HRH Next Services Limited — Q4 FY25 earnings call

Call held 9 Jun 2025

Management summary

HRH Next Services Limited reported a strong FY25 with record revenue and significant profit growth, driven by new client acquisitions and an expanded service portfolio. Despite a temporary dip in H2 EBITDA margins and negative cash flow from operations due to growth-related costs and working capital dynamics, management is confident in future improvements through AI adoption, operational efficiencies, and strategic expansion into vernacular markets. The company maintains a healthy debt-to-equity ratio and aims for a main board listing by 2027.

Highlights

  • Record turnover of ₹57.85 crores, marking a 28% YoY increase, driven by new client wins and additional orders.

  • EBITDA grew 33% YoY, and PAT increased by 70% YoY, demonstrating strong bottom-line performance.

  • PAT margin improved by 34% to 5.43% for FY25, up from 4.05% in the previous year.

  • Earnings per share increased by 6% YoY.

  • Receivable days dramatically improved from 158 to 76, indicating better working capital management.

Concerns

  • EBITDA margin dropped from 20% in H1 FY25 to 11% in H2 FY25 due to high costs from new customer and seat additions.

  • Negative cash flow from operations of ₹86 crores in Q4 FY25, attributed to unbilled revenue and delayed payments.

Key financials

  1. Turnover ₹57.85 Cr +28%YoY
  2. EBITDA Growth — +33%YoY
  3. PAT Growth — +70%YoY
  4. PAT Margin 5.4% +34%YoY
  5. EPS Growth — +6%YoY

What they filed

Q4 FY26: revenue up 49.8%, net profit up 742.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY24Q4 FY24Q2 FY25Q4 FY25Q2 FY26Q4 FY26
Revenue21 24 29 29 32 +51%36 +50%
EBITDA4 3 6 3 6 +55%7 +143%
Net profit2 0 2 1 2 +38%3 +742%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

medium confidence
  • Capex Capex disclosed internal accruals
    • Expanding with one center in Indore
    • Augmenting facilities in Tungkur and Coimbatore
    So we are looking at expanding with one center in Indore. Okay? And that is because, you know, our clients are wanting a very pure Hindi. So We will go into that. From an existing, you know, standpoint, our current. You know, we are mining our internal customers also very deeply, with newest technologies. And ex, you know, service deliveries. So we hope to also, you know, further, expand our capabilities by augmenting our facilities in Tungkur as well as in Coimbatore. A lot of this funding will come through internal accruals at this current stage.
  • Debt Debt disclosed
    • New borrowing Long term borrowings increased by ₹12.25 crores, contributing to negative cash outflow. ₹12.25 Cr
    debt equity ratio is very very less, that is, to 26 percentage compared with equity, 26% compared with equity.

Guidance & targets

Profitability

  • Bottom Line Improvement Profitability · FY26 and FY27 · Medium confidence 200 to 300 basis point improvements
    But with the advanced use of AI. We certainly expect, you know, at least 200 to 250 to 300 basis point improvements in our bottom lines.

    — HRH Next

Corporate Governance

  • Main Board Listing Corporate Governance · by 2027 · High confidence by 2027
    Also one of our main agenda and main mission that we have taken up is that we want to enter the main board by 2027, or somewhere around that month.

    — HRH Next

Operational Efficiency

  • Agent Efficiency Operational Efficiency · by the time this year ends · Medium confidence 20 to 25%
    We would assume that, you know, an agent efficiency of close to 20 to 25% can be achieved in by the time this year ends.

    — HRH Next

Revenue

  • Growth Trajectory Revenue · FY26 · Medium confidence same growth trajectory
    But going by what we have done, and going by a strong start to the 1st quarter we expect to continue on the same growth trajectory that we were experiencing.

    — HRH Next

Cash Flow

  • Positive Cash Flow Cash Flow · Q2 and coming quarters by 2026 · Medium confidence Positive cash flow
    With these revised billing cycles and automation, we expect. Positive cash flow in Q. 2. And for the coming quarters by 2026.

    — HRH Next

What to watch in Q1 FY26

EBITDA Margin Improvement

FY26 and FY27
Current 11% (H2 FY25)
Target Improvement by 200-300 bps

Why it matters

Management guided for significant bottom-line improvement through AI adoption and operational efficiencies, which will be reflected in EBITDA margins.

But with the advanced use of AI. We certainly expect, you know, at least 200 to 250 to 300 basis point improvements in our bottom lines.

Risks & concerns

  • EBITDA margin compression due to growth investments

    medium

    EBITDA margin dropped from 20% in H1 FY25 to 11% in H2 FY25 due to high costs from new customer acquisition and seat additions, expected to yield future benefits.

    Analyst acknowledged

  • Negative cash flow from operations

    medium

    Negative cash flow of ₹86 crores in Q4 FY25 due to unbilled revenue, increased borrowings, backend infra investment, and delayed payments, but receivable days improved and positive cash flow is expected by Q2.

    Analyst acknowledged

Q&A highlights

7 direct
Drop in EBITDA margin from 20% (H1 FY25) to 11% (H2 FY25) Direct
Actually high value, customers added in the second half, and for the cost we incurred. And also we added some seats, fts. For this there is a very high cost, so averaging lead is going up, but in second half that was reduced, but in further years it will be beneficial.

Management explained the significant margin compression as a result of new customer acquisition and seat additions, expecting future benefits from these investments.

Asked by Sahil Agarwal

Negative cash flow from operations of ₹86 crores Direct
There are 2 factors for negative cash outflow one is, there is an unbuilt revenue... approximately 200 crore and another one is long term borrowings 12.25 crore increased... also due to back end infra investment and working capital timing mainly certain delayed payments from certain large clients... the receivable days have improved dramatically from 158 to 76. With these revised billing cycles and automation, we expect. Positive cash flow in Q. 2. And for the coming quarters by 2026.

