margins or the revenue that you charge to AMCs?

Sreekanth Nadella

The commissions that are paid to the brokers, as is the fee that is paid to the registrar, such as ourselves, all goes out of the total expense ratio.

So, to that extent, what gets paid to the brokers has no correlation to what gets paid to a registrar or to a fund accountant or to any other entity that an asset management company contracts with in order to get a certain set of services KFin Technologies Limited May 08, 2023 delivered to.

It is early days in terms of the quantum and the nature of expense ratio cuts, if any at all.

I'd like to believe that the conversation has nothing to do with the registrar's fees at large.

Pranuj Shah

Brokerage, I'm talking about brokers as in during transactions.

So, that you don't see as a headwind currently?

If it impacts the margins of AMCs, that could have a knock-on impact on to KFin's numbers potentially?

MR. VIVEK MATHUR CFO · MR. AMIT MURARKA HEAD INVESTOR RELATIONS

Yes.

So, every time there is a market event, clearly there can be some stress at an overall asset management level.

But we need to understand the nature of our engagement is very different.

Today, we operate at a highly productive cost base, providing some of the top-class services at probably the lowest price point.

Today, cost per folio, in the case of mutual fund industry, is roughly INR27 per year per folio.

You compare that to any other industry, which runs into hundreds of rupees, whether it is just opening a Demat account or bank account or any of those things at all.

The cost itself has already been optimized to a point where further optimization in terms of the pricing is going to be great.

Sreekanth Nadella

Yes situation way back in 2018, for example, when there was an expense ratio cut.

And you would notice that there was no direct correlation in terms of our revenues or our basis points incurred by that particular event.

Likewise, there are certain events that also work in the favor of asset management companies, which may not necessarily pass down to the registrars too.

It's broadly an independent conversation, which is entirely based on the value we add and the work we render for the client to have their single largest piece of work, which is the operations for this particular industry to be managed by us.

Pranuj Shah

Got it.

Thanks a lot, Sreekanth.

That's extremely helpful.

I have another question, but I will come back in the queue.

Thank you.

Moderator · Conference Operator

Thank you.

Our next question comes from the line of Prayesh Jain from Motilal Oswal.

Please go ahead.

Prayesh Jain

Yes.

Hi.

Good morning, everyone.

Firstly, just on the domestic mutual fund business, could you throw some insights after, how do you say, for example, if you get a INR1,000 crores AUM in existing scheme versus the NFO, how does your realization change between the two?

Sreekanth Nadella

Yes.

So, I think it's probably more an academic question, and there is no difference in the revenue that KFintech generates, if a INR1,000 crores were to come from NFO versus through business as usual operations.

Okay.

It is our contract and commercials are largely based on the asset class, which is equity, debt, and liquid, and ETFs.

And for each of these, there is telescopic pricing, which means that up to a certain threshold of an AUM, there is a certain rate.

And as the AUM breaches that, there are certain volume discounts that are automatically baked into the contract.

So, in the example that you have cited, whether the INR1,000 crores come from NFO or through any other form of channels, say one-time investment or through SIP, it makes no difference in terms of the revenue that we generate.

However, the revenue itself will be different between client-to-client and between threshold of AUM to another threshold of AUM.

KFin Technologies Limited May 08, 2023

Prayesh Jain

Got that.

And while you've spoken about the revenues of each of these segments, could you also talk about the profitability of each of these segments in the sense that, what would be the EBITDA margins in each of these businesses, domestic financial solutions, international, and global business solutions?

Sreekanth Nadella

Yes.

So, we don't necessarily provide the business-level margins.

But it's largely also because significant amount of our costs across the industry, especially on the technology and infrastructure side, with a significant increase in both the regulatory requirements, as well as in general, the requirements that are pertaining to cybersecurity, data privacy, resilience, so on and so forth.

But broadly, most of our businesses, at the entity level, before allocating any overheads tend to be around, 60%-odd.

