Intellect Design Arena Limited (INTELLECT) Earnings Call Transcript & Summary

Greetings, and welcome, everyone. Thank you for joining us today to discuss the Intellect Design Arena Limited financial results for the first quarter of the fiscal year '21/'22 ending June 30, 2021. The investor presentation, the press release has been sent to you and is also available on our website. Our leadership team we have with us today, Mr. Saranu; Mr. Rajesh Saxena, CEO of iGCB; Mr. Banesh Prabhu, CEO of Intellect SEEC; Mr. T.V. Sinha, CEO of iRTM, besides some other senior members of the Intellect management team are also present in this call. Mr. Arun Jain will brief you on the results and Mr. Prabal Basu Roy would summarize the comment for the management. This would be followed by the Q&A, which will be replied by the senior members of the management team. On safe harbor. I would like to remind you that anything which we say which refers to our outlook for the future is a forward-looking statement. This must be read in conjunction with the risks that the company faces. With this, I request Arun to give his briefing. Over to you, Arun. Arun?

Arun, you're on mute.

Yes. Greetings. Today, I'll be covering the agenda into 6 parts. Intellect as a snapshot, which most of you have be knowing about the products, but there are a few slides on Intellect as snapshot. Second, I will go to the performance overview and then move to the performance overview, moving from performance overview to financial performance and then some management observations in summary and business highlights. That's the kind of structure we have performed. On performance overviews, I'll -- Intellect as a snapshot. These are the few slides about the product what we have and what products we are offering. It's a suite of 12 products, which we are offering, starting from digital transaction banking, contextual banking experience, liquidity management solutions, payment services, trade and supply chain finance, digital core, secondaries. These are the products which we're offering. So coming to performance review. Strong revenue growth. We grossed 20% growth on revenue, and SaaS revenue grew 100%. We doubled the revenue since last quarter, same quarter this year. So that's a strong growth. Growing customer on-time deliveries, building on market leadership, opening new vistas of growth. Therefore, different chapters I would like to cover. On revenue growth, total revenue grossed INR 55.38 million. That was a number we were looking at it. It's in the line with our what goals we are driving towards. In rupee terms, it's 18% growth. License revenue is moved to INR 79 crores or INR 792 million from INR 600 million last year same quarter. My SaaS and subscription revenue grew to double the revenue at 102% growth. And license-linked revenue is now 58%. 58% is license-linked revenue. So you must have observed over a period of time, our implementation revenue are more flattish because all the focus is on building a license-linked revenue, where we are looking at is to cross 60%. We reached 50% numbers for license-linked revenue. On geographies, today, we have 25 clients in America. In this quarter, Canada signed a significant deal in payment services. In Europe, we have 23 clients and St. James’s Place signed 3 deals, is a major transformation deal for over the next 5-year period. It's a double-digit million dollar deals, which we signed in Europe. Then there are clients -- 54 clients in APAC, where we backed a large deal from second full-fledged Islamic Bank in Malaysia for DTB. Middle East, we signed 2 deals. One is a pathbreaking deal of -- which is a complete transformation deal of digital banking CBOS platform. This is a platform which we have built up in -- on cloud, completely micro services, cloud-native platform. And second deal is on digital lending. Similarly, on Africa, we win QCBS deals. So in Middle East and Africa, we have 150-plus clients. And overall, the customer base is 250-plus customers, which is growing. In this quarter, we went live in 26 financial institution, 8 are the new implementation and 18 are the significant upgrades, which we have provided to the customer. So what -- in delivery, what we have done is, using a lot of design thinking applications or the project delivery cycle time. We reduced the cycle time for implementation, which used to be something like for any competition, which is close to 12 months to 18 months, it's come down to 4 months to 6 months. And that's a unique advantage, which we're getting using low-code technology platform and the design thinking methodology, which we are applying on Agile. The new vistas of growth, what is coming up, geographical geographies. We are looking -- very interesting way the model is evolving with the 5 changes which has happened in the marketplace, the micro services, some people want us in micro services, micro services like Netflix, where you get -- everybody gets their own movie to watch. Similarly for micro services for CBX means every customer, every corporate customer gets their own experience dedicated to them and data is streamed to them at a pace, which they want. And that is a technology which we developed in the last 4 years, and that technology is now -- we are working that this could become a headless technology, where customer and our teams can co-create the user experience, which they want to