Infollion Research Services Limited (INFOLLION) Earnings Call Transcript & Summary

Both. So we are expanding our core business within India, which is growing at a very healthy clip. We're very happy with how it is growing. Some part of it, especially the supply side is being sourced a lot from outside India, which is exports. Again, you can find that number in the number of international payments, which we have done. It should have crossed quarter and in fact, probably more than 30% now. And peripheral areas, we have already shared that what are the new initiatives we are trying. I said that in the opening statement during that as well, which is L&D.

Yes. Got it. And just one last question. And in the core business that we have, is there any differentiator that we have as compared to the many other players that are there? Or is it just purely based on cost and promptness of service?

No sir, differentiator, we have already explained multiple number of times that we are structured in a much different way. We go far more deeper into the tech side. We do almost 2x of our calls per person compared to our peers. And primary reason is that we use a fair amount of tech both to do -- to discover calls. And since we are structured very differently from our peers that we are structured at a domain level, we have far more deeper domain access than just sales. So that's how we have been doing it. And if we go -- if we are able to identify specific areas and specific domains within U.S. geography, we should be able to crack that geography, which we are already doing it, and we are reasonably happy with how it has panned out.

Got it. And any 5-year aspirations.

Sir, I request you to come back in queue, please. Mr. Bhavnik Nair, please go ahead.

I just wanted to ask what kind of revenue are we generating from international experts to Indian clients?

As I said, the last disclosed number was a quarter, but you can go into the details. We always disclose the payments done to domestic experts and international experts. You can have those ratios readily.

Okay. And I just want like the forward-looking statement, like what kind of growth are we expecting like in like 3, 4 years? So like...

We have never ever given any forward-looking statement as of now. Although we have disclosed -- we have discussed in depth how we see the market growing. But you can assume that how consulting firms grow and we are a derivative of that business and how private equity/large public market funds spend on research, we are a derivative of that business. So as and when those spends increase, that's the organic growth, which we will get. Since we are -- we were not very well represented in the financial world, we have kind of gained a bit of market share over there. So we should be able to do better than just organic growth. For inorganic, we are already trying outside India, and we have already shared what are our target areas where we are trying inorganic growth. Outside India and organically, again, U.S. is one of our primary markets, but we have also started making our presence felt in Western Europe [indiscernible].

Mr. Sekhar Mondal, please go ahead.

Just one question. So are we generating any revenues from U.S. clients as of now?

Not too much. It is pretty small right now. But we have started maintaining presence for at least for the last 3 or 4 quarters, we have been traveling regularly to U.S. It is on an uptrend, but not material enough.

Okay. So I mean, are we finding it very challenging to get -- make that number to be something material? Or are we -- is there some kind of entry barrier?

I've explained that even at the time of IPO during the previous AGMs and during previous earnings calls. So this is not a business where you can put in a lot of sales team and then expect growth to follow because you need to have a network. So it goes hand in hand. So we have built up a very sizable network. We should -- we would have crossed 10,000 by now. And that's how we have started gaining market share on the other side as well. Compared to previous years, we are obviously much higher. Compared to the India numbers, we are not there. But from India to U.S. numbers, we are -- we have a very sizable number. I would not say it has been challenging or anything. To be honest, any marketplace business, initially, it goes slow. And only when you are able to connect the relevant guys, it works. Now even if we scale up our marketing efforts or sales efforts ahead of time in U.S., it would only result in a lot of CD calls. We may not be able to do the numbers, but it will not be a sustainable thing. So we want to go hand-in-hand from both from a supply and a demand perspective.

Mr. Rajesh Jain, please go ahead.

I have 2, 3 questions. So you mentioned that corporate development cost, the CD costs had an impact on gross margins, right? But I mean, these calls are pre-calls basically, right? So they will not reflect in the revenue, right?

They will not reflect in the revenue. But the expense will -- so what we do is these are total revenue by total expenses done on experts. So if the first 2 calls of a particular project are free, which gets adjusted over the relevant thing, so it reflects into the one. But on a call-to-call basis, it will not have an impact.

So are you saying that you would not have got the revenue from the client, but you would have paid the experts.

No. So these calls are being done. See, these calls are being done, which in the hope that down the line, we will get more revenue.

Yes. Okay. Okay. And there are some hires in the market that especially with respect to your Indian presence and the Indian experts that you have on board that by the time that the experts receive a call from you, they would have already received the call from other platforms and they would have already accepted the call from the other platform. So what is your comment on that? Have you noticed such a thing?

I can't comment without data, but I mean you yourself mentioned it is here say no, but it doesn't work like that. I mean thanks for pointing it out that we're not as quick, but I can assure you our tags are as good, if not better than most of them.