Prayesh Jain

Okay.

So, in a way, is it fair to assume that while the revenue contribution of domestic mutual funds is at the highest levels, and the profitability will also be at the highest level?

And what is the order of profitability share of EBITDA for each of these businesses?

Could you share that in, if not in direct terms, but at least some indication as to which ranks where?

Sreekanth Nadella

So, I've already called that out in terms of broadly, most of the businesses tend to gravitate between, 50% to 60%, and all of them are in a cluster.

The international business gives us the highest yield, as was answered in the previous question, right?

I mean, in India, it's roughly about 3.8 or so.

For international operations, it's over 5.

Businesses of, corporate registry and mutual funds are of, similar character.

It provides us hedge in terms of having businesses, not all of which are directly related to the market, right?

In the case of corporate registry, it's more driven by the number of folios, corporate actions, so on and so forth.

In the case of our national pension system, it is subscriber driven.

Our value- added solutions and services of technology are purely tech solutions, so to speak.

So, there are various different parameters, each of the businesses thrive, and obviously, the margins associated with each of these would fluctuate based on which year that you're talking about, but broadly, the cluster would be between 50% to 60%, and the international business having the highest yield, if I may, compared to the other businesses.

Prayesh Jain

Okay, got that.

Yes, that would be all for now.

Thanks.

Moderator · Conference Operator

Thank you.

Our next question comes from the line of Abhijeet Sakhare from Kotak Securities Limited.

Please go ahead.

Abhijeet Sakhare

Hi.

So, the first question is, again, on the mutual fund RTA business.

Are there any major contract renewals in the offing for this year that can pressure the realizations, or if you could just directionally guide us on the yields on the MF RTA business?

Sreekanth Nadella

Sure, Abhijeet.

Our overall yield, we continue to be around, between 3.8 and 3.9 for the previous year, ending 31, March, and as we all know, the overall yield of the company is, in some sense, a weighted average computation at an AMC level, so to speak, right?

Each asset management company has a different rate, different structure, based on their focus on a specific asset class KFin Technologies Limited May 08, 2023 versus others, as well as the quantum and size of the fund itself, given the large funds tend to enjoy a telescopic pricing driven lower yield, in some form or shape.

We believe that over the last five years, if you see our trend, it had been the variance of the basis points had vastly been around the same number between, 3.8 to 4.

We believe we'll be able to maintain around the same yield curve this year as well.

We have one contract that's up for renewal in this year.

Abhijeet Sakhare

Got it.

And just from an understanding point of view, are you seeing any discussions around, let's say, differentiated pricing, whether, be it a customer who's coming through a direct channel versus an intermediated channel, or maybe, let's say, a unique first-time investor versus a repeat investor, any of those discussions starting to come into the discussions with your clients?

Sreekanth Nadella

No, Abhijeet, not yet.

I think it's very early days, and there's just a lot of speculation.

I think we should wait for some clarity.

Expense ratios capped at the size of the fund house to GST to new investors being treated as a new, irrespective of whether you are from P30 or B30.

There are a lot of discussions that are, all of this will manifest itself in the form of consultation paper at some point in time, which will further be debated, and some changes may happen sometime during the year.

But it's very, very early days.

With our clients, the conversation is largely business as usual, how to drive the growth, how to expand the overall AUM and the market share by providing value-added solutions.

Our conversations have been largely focused on business and not overtly be worried about items that are beyond our control and of which timelines are not definitive at this point.

Abhijeet Sakhare

Got it.

Second one, on your presentation, you make a couple of references around data lake projects.

So just broadly, could you talk about revenue model here, one-time versus recurring, what's the demand versus what's being currently serviced, any sort of broad numbers here?

Sreekanth Nadella

So Digix is a big data platform we've created, first of its kind, as well as architecture with frugal engineering and something that is fit for purpose for this industry and something that is definitely scalable into the product, BFSI circle itself beyond the asset management space.