do it. This was a need in Americas because customer wants to create the experience to their own or through their own digital partner. So the CBX layer, which we are opening up composable and contextual hyperscale, that is where we are giving you operating system and my partners can build on the top of it. So that was a portion, which you asked last time, what is Americas strategy. This is emerging as a great American strategy to get into working with CIOs to accelerate their digital journey. So this is being done with SI partners. So we have signed -- IBM is strongly working with it. We have -- and second announcement we'll be doing. PayCorp for Canada. So PayCorp for Canada is like a complete solution of payments for Canadian customer on a cloud. This is also a transaction-based pricing positioning, which we have done for the PayCorp in Canada. Then in Americas, our Xponent solution, which is a complete product via the intake routing, we are completely doing from Magic Submissions. Then my data cleaning up the AI engine, which is running on machine learning, where we're just picking up data from more than 1,000 data sources and Xponent as a complete workstation platform is driving complete uniqueness because I have a competition in each space. I may have a competition in intake. I may have competition in data. And I have a competition in underwriting like local players over there. But by combining 3, we are getting a huge pipeline of close to 30-plus prospects, which we are working on. And we are now on verge of closing at least 2 deals in this area so that we are kickstarting the work. And for this data partnerships are being strengthened in American markets so that we have a more accurate data for making underwriting decisions. So these 2 platforms, which are changing this becomes America strategy. And Canada strategy is on transaction-based payment solution is working on Canadian strategy. So this time, it's much more clearer strategy. Europe strategy, we look at it, the BNPL is working very, very strongly now, buy now pay later, and that's a market space, which has beem growing. And there are very few players in the market who have the ability for connecting, which are the APIs for core banking, lending and credit card. And that is where we are able to curate the solution, which is based on what customer needs are. So any innovative customers in Europe and we are working with as of now, 3 customers. We are working with a POC level on iKredit360 where these 3 things coming together and curating the solution using APIs and Turmeric, we are building a solution. So that's our Europe strategy. Building a good capability for hosting in Germany and U.K., and this is a place where we are partnering with the AWS and Azure to work it out. Now we have a fully hosted IDC solution for Catalan in U.K., and we are expanding this solution to the AWS Germany. IMEA, I think one of the big news is we are accelerating in GMV in GeM. The wealth product is getting traction in Indian market. Islamic banking capability in trade supply chain finance solution. And IDX, which is intelligent data extraction or document inspection is gaining momentum in IMEA, which is Magic Aadhaar is built on it. APAC, again, Islamic banking in trade and digital lending and digital core. And over here, we are looking to replace some of the legacy platforms sitting in APAC, which is more than 20-year-old platform. There's a definite strategy of a headless core driving the progressive modernization. We signed 1 deal 3 quarters back in 1 of the APAC countries and that is becoming a more model to create APIs on their core banking system and then building and curating the solution for the customers. So this is a broad level drivers in each geography. The last time this was a question asked by all of you that what is the kind of a growth engine you are seeing it and why you are looking the growth to be between mid-teens to high teens. That was a number which was looking at it. Now this keeping us -- our hands are full, our technology qualifications norm, if I look at product by product, GCB products, IDC and lending has become converted into 100 PBCs with 300 APIs on it, and it's a very healthy pipeline on that business. GTB has a liquidity management system, which is a leading product, which they have a good pipeline on it. Second is CBX, which is their launch in Americas and 1 large customer, they won it on that area. Then if I look at -- the third engine is DTB engine for growth and fourth engine is trade and supply chain finance and fifth is the payment. So there are 5 product lines, which are getting momentum. And on insurance, as I mentioned, our America underwriting market is a big space. And second space is St. James's Place where we are involved in a multimillion dollar deals for -- a 5-year long deal, which we signed on sales force and wealth to be combined together for delivering AI-based machine learning solution to that. So these are the opportunities which we have, wealth and treasury products, both are now matured. We are on the verge of winning at least 2 deals in the treasury space in this year and wealth is also we are having 2 close deals in the offing, which is there. So with this business commentary, I would like to pass on financial performance to Prabal. And Prabal, if you can carry forward the financial performance, I will flip the slides for you.

