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HRH Next Services Ltd

| Q4 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤15th Jun 26

Summary : HRH Next reported strong FY26 results, driven by traditional services and the new AI division AINA, with management expressing bullishness on future AI-led growth and market expansion.

Management Perspective positive : Management repeatedly used phrases like 'very happy,' 'fruitful year,' 'healthy jump,' 'very bullish,' 'super exciting,' and 'future is bright' when discussing performance, AI initiatives, and future prospects.

Concall Report Analysis & Insights

Business Overview

  1. HRH Next provides customer engagement and contact center services.
  2. Company operates from 8 strategic locations across India, serving pan-India customers.
  3. Services include inbound/outbound calls, chat, email, social media, and digital platforms.
  4. Launched AINA, an AI division, in 2025 for technology-driven customer experience.
  5. Serves diverse industries like telecom, e-commerce, food tech, education, government, and fintech.

Future Growth Prospects

  1. AINA, the AI division, is expected to drive significant future revenue growth.
  2. Targeting 50% of revenue from the AI division within three years.
  3. Plans for inorganic growth and potential larger acquisitions in the AI space.
  4. Expanding physical presence into Tier 2, 3, and 4 cities.
  5. Aiming for main board listing on NSE by meeting qualification criteria.

Management Insights

  1. FY25-26 was a very fruitful year with healthy revenue and margin expansion.
  2. AINA, the AI division, is a significant milestone and key to future growth.
  3. Company is an AI-first services provider, not a traditional BPM player.
  4. Strong client retention with average partnerships lasting 5-15 years.
  5. Achieved high CSAT and attendance rates in traditional contact centers.

Signs of Skepticism

  1. The 100 crore FY27 revenue guidance relies on inorganic growth, which is less certain.
  2. Ambitious target of 50% revenue from AI in three years, given its nascent stage.
  3. Vague details on specific revenue contributions from new mandates like Heritage and Chai Shorts.
  4. Capex plans for FY27 are tentative and dependent on market conditions and order book.

Risk Factors

  1. Delayed payments from large enterprise clients pose working capital challenges.
  2. Reliance on inorganic growth to meet ambitious revenue targets.
  3. Rapidly changing AI landscape and competitive environment.
  4. Uncertainty in geographical expansion plans beyond current 8 locations.

Good To Know

  1. HRH Next was formerly Hyderabad Radio House, established in 1938.
  2. The contact center business, HRH Next, was founded in 2007.
  3. Company went public in 2024, marking another significant milestone.
  4. AINA's AI technology supports 11 vernacular languages, focusing on India-first solutions.
  5. Current order book is healthy, with inquiries for AI adoption from new and existing clients.

Key Drivers

  1. AI division AINA driving future growth.
  2. Expanding into Tier 2/3/4 cities.
  3. Healthy order book, new client inquiries.
  4. Potential for main board listing.

Key Analyst Discussions

Competitive Environment

  1. AINA's homegrown product performs better in Indian vernacular spaces than competitors.
  2. Many new AI players offer wrapper services, while HRH Next has deep domain knowledge.
  3. Company has a 'wildcard entry' into boardrooms of large enterprises due to long-standing relationships.

Market Trends & Consumer Behavior

  1. Client response to AINA has been phenomenal, with high acceptance for language-agnostic tools.
  2. Market is rapidly changing, with huge potential for monetizing AI solutions.
  3. Demand drivers are strong, with significant interest in AI adoption.

Financial Highlights

  1. Intangible assets under development (16.36 crore) are primarily for AI development.
  2. FY26 revenue grew 18%, EBITDA grew 38%, driven by cost consolidation and AINA contribution.
  3. PAT margin guidance is 10-12%, aligning with ITES industry trends.
  4. Working capital impacted by delayed payments from large enterprises, but no bad debts.
  5. FY27 capex plan includes 3-3.5 crores per new center and 5-6 crores for AI development.

Product Composition

  1. AINA is developing 8-10 different AI products, not just voice bots.
  2. Currently, 7 crores of FY26 revenue came from digital platforms and AINA.
  3. HRH Next aims to remain an AI-first services company, not a product company.
  4. AINA has 2-3 full productions live, with more in the pipeline.

Strategic Considerations

  1. Long-term ambition includes main board listing, larger acquisitions, and AI space expansion.
  2. Company is not a traditional BPM player but an AI-led services company.
  3. Management is very positive about maintaining a healthy growth rate.
  4. Focus on expanding pack margins through AI integration.