The platform created in collaboration with AWS, who is also our strategic partner for all things Big Data.

We have since then implemented for one of our largest clients.

And we have recently, in the month of March, signed up with one of the largest wealth managers in the country, who also happens to have an asset management company.

The revenue model is twofold, a one-time implementation cost, which is largely dependent on the lineage and the legacy of the data in terms of architecture that the asset manager or the wealth manager has, which is basically the continuum or the number of years.

And the quantum of data itself, as well as the use case that they would look at us for us to be developing it.

So that is effectively a one-time fee.

And there is a recurring annual maintenance, which is largely rendered in a SaaS model to the clientele, which is to provide end-of-the-day cutting-edge analytics, both on the side of sales, marketing, and distribution, on the compliance, as well as the delivery and operation side, so to speak.

KFin Technologies Limited May 08, 2023 We have since then also embedded the layer of account aggregation into this for the data and the information to be far more useful than it ever was before.

So it has already seen a lot of that.

We have implemented within KFintech first within ourselves in the previous year.

And after its proven success cutting across petaflops of data that we put on ourselves, we have found a sweet spot for all asset managers and wealth managers in the country and beyond.

Abhijeet Sakhare

Got it.

I have a couple of more.

I'll come back to the operator.

Moderator · Conference Operator

Thank you.

Our next question comes from the line of Prithvish Uppal from Asian Market Securities.

Please go ahead.

Prithvish Uppal

Yes, thank you for taking my question.

Firstly, just wanted to understand what has been the contribution from value-added services, and especially you touched upon the Digix platform as well.

So just how the trend is shaping up over there and overall revenue, how much would that contribute?

MR. VIVEK MATHUR CFO · MR. AMIT MURARKA HEAD INVESTOR RELATIONS

Yes, VAS revenue contributes to 5% over total revenue, and currently it ranges between 5% to 6%.

But we expect that with the demand, as Sreekanth mentioned about value-added services like Digix and Data Lake ramping up, and there are more value-added services products that we are planning in the issuer solution space as well, we expect this percentage to go up.

Sreekanth, do you want to add on?

Sreekanth Nadella

No, that's about it.

Thank you.

I think the quantum was asked and you have answered that.

So as the overall revenue base expands, the percentage on that, of course, the value-added solutions increases.

VAS, to be clear, cuts across every line of business.

It is not specific to mutual fund alone.

On the corporate registry side, we provide cutting-edge platforms of insider trading, electronic AGM, electronic voting, so on and so forth.

In the case of mutual funds, it could be platforms such as Digix and extended CRM, ORM solutions for our clientele, apart from taking care of the entire mobility stack for them, that is building their mobile apps and websites, so on and so forth.

It also cuts across alternate investment funds and into our global solutions as well.

So it is broad-based and secure across every single line of business, and we constantly find opportunities to create solutions which have an impact across the industry and across the geographies.

So, this is a new line of business in some form and shape for us recently, right, and we have articulated 4-5% of our total revenue pool to come from this business.

And a good part of this business also compounds into annual revenue, especially on the AMC side, which provides an amount of stability to the company.

Prithvish Uppal

Okay, so understood.

My second question is with respect to your global fund business, the international MF business.

So, I'm thinking, despite mark-to-market connection in the AUM, you mentioned that revenue was more or less, as it has actually increased.

So that would mean, from a yield perspective, the yield at the charging that would have gone up, and if you could just somewhat elaborate on in terms of how, the pricing is maybe different from how we charge to KFin Technologies Limited May 08, 2023 domestic MF.

Is it on a similar sort of pricing model, or is it different across different geographies?

Sreekanth Nadella

Sure.

So we have created, in some sense, we have taken this model to these countries in some form and shape, which is that it did not, exist.

And of course, some of the lessons that have been learnt from the markets over here, compared to other cities, we didn't want to replicate the same challenges.