Sure. Thank you. Thank you, Arun. Thanks very much. So good evening, ladies and gentlemen. I mean, in reference to all your feedback, which we have received, we are going to take the financial metrics, which have been presented here as read. And -- but from the time which we have, we'll try and give you some takeaways as we see it from the -- which is emanating from these financials and the business outlook, which Arun sort of gave us now. So it helps us in understanding the financials better. I think last year, this time, exactly at this time, quarter 1 last year, we came to you and talked about the transformation, which we had undertaken and we were undertaking on behalf of the company. And the results, of course, have been there for all of us to see over the last 4 quarters. And all I would like to say is that at a high level, the financials also this quarter, essentially tell us that we are continuing on our guided strategic path, which is calibrated growth with predictable profitability. That was the basic stance, which we took last year when we changed the direction of the company. And this is exactly where we are today as well. So if you see the financials, you will see that revenue-wise, we have grown 21% in dollar terms. The EBITDA growth has been 48% and profit after tax, 73%. So these are the effects of operating leverage, which is in built into our model. So you can see that the predictability part and the growth part, both are intact in terms of both revenue and profitability, at the EBITDA level as well as the profit after tax level. The second part is, of course, in terms of the revenue itself. Now those of us -- those of you who have followed us over the last 6 years and 24 quarters would have seen that the quarterly revenue, we had very specific humps, which we needed to overcome in this entire journey of 24 quarters. And they were $40 million at 1 point, it became $45 million and then $50 million, right? Now this happens in any product journey. Any product journey, there will be humps because of scale issues and so on and so forth. So we are glad to see and you can see for yourself that for the last 2 quarters, we have consistently crossed the $50 million to $55 million hump, which was a big hump for us in the current context. So there has been the stability in revenue and more importantly, the quality of the revenue has improved significantly, as you can see, because of the steady raise -- basically the steady increase in the ARRs, the annual recurring revenues, which again, we spoke about last year, which is essentially our SaaS and subscription part, and that has grown up by 100%, 100%. And the license-linked revenue, which is also an indication of the same, has also grown significantly. So therefore, both in terms of the revenue growth, in terms of the stability of revenue and the quality of revenue, there has been a significant improvement from the time we were here last year. Having said that, you can check -- you can see for yourself that the pipeline figures, which we have disclosed, shows a healthy growth in pipeline, too. And this is because of the numerous digital opportunities, which are coming about globally. And this is an industry-wide phenomenon from the Infosys of the world to Coforge on the other hand, to Mindtree everybody is talking about digital opportunities going global. So in our case too, in the specific nation, which we operate, we see a very healthy growth in pipeline as well. Now this sets us up for future vistas of growth, which Arun touched about. And you would recollect that I had consistently said this over the last many quarters that when you control the IP of the product, when you're an IT company, which is what we are, leveraging the IP towards new products and models is a distinct possibility. It's something which we always retain the flexibility for. And the future vistas for growth is essentially a reflection of that. So we are leveraging our IP towards newer products and towards newer geographies. So Arun touched upon CBOS, PayCorp, Xponent Lite, iKredit, GeM Solutions, Islamic Banking, all of them. These are all different models of leveraging the IP. So the future vistas for growth as we are setting up now, this require investments, of course, but these are sort of things which are -- which place us on a very exciting path going forward. On the EBITDA side, I think the greater trajectory of growth in EBITDA percentage continues, the greater trajectory, which we talked about. While there have been some core changes in the market environment, especially with respect to talent, and this is in the context of this huge explosion of digital opportunities globally, we talked about. So as you know, industry-wide, there is a talent crunch and there's a supply-demand mismatch at the moment. But we continue our upward trajectory of EBITDA growth albeit with some potential flattening of the gradient of that growth curve that we will see as the year goes along. From a taxation perspective, I think the taxation hedges will continue to unwind as they become more and more profitable. I mean that's a given, right? And more and more accumulated losses are getting wiped out, plus they're up because of the large-scale RSUs, which we had given over the last 1 year, which we had talked about earlier. So there are some costs on account of that. And amortization will -- we have guided this in -- for FY '22 earlier, where amortization will start normalizing with the capitalization levels. So these things will happen. So taxation hedges, costs of RSUs and so on and so forth and amortization and capitalization. So these things will happen as we go on in the course of the year. The cash balances, as you can see, have continued to be very healthy, despite there been a marginal increase in DSO in this quarter, but cash balances continue to be healthy. And net-net, I would say, in terms of the financial performance, with the benefit of our in-built ability of leveraging our IP to open up new avenues of growth, we continue on our guided strategic path, which is calibrated growth with predictable profitability and whilst keeping a very keen focus on the balance sheet. That is how I would like to summarize the financial performance. Manish, would you like to add a few words on iGTB, please?

