HGS - Hinduja Global Solutions Limited Share Price

In the Q1 FY2026 Earnings Conference Call for Hinduja Global Solutions (HGS), management provided a positive outlook, emphasizing a strategic shift towards digital services and AI-driven operations. Key highlights from the management's outlook include:

1. Financial Performance: HGS achieved a total income of Rs.1,187.3 crores and operating revenue of Rs.1,056.2 crores in Q1 FY2026. EBITDA stood at Rs.159.7 crores, with margins improving to 13.5%, up 169 basis points year-over-year.

2. Focus on Margin Expansion: Management highlighted the decision to prioritize margin growth over top-line revenue amid macroeconomic volatility, indicating a shift towards sustainability in profitability.

3. Strong Sales Pipeline: The order pipeline for digital services in the Americas is robust, with over 55% of the pipeline devoted to this segment, supported by the increasing adoption of the Agentic AI platform, HGS Agent X.

4. Future Growth Strategy: HGS is reinforcing its commitment to AI-enabled BPM (Business Process Management), focusing on intelligent augmentation rather than traditional human-intensive methods. This transition aims to deliver enhanced efficiency and quality.

5. Investment in Skills and Technology: The company plans to allocate profits toward reskilling personnel and developing innovative solutions, especially in digital services. Management emphasized their ambition to transform into an "Intelligent Experiences" company, targeting key sectors like BFSI (Banking, Financial Services, and Insurance), healthcare, and retail.

6. Broadband Segment Focus: With significant opportunities in broadband services, especially in rural areas, management anticipates long-term growth and improved ARPUs through enhanced service offerings and customer engagement.

7. Continued Transformation: The approved 5-year business transformation plan outlines efforts to create frictionless experiences through AI-centric workflows, aiming at sustainable growth and creating long-term shareholder value.

Overall, the management conveyed optimism about future revenue quality and sustainable growth, supported by strategic investments and a strong focus on AI and digital services.

Question 1: Given the increasing importance of AI across your offerings, how do you evaluate building, partnering, or acquiring when expanding your AI capabilities?

Answer: We plan to approach AI strategically. Core components will be developed in-house to create a competitive advantage, while we will collaborate with external organizations for non-core capabilities, such as voice biometrics. This dual strategy ensures speed to market while enhancing our ecosystem.

Question 2: What caused the loss of approximately Rs. 38.8 crores in the media segment in Q1, compared to a profit of Rs. 30.5 crores in the previous quarter?

Answer: The decline stems primarily from Rs. 30 crores in unbilled marketing deals with broadcasters and an excess provision from Q4 impacting revenue. Increased content costs and a general decline in cable revenue further contributed to this loss. We expect normalcy in coming quarters.

Question 3: Was the BPM segment's revenue decline driven by client ramp-downs, macro softness, or seasonality, and what is your outlook for FY'26 revenue growth and margins?

Answer: The BPM segment's decline results from clients diversifying vendors, not losing them. We expect improvements as we gain technology business. Despite this quarter's challenges, our focus remains on robust revenue growth and improved margins in FY'26, driven by positive trends in digital services.

Question 4: How will pricing trends and deal velocity change in the Americas?

Answer: The digital operations field is evolving, and we observe a shift to outcome-based pricing. Project sizes are pilot-sized, but as we demonstrate success, larger deals will follow. Automation solutions yield higher margins, despite a smaller revenue footprint compared to manpower-driven solutions.

Question 5: What share of recent wins can be attributed to Agent X or the AI-led verticals offering, and are there any client testimonials?

Answer: Agent X is being effectively utilized across various sectors, including banking for fraud detection and compliance. We have multiple case studies available on our website showcasing these applications and their positive impacts, including enhanced cross-selling and customer experience management.

Question 6: What are the expectations for ARPU trends and subscriber growth in Tier-2 and Tier-3 cities?

Answer: While our ARPU is currently stable at Rs. 177, future increases will come from added layers like OTT and IPTV services. We expect growth driven by service quality in Tier-2 and Tier-3 markets, where we see less competition and higher demand, ensuring sustainable revenue growth.

Question 7: Is the board planning to implement any buyback or increase in dividend payout to improve returns for shareholders?

Answer: While we executed a successful buyback previously, we are currently focused on acquisitions and maximizing shareholder returns through strategic investments rather than buybacks. Future growth opportunities will dictate how we utilize our funds moving forward.