Yes, because in fact, 2, 3 contacts who are my -- not my direct contacts, but you can say second level or third level connects. So they have pointed it out that some projects or inquiries they received from Infollion was a bit delayed and they already received similar inquiries from other platforms, and they already accepted on those platforms.

I can't comment on that. I don't really...

Okay. No problem. And which are the industries in which you serve your clients? I mean, where do you see the demand coming from, which industries? And why is the demand repetitive? How do you ensure that your target customer does not collaborate with your expert directly in future?

This is a fairly well-discussed answer. I would still quickly address that, but in previous transcripts as well as the DRHP ones, I've explained it very clearly, how we position that. So one, it is essentially a reflection of Indian economy. The Indian business is a reflection of the Indian economy. BFSI, IT services, life sciences, CPG, retail, et cetera, is roughly 40% of our business. manufacturing, chemicals, capital goods, et cetera, would be around -- all put together would be around single digits, et cetera, et cetera. So that's how it is. Your second part was, will they go direct? Sometimes they do, sometimes they don't, but we only focus on cross-domain short-term businesses where the value which we deliver is far more than the money they will save on that. So this disintermediation, we have discussed in fair detail earlier. I would recommend you to refer to that. Others might have already gone through.

Okay. But can you start publishing the industry-wise breakup of...

Sir I request you to come back in the queue, please.

Yes, it's just a suggestion. It's just a suggestion. It's not a question.

So we have already published the 60% because there in the DRHP.

No, no. In the investor presentation, in the half yearly investor presentation. Because it will keep changing, right? It will keep changing.

Not really. It doesn't change too much, to be honest. I've been saying this for almost 2 years, and it is still within the plus/minus 1% to 2% range on each domain.

Okay.

So investor trends change, yes. But for us, detailed discussions, it's very minimal change.

Mr. Rohit Balakrishnan, please go ahead.

Gaurav, just one thing on your investments in AI. So in terms of like I was going through some of the global players and they have been talking about a lot of stuff that they are trying to do with AI and they're trying to sort of, in a way, relook at this whole business in itself, like what AlphaSense is trying to do, et cetera. So just wanted to get your view, what is it that you are doing? What are your thoughts on this?

Fair enough. So again, this is -- I think we just had it in the last AGM, but I'll definitely take this. So we have always positioned ourselves as a business where research, which has already been done is added upon by research, which has never been written down. Now we don't see AI as a magic wand for our business, neither for our other clients or for other peers. It is just a very smart way of deriving insights from unstructured data, which is widely available, right? But if you have a look at most of our projects, they do not ask for basic data, right? If you happen to speak to any consultants, the basic research reports, Bloomberg, even AlphaSense, all these subscriptions are already available to them, right? So we are not in the data/report/information services -- written information services business, right? So that's a different business. Good or bad, it's a different problem, but we are not in that business. We are in deep insights. That's point number one. Second, you mentioned various AI use cases. So we have been trying that. I -- in fact, the core expert network/AI offering of AlphaSense, I don't think it is directed more towards shallow public market research as opposed to in-depth consulting or private equity research. So our business remains different. People have tried using it. In fact, there have been more failed examples than successful examples on that front. A one line answer is what I believe is that the half-life of old transcripts does not justify the transcription cost. So when you subscribe that to for the first time, it feels very overwhelming that you get a lot of data, but most of it is shallow data. A 3-year-old transcript or even a 2-year-old transcript is much more shallow in terms of understanding of the business than the past 4 concalls. So what happens is you need to keep subsidizing and having a larger and larger pool, but the incremental cost which you spend on the pool is not justified. So that's what we have observed. We have done that business. We have experimented with the business. At this stage, I don't think we will go into the transcripts or deriving insights from publicly available transcripts and our business. Having said that, we have a data offering, which we have been experimenting with a few clients where we have aggregated lots of research agents, loaded up with their customer, with their primary data. We have given them some sources of crop data, which is publicly available where they can fetch from those sources and some -- we are trying for some paid crop data as well on a pay-per-use basis. So that is one experiment we are doing. What we believe is that that's a report writing business. That's a very different business. One, I don't see too much of impact on us, neither we can impact them. Our business is just an add-on to that business. So what we have done is we have released our APIs for finding experts. We have tied up with a few research companies like that. And all we can say is that we -- our experts would be searchable through external APIs, if at all, that matters. Doing or adding value through our own transcripts from publicly available data, I don't think that's a very lucrative business.

Got it. Okay. Fair enough.

That's my perception. If we would be happy to pick that up. We have enough repository of transfers.