Sure, Prabal, I can take that from here. So the journey around like I've been sharing it, it's about product leadership with liquidity and DTB to market standard products where we had de facto market standard and market depth in each of the markets. In the last 2 calls, I've shared about how with -- the need for liquidity management growing. We've been -- we've won quite a significant amount of deals. And last quarter, we shared SocGen, which is one of the super large global banks. They bought up liquidity management to roll out across 50 banks. And that's the program currently underway. Coming into this quarter, the quarter which just ended, in Middle East, we closed a very large deal with the existing customer to migrate them to a cloud-native digital corporate channel, whereby we will take the entire cash piece of it. And this will extend out to UAE, Saudi, Egypt, U.S. and APAC. So it's a large global rollout. I think what's heartening to know is top 8 of the 9 banks right now are our customers. And Middle East, we've got over 35 customers, which bank with Intellect. Winner -- the whole philosophy of everyone follows the winner is clearly being emanated over here. We are a natural choice in this market, and we continue to win large deals over here. So that's our first win over here for one of the largest UAE banks, which has progressively modernizing their channel with us. We started the initial channel about 10 years ago. And this clearly says that when the time comes for renewal, they come back and they again have large deals which can happen along with us. The second deal is with a Canadian bank, we've been part of their payment modernization, and we've extended out for more capabilities along with them. This is -- Canada is a market like I shared. Last quarter, we shared we signed a deal with another bank to do payments, PayCorp over there. This is the 9th deal in that market, which we are doing. Again, the second example of showing a market dominance around products we have chosen and how we are leading in those markets. The third one win is in Malaysia for us. This is an Islamic trade and cash management opportunity. And this is our second Islamic deal in that market. But overall, this is a 10th digital transformation program. So if you see across these 3 markets, in Middle East, we've got 30-plus; in Canada, close to 9 accounts; in Malaysia, this is the 10th deal. Our strategy of going deep with existing customers and existing markets and especially during these COVID times to take the unpredictableness out of it, converting every customer into a promoter whereby we can leverage him to grow along with him as well as leverage him to help us grow along with others is very valuable. So that's happened very well. Arun, if you can move to next side? From a go-live perspective, the first one is the top 10 U.S. bank. In 7 months period, we were able to roll out the liquidity management solution for them. This is the second U.S. bank in the last 2 quarters we've gone live in such a short span of time. And these are fairly, fairly large asset companies, in trillions of dollars of assets they manage. That clearly shows the readiness of our product, our understanding of the market and our implementation methodology, which is able to define success. And that's why customers trust on us consistently on a liquidity. The second deal is with an existing customer -- large liquidity customer, which is a leader in Asia market. It's an Australian bank. Other than liquidity, now they have bought virtual accounts from us to manage the cash opportunities for them in Asia. That's also gone live in a span of 7 months. So repeatedly, delivering large deals rapidly and establishing trust and helping our customers to monetize the investments they are making, the ROI truly starts coming only after we go live onboarding of customers. And then there's a 12-month cycle whereby they start growing up. So from changing the paradigm to where it used to take 12 to 18 to 24 months to implement and then take another 12 months to roll it out, the whole scenario has changed quite significantly. We also had about 9 other customers, which bought incremental capabilities, 14 modules were bought from liquidity, digital payments and digital transactions. These were either to -- and also to market extensions. So that existing customer focus continues very well for me. I think in this quarter, we would have again