So, we have a few things.

One is, yes, we have provisions in our contract to increase the price and not necessarily discount the basis points as the AUM increases.

So that is one definitive difference between the market here in India, as well as coming compared to the other markets.

So that is a goal and an explanation that is possible, which we have been trying successfully to effectuate year after year.

Second, there is also a minimum price at a fund, at a scheme level, given we have set an amount of efforts and, a scheme's non- make it, in order for us to render our services.

So even though the AUM had come down in the previous year, revenues remain flat for these two count, for these two reasons.

One, primarily a basis point expansion, and two, and more importantly, a minimum fee per scheme that we charge, irrespective of the quantum of the AUM scheme that we have.

Prithvish Uppal

Okay.

So, on the pension side, so, previously it was disclosure, the segmental result, especially on the pension side, we were, it was on the negative side.

But now, with the changes in terms of the segmental disclosure, we have reported a positive number for, the entire international and other, the international other investor solutions.

So, just wanted to understand, has the pension business turned profitable from this quarter or when do we expect that to happen?

MR. VIVEK MATHUR CFO · MR. AMIT MURARKA HEAD INVESTOR RELATIONS

Yes, the pension business continues to grow in terms of market share, number of subscribers, revenue has been, has grown year-on-year by about 83%.

But it is still not turned profitable.

So, at an EBITDA level, so we have yet to reach scale to become profitable.

But we do expect that with the kind of growth that we are experiencing, in terms of number of subscribers, we will be, able to achieve that kind of breakeven in the current financial year.

Amit Murarka

So, just to add, as we business and all, we will see the operating leverage kicking in.

I mean, on a year-on-year basis, while my revenue growth has been 83%, my losses have already reduced by half, almost 50% this year.

So, as we go along and we see more scale coming into the business and all, we will see this business to start contributing profits as well.

Prithvish Uppal

Okay.

So, this is just one last question on the data keeping side.

If you could split the international and other investor solutions revenue into the pension, AIF, and the global fund of business, that could be very useful?

MR. VIVEK MATHUR CFO · MR. AMIT MURARKA HEAD INVESTOR RELATIONS

So, largely, the revenue comes largely from Southeast Asia business in the international side.

And that is about 80% of the total business revenue comes from that.

Then we have, other businesses which are related to pension and AIF, which is the balanced fund.

As you know, pension is a very small business.

So, large part of the growth is coming from the AIF and PWM.

KFin Technologies Limited May 08, 2023

Moderator · Conference Operator

Thank you.

Our next question comes from the line of Anand from White Oak Capital.

Please go ahead.

Anand

Thank you for the opportunity.

A couple of questions.

First is, from investment perspective, do you see any significant need which can impact, our operating expense for over the next couple of years?

And second, from international business perspective, over, let's say, next two, three years, where do we see this mix to be given our current standing?

And from profitability perspective, what would be the next expectation or, let's say, next two, three years?

Sreekanth Nadella

Thank you, Anand.

Anand, I think the first question was any sizable capital investments planned.

Is that the first question?

Anand

Yes.

So, we have cash.

We might have some inorganic growth plan.

So, that is one part.

And from investment perspective, like low cost of business, is there any major investment in any particular segment which might need to hire as well?

So, you can comment on both of those things.

Sreekanth Nadella

Yes.

So, the years that have gone by, in fact, we have had, substantial, capital expenses that we have incurred, in the context of, creating the data structures that are required for our products and platforms, as well as the entire infrastructure that was required for the field that we are in deciding into the coming three to four years.

So, a good chunk of investments in the case of IT infrastructure has already taken place.

And we have, some more to happen this year as we also modernize the end user computing for us to be able to successfully gravitate towards a hybrid work environment, which effectively translates in the form of, mobility platforms, collaboration platforms, and laptops, so to speak.

So, there is some expense, capital expenses planned for that.