Management provided a detailed breakdown of reasons for negative cash flow, including unbilled revenue and delayed payments, and outlined corrective actions with a timeline for achieving positive cash flow.

Asked by Sahil Agarwal

Revenue recognition policy for long-term client contracts Direct
We work on a very easy concept. It's called. You know, we build per ft, that's a full time executive... We operate on a very, very you know, firm, fixed model which is per person. so that fixed Model includes everything. It includes a cost of person, cost of it, cost of infrastructure, etc. It gives you more stable revenues.

Clarified the company's stable 'per full-time executive' fixed revenue model, which provides predictable revenues compared to variable performance-based models.

Asked by Sahil Agarwal

Expansion plans to the Middle East Partial
Okay, there is no definite timeline for our expansion plan in Middle East, though we are talking to a few clients there... it will largely be focused for the Indian diaspora. I cannot give any forward looking statements or any definitive timelines in this meeting, but things are very positive on that side.

Indicated strategic interest in international expansion targeting the Indian diaspora in the Middle East, with ongoing client discussions, but no concrete timelines yet.

Impact of AI tools on service delivery efficiency and operating margins Direct
We are in the stage of piloting these processes and piloting these tools for our set of customers. Right now, the immediate impact in terms of revenue cannot be measured right now, but maybe in the coming few quarters we'll be able to give a guideline as to how much you know it will really affect. But my estimate is that you know, an agent efficiency of close to 20 to 25% can be achieved in by the time this year ends.

Detailed the company's AI adoption strategy, focusing on piloting for 100% call audits and agent assist, with an expectation of 20-25% agent efficiency improvement by year-end.

Asked by Keshav Bhauwala

Competitors in the BPO/CX space and HRH Next's differentiation Direct
I think we have some sort of a definite advantage. We have a 1st move advantage we have. We have the advantage of going into literally the nooks and corners of South India... We have competed as a very, very big players like Hinduja... our company is doing reasonably well on the Ebitda margin side... our debt to equity ratio we are operating at a very low 0 point 2 6, while the peer group is operating at 0 point 4 0.

Management articulated HRH Next's competitive advantages in regional vernacular expertise and strong financial metrics (EBITDA margin, low debt-to-equity) compared to larger national players.

Asked by Keshav Bhauwala

Capex and fundraising plans for FY25 Direct
So we are looking at expanding with one center in Indore... We hope to also, you know, further, expand our capabilities by augmenting our facilities in Tungkur as well as in Coimbatore. A lot of this funding will come through internal accruals at this current stage.

Outlined specific expansion plans for new centers in Indore, Tungkur, and Coimbatore, driven by client demand for Hindi services, to be funded entirely through internal accruals.

Asked by Rhythm Gandhi

Promoter holding dilution and participation in future fundraising Direct
The promoters would like to take part in any upcoming funding rounds. and there is a warrant route, also that we would like to take so definitely. The promoters would like to take part in any future funding rounds and keep up our share.

Reassured investors about promoter commitment, stating their intention to participate in future fundraising to maintain their shareholding and avoid dilution.

Asked by Rhythm Gandhi

2 min read 5 chapters

Detailed narrative

Strong Financial Performance and Growth Drivers in FY25

HRH Next Services Limited achieved a record turnover of ₹57.85 crores in FY25, representing a 28% year-on-year increase. This growth was primarily fueled by new client acquisitions, including IRCTC and M Pocket, alongside additional orders from existing clients. The company also reported a 33% growth in EBITDA and a significant 70% increase in PAT compared to the previous financial year, with the PAT margin improving by 34% to 5.43%.

Strategic Focus on Vernacular Services and Geographic Expansion

The company positions itself as a leading vernacular premium services provider in South India, supporting over 11 languages across 7 service offerings. HRH Next has expanded its operations from Hyderabad to 8 locations across South India, serving over 2,500 employees. The strategic focus includes venturing into Tier 2 and Tier 3 cities to leverage vernacular expertise and manage costs effectively, with plans to open a new center in Indore to cater to Hindi-speaking clients.

AI Adoption for Enhanced Operational Efficiency and Customer Experience

HRH Next is actively integrating AI and new technologies to improve customer experience and operational efficiency. The company is piloting AI tools for 100% call audits, a significant improvement over the manual 2-3% coverage, and implementing real-time agent assist features. Management anticipates a 20-25% improvement in agent efficiency by the end of FY25 through these AI initiatives, which are expected to contribute to bottom-line improvements of 200-300 basis points in FY26 and FY27.

Addressing Working Capital Challenges and Margin Compression

The company reported negative cash flow from operations of ₹86 crores in Q4 FY25, attributed to unbilled revenue of approximately ₹200 crores, an increase in long-term borrowings by ₹12.25 crores, backend infrastructure investments, and delayed payments from large clients. EBITDA margins compressed from 20% in H1 FY25 to 11% in H2 FY25 due to high costs associated with new customer acquisition and seat additions. However, receivable days improved from 158 to 76, and management expects positive cash flow by Q2 and in subsequent quarters by 2026.

Long-Term Strategic Goals and Capital Allocation

HRH Next aims for a main board listing by 2027, signaling its ambition for greater market presence and capital access. The company's current expansion plans, including new centers in Indore, Tungkur, and Coimbatore, are primarily funded through internal accruals. Promoters have affirmed their commitment to maintaining their shareholding by participating in future fundraising rounds. The company also highlights its healthy debt-to-equity ratio of 0.26, which is lower than its peer group's average of 0.40.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Services earnings calls