remained between 87% to 80% of revenue coming from existing customers that keeps saying continue to grow along with existing customers. From a market recognition, IT recognized us as a significant player in payments in hub in Canadian marketplace. And that's a second level of endorsement after customers consistently endorsing. Analysts have been consistently rating us in the top quadrant. Last quarter, we shared IBS second time round rated us as the #1 leading transaction banking player. Anyone who came close to us basically putting extensions of the co-banking module, and they were not true transaction banking platform from that perspective. So this focus on transaction banking, building the depth around it, is showing clearly results for us from that perspective. For next one? I think from -- as we are growing marketplace, as we are growing the products, the investments on deepening capabilities on the product to take out new capabilities, which we can take out to existing customers as well as new customers in the same market and the new markets. We had quite a number of product releases happen to extend our liquidity and virtual account space where we're winning quite a bit. Our youngest platform on trade and supply chain, which we are currently running the largest transformation in Asia as well as in Europe, we continue to extend the capabilities on them as we learn from each of these markets the market needs. We're now also complying with the SWIFT standards from that perspective. I think this is the next lever of our growth, which will help us take it out to the market. In this just quarter with a Malaysian bank, we have added trade supply chain incrementally over there. There's a decent funnel buildup for us over here. And in the next quarter -- in the next I would say, 60 to 90 days once we close out some of our existing implementation, taking this out, starting '22 to a larger number of customer base, our confidence will be very high to add another lever for growth for our purposes. I think all of -- Arun, maybe next slide. All of this has been possible by primarily -- this growth has been possible by having customers as promoters, and that's my truly gold dust and customers being able to come up on public platforms and act as promoters. These are examples of 2 banks, 1 in Middle East, Emirates NBD, which is the fifth largest GCC bank, and Vietcombank, 1 large state bank in Vietnam, success we have established along with them and how they have grown as a business speaks of when the customers are willing to openly come on a public platform and endorse the success they have had. This is a mutual rewarding relationship, and we continue to grow along with both of them and many others, and we'll share more stories in the coming quarters about successes we have had enabled by customers and truly from a customer speak story perspective. And this is all enabled -- Arun, next one, is consistently market -- we run an insightful industries webinar, which is what we branded as Wednesdays with iGTB, consistently getting market leaders and our customers' customers as part of this channel to share out what's the developments around. The first one is virtual account, how the context matters in virtual accounts and how we are helping the corporates manage their receivables, their payables, their liquid much better and they have self-service capabilities. So we talk about that along with our existing customers. We had ANZ over there. We had Accenture participating as a understanding of that in the market and how we are collaborating together. The second one was along with coalition Greenwich Group, which is a research group focusing on corporate treasurers needs. So we anchored a session along with them. And we also had speakers from SocGen and our customers' customer Unilever of how jointly we are serving market needs. So it's a full circle if you look at from market leadership -- from product leadership to market leadership, converting customers into promoters, getting analysts to endorse it, making -- bringing the customers into natural public speakers for us, and then keeping the knowledge channel on so that we can keep the [ Sage ] brand around transaction banking. We do only transaction banking. We make a difference in that marketplace, and we're creating a full ecosystem with which we can influence and help grow our customers. I'll take a pause over here. Arun, back to you.