Not beyond that, we do not have any large, capex planned.

M&A continues to be a very, very important focus area for us.

And, as I called out in the previous year that, we were looking to have a couple of acquisitions this year that we have concluded already.

We are looking at, through this year as well, and probably, sizable, bigger than the current acquisitions we've had in the previous year.

So, to that extent, yes, I think expect some money on the M&A, hopefully, to be expanded this year.

Other than that, in terms of pure opex, I believe, we do not have any sizable or material deviationaries we required.

In the last two years, we have expanded our sales and marketing teams beyond India, which had been one of the contributing reasons for our fast expansion into our international overall clientele as well as revenue.

That has now become a business as usual expenditure that is the sales teams that we have created within Thailand market, Philippines market, Malaysia, and now in Singapore.

So, to that extent, this will not be differentiating or a variable cost that we will be building for this year.

And you had another question.

My apologies.

Anand

Yes, it was on the international business.

Where do you see this mix of domestic versus international evolving, given our current standpoint and with the current visibility?

And from KFin Technologies Limited May 08, 2023 profitability perspective, also, what will be the mix of revenue versus profitability two to three years out for international business?

Sreekanth Nadella

In terms of revenue mix, three broad components in that, right, international and other asset management solutions.

The international itself, truly.

Then the alternate investment funds and the wealth management, and then the national pension system.

Of these three, we believe the first two have the highest revenue potential, both in terms of the addressable market, as well as the potential to have, margin structures, which are more commensurate to our line of business.

Pensions, any which way there are some, I think we'll have to wait and watch this space given how the government is looking at national pension system versus old pension system.

But given our growth had largely been on the all-citizen sector, we continue to be optimistic about it.

In terms of the proportion of the revenue to come from each of these segments, I believe that there would be a similar growth trajectory, especially into this year.

Alternate into the next year, it may change more in favor of international business as the full year's revenue for the deals that we are winning and the transitions, those will conclude, will kick in.

But for now, the number of alternate investment funds we have won are signed up and yet to launch into this year.

And the new ones we are signing up is quite substantial.

So, I'd like to believe that, we will continue to maintain similar mix of revenue among these three categories into this year.

Even as into the medium and long-term perspective, I would expect the international business to be significantly higher than that of alternative national pension system combined.

Anand

Okay.

And last question, if I may squeeze in, from international business perspective, fair to say that the runway of opportunity here might be much more beyond the next couple of years.

And if you can give us a more structural sense of the business, given that at this point, then you're kind of unique in that geography as an India origin player.

So, what is the structural scope of opportunity here?

Sreekanth Nadella

Yes.

So, we're nearing the top of the hour, so I'd be brief and probably we can pick this up offline at length.

But very succinctly put, it's a, it's a $6 billion industry, right, beyond India.

So, business that we are in, and that is a totally addressable market.

Splitted between East and West, East is largely a transfer agency opportunity, which is where, KFintech have been for the longest time.

West is largely a fund administration opportunity, which is where we have started making big moves after acquisition of Hexagram and having started delivering fund administration solutions for several alternative funds in India, in Singapore, in Canada, and other parts of the world.

So, together, that's the business opportunity we look at.

And we, our aspiration, our intent is to be the first Indian company to be globally relevant in this space.

Moderator · Conference Operator

Thank you.

Our next question comes from the line of Devansh Nigotia from SIMPL.

Please go ahead.

Devansh Nigotia

Thanks for the opportunity.

So, in case of employee cost, if you can help us understand in terms of count, how the count has shaped, and were there any one-off costs in the last quarter?

Because KFin Technologies Limited May 08, 2023 the 10% Q-o-Q de-growth seems quite significant.

And what is the median increase of remuneration we are ex

Sreekanth Nadella

Our employee payroll costs for the previous year, have seen an overall 20% plus growth compared to the year before that.

I think there are two broad reasons.

