Indegene Limited analyst Q&A

Thank you very much. We will now begin with the question-and-answer session.

We will take the first question is from the line of Prakash Kapadia from Kapadia Financial Services.

I had 2 questions. The revenue per employee has increased to around $75,000 from $67,000 last year. Is it just the on-site mix increase or there is something else or any other metrics which you can highlight? And secondly, if I look at more than $10 million revenues, there are 10 clients which are same as compared to last year. So, is there a product life cycle for larger clients, which is showing up there because we've not seen any increase in number of clients in that cohort? So, these are my 2 questions.

I'll start off with latter one and pass it on to Suhas. We hear that cohort is stable. It's also a function that at least one of our clients was just tad below that $10 million . And from a categorization perspective, $9.9 million something falls into the other bucket. And these customers are taking a bit more time to change their operating model, adopt some of the platforms and discussions we've been having with them. Having said that, we are very bullish that this cohort also will increase. It's just a matter of cycle times and when they do change management internally. Suhas?

Thank you, Manish. And moving to the first question on the revenue per employee in our fact sheet, the KPIs, you'll observe that our on-site offshore mix has remained fairly stable over the past many years, actually on-site increasing marginally over the last couple of years. But having said that, I would like to highlight that over the last 5 years, our RPEs have consistently grown from $51,000 to close to $75,000 today and also from $66,000 to $ 75,000 on a year -on-year basis. So, there is a sustained effort to increase this in combination with the technology impacting our operations positively , combined with the outcome or output -based pricing model in our engagement, which help us retain the benefits of the productivity increase without being dependent on timesheet-based or input prices.

I would add one more line. As I said earlier, in this world, the competitive structure of the market is being rewritten and right now all the directions, it looks like that's being written in our favour. And hence, the quality of the kind of engagements we are running with our customers are much more strategic, which also is resulting in the kind of contracts we write.

Sure. And lastly, Suhas is it fair to assume debtor days will be more or less stable at these levels and we can have growth also or any major change envisaged going forward?

So, debtors have reduced significantly, resulting in higher cash flows. And we are seeing a trend reducing from mid-80s about 5 years ago to the 60s as we speak. But having said that, I would guide towards mid-60s to 70 days on a steady basis.

The next question is from the line of Prolin Nandu from Edelweiss Public Alternatives.

Just 2 questions from my side. One is on this AI initiative that you have talked about. Now what I gather is that what works in our favour is the domain knowledge and the regulatory aspect of the industry in which we deal with. Just wanted your thoughts on how defendable are these moats, so to say? Don't you think that over the period of time, maybe this domain knowledge can also be commoditized by some of the large LLM players like they have been doing in other industry. Why do you think that cannot happen in our industry? So that's my first questio n on the AI side. And the second question is on the margin, where you have talked about some of the investments that you are making and you coming back to your previous high sometime in the second half of FY27. My question here is that what is the risk that this could probably catch up to stay relevant in the AI world ? We continue our investment part and not bear the fruits of that operating leverage that we are envisaging. So yes, pretty much the questions are more on a medium-term outlook and to do with AI?

That's a fair question. So let me start with the first one. Our real moat over here, which we continue to invest and solidify every day is domain expertise. And domain expertise is just not a very broad term. For example, when I spoke about “the 3 months to 3 days” thing that required therapeutic area expertise, that required medical expertise, that required creative expertise, very market nuanced expertise for different market. It also used our own proprietary data sources. So along with domain expertise, we are also bringing in our proprietary data sources. Most of the cases, we see whenever we're building our tech product, LLMs on their own are not solving for the problem. We are using all the LLMs, all the frontier models. We are working with AI labs, names which you might not have heard of, but have cutting-edge labs in different parts of the world. But we have to bring a couple of them together along with our technologies to start to solve different problems. And the reason why we are able to articulate that well is again the domain expertise. So at least in the medium term, call it 3 to 5 years, we don't see LLMs having the ability to do this. LLMs still don't have the reliability when you're talking about in operating grade . So, the human in loop is going to be even more important. There has been an FDA call out to one of the companies in just last 2 weeks a warning letter that looks AI generated. Now what happens in the medium to long term, that jury is still out. But domain expertise and data, embedded in these platforms, which are going to be a combination of multi platforms is the approach we are taking, and we believe that's fairly defensible in the medium term. And the second question was the AI investment. You're absolutely right. The reason why you see us talking about our margins recovering over a couple of quarters is because we continue to invest. We have baked in a bunch of investments. This year, our R&D cost as we call it, has gone up. It's tad above 2% of our revenues. We're making those investments. We have made GTM investments . We are increasing those investments as well and a bunch of areas in the domain expertise because customers also need much more handholding when they're going through this turn. So those investments have been factored in. And one reason why we're not saying that our margins will expand beyond what they used to be, while there might be leverage over there , is because we believe that anything above that range we are operating in, we are going to reinvest in the business. Maintaining this broad range is very doable as we see it today.

The next question is from the line of Raghav Maheshwari from Kamakhya Wealth Management Private Limited.

Congratulations on good top-line work. Sir, my first question building up on the question that the last participant had, I just wanted to get a bit of a technicality here. Sir, we talk about Generative AI, we talk about Cortex AI. Just wanted to understand what kind of AI that is. Is it like an in-house trained element or it is like a wrapper with proper role defined by your domain expertise? So just wanted to understand what kind of AI we are into.