Thank you. So I think we have a few slides in the deck, which is related to GCB and insurance. So maybe if you go through it and you have a question, we can type it. At this point in time, I would like to open the floor for question, answers.

So there are some questions which is in the question box, which I'm reading it. And if you can keep typing, that will also be nicer to consolidate. So there was a -- question is around what are the reason of loss in JV and associates? There's associated investment in 2 companies, NMS Works and Adrenalin. Their first quarter typically is slow on their business, third and fourth quarter is better in the business. That's how the last year they performed. Second question, Vaibhav Gupta has asked, how should we look at the revenue growth in the current year. The revenue growth is, I mentioned, it should be mid-teens to high teens. That's the kind of a number we are looking at. First quarter, we are able to achieve 20%. So that is how we mentioned to all of you is that we designed the business based on -- [Foreign Language] second, I'll just stop the sharing, designed the business for 20% growth. We achieved 20% growth, but every quarter need not be 20% growth. So it can be anything between mid-teens to high teens. That's our growth number. There's a question from Vivek Choraria, is pre-EBITDA costs have gone from INR 286 crores in Q3 last year to INR 308 crores in this quarter. I think they are -- obviously the -- when business grows, cost also grows to some extent. So it's not substantially growing to me around -- it went up from INR 286 crores to INR 296 crores -- sorry INR 286 crores to INR 296 crores, and then to INR 308 crores. There's a close to INR 10 crores to INR 12 crores increase quarter-on-quarter. This increase with the talent issue going forward will result into a hit on EBITDA. I think our talent costs in the industry are going up and 30% EBITDA may be push and [indiscernible] opportunity, which Prabal was mentioning are there. We'll be looking at it between 25% to 30% EBITDA range, rather than 30% EBITDA, which we are targeting earlier based on the earlier scenario of the talent to be similar, not -- talent -- our growth -- to increase our growth rate, we are looking for the EBITDA between 25% to 30% going forward. Are we looking for merger and acquisition in future for commercial and tax background? What do you mean by commercial and tax background? I didn't understand that. First of all, M&A, we will be looking at it if there are some niche players are there, but not very actively because if company is growing 20% plus, there's no need of a merger and acquisition, we need to plan and -- so many products to go to market. But some niche places are there. We would like to go for M&A or some investment basis. Any opportunity in cryptocurrency space going ahead? No, we are not in cryptocurrency right now. And I think we are at least for next 12 months we don't have any agenda of getting into cryptocurrency. For a product -- software product company like us, amount of investment to fixed assets seems to be very high and there is an annual cash outflow of INR 100 crore plus [indiscernible] sorry just...

That is product development, Arun.

Yes, yes. Just -- so maybe somebody can read out the questions to me, so it will be much better. Saranu, if you can respond to that question?

Yes, I responded to it already.

So that is the product development cost. This is not a fixed cost because of the product capitalization. So that's the cost which you are seeing INR 100 crore cost. We invest INR 200 crores in R&D. In the last 6 years, we invested more than INR 1,200 crores in R&D. Out of which the product which is tangible product, we capitalize them and the capitalization is close to INR 120 crores and INR 80 crore is something, which is technology upgrade costs and other R&D-related costs. That is the expense out every year. And that INR 120 crores, you may be referring to as a high fixed asset, which is there. Which is our next question?

With PayPal's adoption of coin-based transactions moving finances to Bitcoin, do we have a digital cryptocurrency software in place?

No, we don't. And Manish, you have a different answer to this? As of now we don't have any.