Sure. The other question was in terms of your -- I think in the last concall -- I mean I think in this concall also you mentioned to a previous participant that you're growing faster in your financial services. So any sense what is the contribution that financial services is now to us in terms of the revenues?

So I think I answered that in the previous one as well. So there is a layer -- there is a gray area because a lot of financial services clients sometimes bill us through consulting firms and some consulting firms do it for -- through our clients. So there is no very segregate answer, a very strict answer to it. But at an overall level, we have seen it improve. I mean that's the best I can say right now. It will be very difficult to segregate it into clear numbers because a lot of these due diligence projects sometimes comes through us through consulting, although they get billed directly and vice versa.

Got it. And for you, when you are looking at your expanding the market within India, like in terms of your -- so of course, within consultants, it's -- I mean, I understand how that works. But like do you have like and of course, I think private equity also uses a lot of the consultants also, especially during due diligences. But like with this whole mutual fund and the whole public markets boom that has happened, I mean, any thoughts on the penetration there? Have you gained some market share? Or has that segment picked for you?

I'm sorry, which specific segment, the public market...

Yes I said public markets. Public markets, yes.

See, public markets is a very small part of export networks in India. I mean I would -- all inclusive, my sense is it will be in single digits or even lower across all players, right? So most of it is -- so about 60-odd percent is about consulting. Private equity is about 20-odd or even higher, 25%, 1/4 of it of sorts. And then public markets would be about a few single-digit percentage and corporate would be a few single-digit percentage. So for large public market clients, we haven't really gone too deep. For small clients, again, we are trying to find a way. But as of now, aggregation or demand aggregation is the only way. And what we try to do is collect a lot of them and answer in a cool way. But otherwise, the market in itself is not very large.

Gaurav, all the very best and happy Diwali to all of you.

Mr. Sonal, please go ahead.

See very confused abit. Gaurav, happy Diwali to you and your team. I have two quick questions. First one, you were talking about the BD calls that are being done, which was contributing to a little bit of dip in gross margins. From a tonality of these BD calls, are these being done more in U.S. or these are being done more to financial services clients? Is there some direction you can give around?

Mostly outside India, the clients which we have who are global clients instead of sending people to various geographies, we just try to circulate within them that if you are interested to pick us up in a project, we'll give you the first two or we'll waive off the charges for the first two, something like that. So yes, primarily U.S., but the impact of it will come down the line.

Understood. Understand that. Second part, like I think you mentioned in the earlier part of this call that the U.S. revenues are growing, but they're still very small. I wanted to understand like what are your operating milestones for the next 6 months, next 12 months for the U.S. business? Like bottoms up what do you want to see from an operations perspective in the U.S. If you could share that, that will just help add some color to.

Perfect. So from an export perspective, so we recently set up our subsidiary in U.S. We have gained a fair amount of comfort from U.S. exports because of that because now they have something which is local and the payment is coming locally. So that helps. At some point of time, as of now, we are maintaining a presence of about a month every quarter in U.S. At some point of time, we would like to maintain a permanent one. We are actively looking at various ways, both organic and inorganic in U.S. Operationally, we don't have a very specific milestone, but let's say, at a sizable number where we can justify the cost of a salesperson of, let's say, INR 1.5 crores, INR 2 crore kind of a cost, we should be able to hire permanently. While we still have the money to hire right now, but I think it is a bit premature and we might not derive the key value. As of now, we are more focused on traveling more often. Maybe a year or 2 down the line, we would probably hire full time. I mean -- but is there a very specific number? I am not so sure we have already thought through that.

No, I understand that. So it's still early days. Basically, it's still early days.

Thinking about early days is the best part. From a network expansion point, it is pretty much on track. We are getting the numbers which we wanted. We are going as per what we had intended.

Yes. Because if you're still thinking about whether I should hire a senior high-cost sales guy, then we're still a little far away from...

Yes, yes.

Going aggressive on BD or, let's say, sales...

So once we have it -- see, once we have maybe about 50 to 100-odd touch points, only then it makes sense to have a business person. You can't have a business person doing 1 or 2 touch points every month. It just doesn't make sense from an ROI perspective.

Understand that.

You rather spend INR 5 lakhs, INR 7 lakhs to some other sources and which we believe are likely to have a higher ROI.

No, I understand. There are a lot of hacks you can do basically. So two suggestions, Gaurav, if I may make for disclosure for the deck. One was if you could share free calls being made on a half yearly basis as you disclose your calls. And second, total paying clients that you have, if there is a line we can draw on a half yearly basis, that will just help add some color to the disclosure, if you can.

We will disclose that in the next earnings call.

Mr. Arnab Bhattacharjee?