So, what we are doing is let's think about it, there are frontier models, and there are lots of them. There are obviously, the large language ones, there are much more specialized ones . We are using those along with a bunch of very specialized things, for e xample, computer vision. We partner with large action models. That's another category. So, I can go on and on. There are a bunch of these very specialized things along with the large frontier models. We are partnering a bunch of those things. We have our own engineering team, which is building various stuff. Those are the platforms which we are integrating from a pure tech perspective, and we realize different combinations work well for different use cases . Now what is Cortex ? Cortex is a knowledge engineering platform which is meant for developing agentic workflows with all the security, enterprise security, scalability, meant for life sciences. That enables us to build agents quickly using a knowledge engineering approach. We have also decoupled the domain layer from the technology layer so that we can very quickly scale up many use cases, which is what Cortex has enabled. So that's the broad approach. Now we continue to build agents, and agents is just one part of it. How do you reconfigure workflows? How do you think about skills in context of those workflows? All that stuff is up for change. So those new skill sets, new workflows along with these agents. That's the direction the industry is moving in. And of course, the agents are using the platforms I spoke about.

Right. That was good information. And sir, second thing which I wanted to ask a little bit if you can throw light on FY27. What are some of the growth drivers for the year? And what kind of revenue trajectory are we looking for? And most important thing is what are we planning to do differently than what we did in FY26?

FY27 is going to be more a year of scaling what we did in FY26. In FY26, we did a bunch of things different. We made investment in talent, we crystallized on solutions with bunch of our clients across the board. We won some very marquee engagements I spoke about earlier. So, we are not in a mode to do anything different from a scale perspective. Everything we started on FY26, we feel vindicated that we are moving in the right direction, and FY27 is going to be doubling, tripling down in them to scale, whether it's on the customer side, engagement side, revenue, rejigging our own internal locks and ways of doing things. You want to add on, Suhas?

Maybe to put a little more colour to that. What Manish mentioned on the GenAI-led wins. Our customer engagements which have moved from experimentation to POCs to hard dollars and long-term engagements and commitments. That combined with Tectonic investments we have been doing over the past many quarters, now getting crystallized with 2 customers moving into long -term engagements. Specifically, our largest customer signing up with Germany as a region , but also active and very high probable pipeline for many other regions with the same customer. And finally, I would add the consistent $1 million-plus wins that we have been talking about for the past few quarters give us the confidence of the strength of the revenue visibility, combined with the strong pipeline that we continue to generate and carry as we speak. One last final comment- that $10 million win that we had mentioned in quarter 3, while it has kicked off and started. From a revenue recognition perspective, it is deferred because this is an outcome-based pricing model and will be entirely recognized in FY27. So, these are some of the specifics of why we feel confident as we move into FY27.

The next question is from the line of Lakshminarayanan from Tunga Investments.

Few questions from my side. I understand that we work with top innovator companies. Just want to understand what kind of solutions we have for generic companies or even small size companies. They may find it difficult to offer the 70 K+ revenue per person. Is there a market that exists or do you intend to expand through either generic companies as well as small or mid- sized companies into pharma?

Mid-sized and small companies is something which we are expanding rapidly. We are seeing significant traction. In fact, I spoke about some of the deals where we are launching a product for a small biotech . And our model of launch is becoming the way to g o for a lot of these companies. We have a customer talking about in public domain that they were planning to hire a lot of reps, but then we showed up and they had to add only 25 reps and getting everything amplified by our omnichannel engagement. There's another customer where we are doing end-to-end medical and commercial functions. So, the whole biotech, and smaller segment, is attractive segment for us and we believe we will scale over there. That segment also seems to be getting tailwinds in general. The biotech in the U.S. had become very tough from a funding environment . It's coming up now and been on the upswing. So that is one part. As far as generics are concerned, we do some work with them. We have some revenues coming from generics. But if I just contrast the opportunity we have with innovative pharma companies, where, as I mentioned earlier that we believe we will have $100 million clients in some years versus the other part. So, we want to prioritize the resources accordingly.

The next question is from the line of Yash Mehta from AART Ventures.

Sir, I wanted to ask what has been the organic growth in constant currency terms in Q4 FY26?

Constant currency terms year -on-year growth has been 12% organic and a little north of 3% QoQ. You can look at even our financial disclosures in the investor presentation where we have provided the ex-BioPharm pro forma financials and that provides more details beyond the revenue.

And sir, how does the margins span out in FY27 considering the integration with BioPharm?

So, the integration of BioPharm was successfully completed ahead of schedule towards the end of February. The transition services from the seller was originally planned to get concluded end of March. This completion of the transition would be adding to basically synergies on the G&A side. But as we speak, we are also looking at synergies on the data subscriptions , on the business operations, and eventually go-to-market. And we would progressively start impacting us through the quarters in FY27 more positively. But G&A would be the immediate impact that we anticipate to see coming in the next quarter itself.

Thank you very much. Ladies and gentlemen, we will take that as the last question for today. I now hand the conference over to Mr. Manish Gupta for closing comments.

Thank you. I want to close by thanking all our 5,000 plus colleagues globally whose dedication and expertise make every one of these wins possible. I also want to thank our customers for the trust they have placed in Indegene. And, of course, our investors and analysts for their continuous engagement and support. Thank you so much.

Thank you, members of the management. On behalf of Indegene Limited, that concludes this conference. Thank you all for joining with us today. And you may now disconnect your lines. Thank you. (This document has been edited for readability and is not a verbatim record)