We're not a crypto coin player from that perspective. For me, it's another currency, it's an FX translation table. So if somebody wants -- if a bank offers cryptocurrency as a payment type, for me it's an FX conversion and our payment platform will take care of that as long as they have the connectivity to the right exchanges. I've been a long-term investor in Intellect, promoter holding has been decreasing every quarter, through -- though marginally. Can we go for some buyback or open market purchases to increase the promoter holding and thereby increase the confidence of minority shareholders?

Promoter holding is not decreasing. It's a percentage of when stock options are given and that's added to the stock, and that decreases the promoter holding from that perspective, but it's nowhere promoter is selling any share in the market for decreasing the promoter holding in the -- our promoter plus employee holding is close to 39%, 31% is direct promoters plus 8% is the close friend and associate and Intellect employees, so which is a good number for building the confidence that 40% of the equity is the people who are running the company.

Next one is, are you looking at entering blockchain solution space, maybe supply chain solution, et cetera, to start with. We have partnered along -- we have done pilot partnerships along with Ripple and r3. They have been POCs only. The adoption is still very slow from that perspective. But we have ready adapters with those market. What is the current attrition rate for our company? Are we hiring only replacement or new hires? Replacement employees are coming at what cost?

Yes. Attrition is increasingly -- is higher. It's higher than -- substantial increase in the last 1 quarter. I think last 4 months it has gone up. We have -- replacement is the first agenda, but with a new digital opportunity of a headless score, we are building a bench strength also. So that bench strength will be required for growing our number from $55 million number, which we have reached on a quarterly basis to $60 million [Audio Gap] $5 million, $10 million increase growth we are hiring right now. Because of the higher attrition rates. So the expense management cost is slightly going up in this quarter -- will be up in this quarter.

I think, Arun, the next 3 questions are around, we have sufficient cash balance and profits. Are we looking at dividends for the confidence of investors.

That may be looking at -- Board will take that call what is the right appropriate level of cash balance, which is there. Last few years, we are struggling for the cash. We had a debt of INR 250 crores last year March, just 15 months old memory in the memory of the Board. I think we'll be taking the time at appropriate time. When we have surplus cash, we'll be willing to distribute as a dividend. So if you find some opportunity better than that for investing that cash into some opportunities of investment, we look at that. So I think this is a board decision, which I cannot take one decision on it.

When do you think 30% EBITDA margin can be achieved? Earlier you mentioned by end of FY '22?

Yes. So this is a -- this was a moving target. We are very confident of doing it based on the cost structure. I think this talent explosion which happened right now. That is a thing which is quite uncertain right now. So I'll come back to you in next 2 quarters when is the target time line for getting a 30% EBITDA. At that time, I had faced a lot of resistance. Actually, when I announced 30% EBITDA, some of the investment bankers are saying why you are pushing for 30% EBITDA, you should remain at 25%, but you should paddle your growth engine faster than doing on 30%. So some of the investor meetings I had one-to-one or in groups, their constant was that as a digital opportunity, which is so big, why you are pushing for pedal on EBITDA versus growth. So I think our management team is also thinking about that too much of a pushing on EBITDA right now may not be most appropriate, but 25% EBITDA is a good number to drive on rather than losing the focus on EBITDA.

Can we know the reason for decline in revenues in Q1 F '22/'23 as compared to previous?

No, there's no decline in revenue. Which one?

Abhinav Malviya has asked, can we know reason for decline in revenue in Q1 '21/'22 as compared to [ Q2. ]

We have INR 408 crores revenue. And Abhinav, last -- Q4 was INR 396 crores revenue. Maybe some other number you are seeing.

What will be the effective tax rate for FY '22?

I mentioned a response to the mail, it will be between 16% to 18%.

What is the intangible assets amortization policy? And how much of expense is capitalized?