I had a small question. Just wanted to understand how you -- so I will just -- like one will be in terms of development, probably you'll be looking at developing your platform in the current context plus utilities. When I say utilities, it can be automation plus AI-driven, whatever efforts you are working on. I sort of want you to tell me how will you segregate like how much of allocation in terms of efforts is going into building automation plus these tools? And if you could also give where do you think AI comes in? Because I think you just explained that it doesn't directly come into just taking a read...

I get that.

I'll add one more question. Is it fine? Or you want me to wait.

Go ahead. Go ahead. If it is similar to AI, then I'll do that.

No, it is not similar to AI.

Okay. Go ahead. Go ahead. Let me see that.

I also wanted to understand how you guys pair. So basically, when someone approaches you for a consultant, how does the workflow looks? Do you have an algorithm which sort of finds a match and then it happens? Or when a customer comes to you, they are coming with this is the consultant that is -- with whom I want to get in touch with. And what do you -- is there a hit ratio? Like is it possible to tell me, is that data skewed that you end up assigning a lot of requests to some consultants and there are other people who get 0 or 1, if you look at the quarter data, how is that data skewed?

Perfect. So there are three questions. The first, the AI bit from a use case perspective, I described that. From an initiative perspective, although I have disclosed that in just last month in the previous AGM. So we have been using a lot of AI for our own use cases, right? All our codes are through pilots and all. [indiscernible] we have kind of identified 2 or 3 pillars. One is we'll always remain within a human in the loop phase and have a crop data to back it up. From a financial perspective, we have figured out that we are not going to do any research-oriented stuff on AI. We would rather have we would only do stuff where we have a very clear visibility of ROI. So the kind of experiment which we did was on a pay-per-use basis. So you pay only then you get. We are not trying to bulk it up. There is no VC money to blow for us, and we are not going overboard on that. Having said that, we will be doing a lot of experiments internally, both for our own use cases. We have already integrated our core VC chains with the vendor mapping and value chains with our core tech product, which is -- which brings me to your next answer, how do they discover. So there are two parts to it. Whenever we get a request from a client, we have our kind of an algorithm, which gives us some suggestion that these are some of the experts who have done these kind of consultations in the past, and this is the agenda which was captured last time. These were the answers which they shared last time on an intro basis. Then we have a discovery platform, which is, again, value chains, where we do our own research and suggest experts, which is again a semi -- which is a structured services kind of a product. And third is -- I'm sorry, I missed this.

The distribution of your consultants, how -- let's say, I would look at the data, how many calls is one consultant? How does the graph look? How many -- like is it very skewed that some people -- some of your consultants are getting a lot of calls and...

Not really. There are lots of -- I mean, you're basically asking how many unique experts, right?

Not really unique experts. It's more like querying ends up -- yes, the algorithm.

Most of the calls are 1 or 2 calls. Most of the experts are 1 or 2 calls. There are very few experts who would cross a very sizable number. In fact, that's what we take pride upon that we are able to discover a lot of experts across a lot of domains through our tech capabilities.

Is it possible for you to put a percentage of spends that you want to do in building utilities and, let's say, marketing, marketing? I just want a rough percentage doesn't has to be exact. It can be evolving. But let's say, 5% market -- on marketing, 5% on building utilities.

I don't think I would be able to put a number to it.

No, I'm basically more wondering how to -- how much do you want to do experiments. And that's the -- whether you think it as something which can evolve out of it? Is what I'm trying to say. It's like throw away money, yes, it's not a return on investment, but it can be...

So no, we won't be doing too much of throw away money from our existing coffers. So we would be doing experiments to the extent we have a very clear ROI from within our own tools, our research, et cetera, we'll spend a fair amount. But if we come across something from where a cost center can be converted into a profit center and we can offer those services to our -- to other clients, we would probably double down on that. In that scenario, maybe we may even invest. But it is such a dynamic environment on the AI front that I have absolutely no answer to it right now that what kind of investments we are committing to it right now. To be honest, the kind of investments that are happening in AI, even from an Indian VC entry-level perspective, the money which we have is minus -- so there is no point. We can't even hire U.S. kind of engineering or hardware power to do any kind of experiments.

No issues. I hope if you ever come across, then you'll keep us posted.

Yes, if we see some interest, we definitely double down on it. I've given a note on AI, the entire AI thing in my letter. You can have a look at it.

As this was the last question, I thank Gaurav sir and the entire team as well as all the participants for taking part in today's earnings call. Wish everyone a very happy Diwali.

Thank you so much, Purvangi, for organizing this. Thank you, investors, for joining it. Wish you a very happy Diwali. The team is waiting right outside for Diwali celebrations. I hope each one of you have a great Diwali and a happy New Year and a very happy new summer.