HGS: AI-Driven Future Powers Margin Expansion and Growth

• **Sales & Revenue Outlook:** HGS anticipates revenue profile improvement by Q4 FY26, driven by a strategic shift towards higher-margin digital services and AI-enabled operations. The Americas sales pipeline already shows over 55% in digital services. The CelerityX broadband division, a key growth driver, aims to contribute "well into double digits" to revenue by the end of FY26. Growth in broadband is expected to offset headwinds in the traditional digital television segment.
• **Margin Outlook:** The company is prioritizing margin expansion over topline growth, evidenced by an improved Q1 FY26 EBITDA margin of 13.5% (up 169 basis points year-over-year). This improvement is attributed to a shifting revenue mix and increased utilization of the internally developed Agentic AI platform (Agent X), which significantly boosts efficiency and reduces costs (e.g., 25% productivity improvements, 30% cost reductions). An improved margin profile is also expected from the BPM segment.
• **Strategic Direction:** HGS is reinventing itself as an "Intelligent Experiences company," with a strong focus on AI capabilities (Agent X being a core platform). This involves aggressive reskilling of talent for AI proficiency. The company is refining its sector focus to target high-growth verticals like BFSI, retail, consumer products, healthcare, and the UK public sector. Strategic acquisitions and partnerships are planned to further enhance AI capabilities and accelerate growth. Broadband expansion specifically targets Tier-2/3/rural markets, aiming for higher Average Revenue Per User (ARPU) through quality service and value-added offerings (OTT, IPTV).

Hinduja Global Solutions (HGS) is strategically embracing an AI-first future, focusing on high-margin digital services. Despite Q1 FY26 showing mixed results, the company outlined a clear vision for sustainable growth and enhanced profitability, driven by innovation. This involves significant investment in AI, a redefined sector focus, and aggressive expansion in the broadband segment, promising a robust outlook. The company expects to see these effects in the fourth quarter of this year.

Embracing AI and Digital Transformation for Margin Growth

Hinduja Global Solutions is strategically shifting towards AI-enabled Business Process Management (BPM) services, prioritizing margin expansion. CEO Venkatesh Korla stated,

“We have consciously decided to prioritize margin expansion over topline growth due to market changes.”

A core driver is their proprietary Agentic AI platform, HGS Agent X, which delivers substantial operational efficiencies, including 25% productivity improvements and 30% cost reductions. The Americas sales pipeline, with over 55% in digital services, highlights this strategic move to higher-margin offerings. HGS plans to invest in reskilling talent and strategic acquisitions to bolster AI capabilities, anticipating an improved margin profile by Q4 FY26.

Strategic Broadband Expansion to Drive Future Revenue

Alongside AI initiatives, HGS is significantly advancing its broadband segment, poised for substantial growth. The Indian wired and wireless home internet market is projected to reach $16.5 billion in five years. The CelerityX broadband division is rapidly expanding, currently contributing about 5% to revenue, with a target of reaching "well into double digits" by fiscal year-end. While the digital television segment faces headwinds, broadband growth aims to offset these challenges. HGS focuses on Tier-2 and Tier-3 markets, maintaining a strong Average Revenue Per User (ARPU) of Rs. 177. This approach, bolstered by quality service and integrating value-added offerings like OTT and IPTV, ensures sustainable expansion.

Conclusion

HGS's FY26 outlook emphasizes a strategic pivot towards AI-driven digital services and aggressive broadband expansion. This dual focus aims to enhance profit margins and ensure sustainable growth, mitigating challenges in traditional segments. Investments in technology, talent, and strategic partnerships position HGS for an "Intelligent Experiences" future, fostering long-term value and robust financial performance.