One, of course, is, I called out about our expansion of sales and marketing development teams, product and platform development teams.

So, we have been adding, certain functions, which were much smaller, back in the day, given, KFintech, that largely was in the domestic space, largely looking into the domestic mutual funds and into the issuer solutions.

Now, as we expand other asset classes and other geographies, it is quite obvious that we need to have the, feet on the street, on the ground in each of these parts of the world.

So, the head count of a different, skill set of employees was one of the contributing factors in terms of the payroll cost.

The second one, of course, is the inflation itself.

Now, the previous year, India, across the globe, has seen inflation in the form of, salaries, expanding quite substantially.

We were not immune to that either.

But as we moved into the H2, we have seen two opportunities.

One was, of course, a normalization of the wages, which I'd like to believe has happened and continues to happen eventually.

And second, we have driven a very different software services companies operating model in our IT, which effectively means it operates in a pyramid model as against a pod structure and, product or a platform layer.

So, basically, we brought the best practices of our IT services work to deliver IT to its clients the similar way our IT in KFintech renders its services to its internal customers, which is the domestic mutual funds registry, so on and so forth.

So, we have transformed our business model into a pyramid-driven structure, which has helped us reduce the overall cost, at an hour level in conjunction with the normalization of, wages.

So, those two together have helped us optimize our wages.

Into the coming years, we are still deliberating.

You know, we have not yet closed out the numbers, but I'd like to believe, as always, we will continue to be an employer, who will be, market-relevant and be in the top region of it.

It is very important for us to have the domain knowledge as we expand fast and do with it as classes create top leadership and expand beyond countries to have best-in-class talent.

Devansh Nigotia

And there has been a significant jump in the international customer count, Q-o-Q.

So, if you can just elaborate a bit more on that, with geographies that it is related to.

And also, we've made inroads in Singapore recently.

So, what do you think, how much that business can scale up?

Amit Murarka

Devesh, I mean, if you see on the sequential basis, the number has gone up because we have just repurposed the classifications and trying to consolidate our international operations.

So, between the previous quarter and the current quarter numbers, if you see the gap is majorly because, I mean, we have included the gift-city client also in terms as part of, the Q4 numbers.

But on a 32 to 41, purely because, I mean, those many number of clients have added into the international business because the Gift City was, we just started in Feb, the Gift City operations and Hexagram KFin Technologies Limited May 08, 2023 also we have consolidated only in the last year.

So, hence, the more comparable number is March versus March rather than looking at the numbers from December versus March.

But as Sreekanth mentioned, we have been adding, the clients both, in gift city as well as in the overseas market as well.

So, yes.

So, that is how the numbers are.

Sreekanth Nadella

Yes, this is not an acquisition.

So, we have added clients in Singapore, two funds to be specific.

And so, Hexagram acquisition, as we all know, is something that adds color and character of clientele in India and beyond.

So, the clients that we have added in international, partly are KFintech direct clients in the form of transfer agency work, both for mutual funds and alternatives.

That's where Singapore comes into picture.

It also includes clientele that Hexagram from a fund administration standpoint has won, which is, again, Asia and beyond.

And also, of course, the Canadian funds that we spoke about in conjunction with Gift City funds.

So, it is a combination of, Gift City plus the international funds and also a combination of transfer agency and fund administration contract that we have won during this time.

Moderator · Conference Operator

Ladies and gentlemen, we have reached to the end of the question-and-answer session.

And I now hand the conference over to Mr. Vivek Mathur for closing remarks.

MR. VIVEK MATHUR CFO · MR. AMIT MURARKA HEAD INVESTOR RELATIONS

Thank you very much, everyone, for joining this call.

And we look forward to remain engaged quarter-on-quarter.

Thank you very much.

Moderator · Conference Operator

Thank you.

On behalf of Kotak Securities Limited, that concludes this conference.

Thank you for joining us.

And you may now disconnect your lines.