Yes. We mentioned it. INR 120 crores is the total number budget we keep it. We capitalized between INR 27 crores. This quarter is around INR 26 crores, Venkat Saranu, which we capitalized?

Yes, Arun. It is INR 26 crores, Arun. INR 25.5 crores.

Yes.

Reasons of high other income?

High other income is, 1 is on currency. Second is on some of the flat sales, some 5 flats which we have in Mumbai, and these are not being used. So those are sold off this quarter.

Next one is on dividend. You have answered it. Any new opportunities like Auto Germany nonbanking that we are seeing?

Yes, yes. We have 2, 3 such large opportunities of this in the Europe, which we are on a POC with them.

What is the next quarter guidance from this quarter?

We don't give quarter -- don't expect quarter-on-quarter. We are running a licensed business and enterprise sale, it takes 18 months to close a sale and close a contract goes through 14 signatures. So quarter-on-quarter guidance is not possible for us at all, and we don't want to get into. That's why our -- we're -- business is -- last 12 months business rather than a quarter-on-quarter business.

How should we think of SaaS revenues going forward? We are INR 310 crores here. What is the vision for this in a few years out?

I think at this point of time, we are close to 15%, 16% now. I guess 20% to 25% should be our cloud revenue.

Correct.

You claim to be a product company, then how wage inflation affects us?

The product company talent is more in demand than the service company talent is in demand. So cost to pay -- average salary paid to the product company engineers are much higher than the average company paid by the testing companies or other companies in the world.

Last con call, you mentioned that in Intellect SEEC there were 30 active discussions with customers across the world, finally in India and U.S., what is the progress on that?

That's what I mentioned. Manish, you'd like to mention about this?

No, I think the positioning that we've done with the platform coming together between the data and the Xponent, including a version of a lite Xponent in a SaaS model has attracted over 30 people to actually start doing POCs and discussions with us. We're sort of advanced in that sense. We have 2 very large companies that at the end of the first quarter signed up for a Sprint Zero. I think the Sprint Zero is in progress. It is going to be completed sometime around early August. And I think the Sprint Zero is a method for some of these insurance carriers to feel comfortable that they can actually operate in a SaaS model from their existing traditional models that they have. So I think it's a big transition for them, a big transformation in a way. And I think that momentum is building very well. It's coming together of 3 of our product lines, which is data, IDX, which in the U.S., we call Magic Submission and the Xponent underwriting platform. So I think a pretty good traction on all those discussions in progress here.

Manish, there is another question over here. Data inspection is a large market. Would you become aggressive in whole opportunity and act as the AI accelerator for other companies? Would we like to venture in other areas to provide analytics such as health, et cetera, using data inspection.

Yes. So my view to that question is that data is really obviously a very critical part of what has been transitioning over the last year or so from an information age sort of direction from digital. However, it's so broad and it's so extensive that unless you use the data for a specific user journey, so that journey could be both personalized, contextualized at the right time. Just having the ability to access data and use the platform we have found, is not giving the end business outcome to the client. So what we've been doing is identifying very specific user journeys, starting with insurance. And then we have with IDX using that data for robotic process automation so that we can make a difference to that customer journey to be more personalized for the client. And I think we are beginning with a couple of things around those areas with the IDX platform. Magic Aadhaar was one of them. We have Magic onboarding. We have Magic invoice, which is just about in final stages of discussion with another client in the U.S. So I have a feeling that the data being used for a specific journey is more important than just providing the data as a service. I don't think right now, we are in that space, though we have very rich data and very good data. We still need to get it to achieve a business outcome for our clients.

Opportunity is there. Yes. Go ahead, Manish.

Can you please update on credit rating as well as net debt status?

Saranu?

Yes. I think as of today, we've got a debt of INR 34 crores in FCTL. As the rating is concerned, I already replied that as far as the long term is that A stable by CRISIL and short term is A1 rating.

Thanks, Saranu. Like you guided on some TV interview on 30% EPS growth. Can you give some guidance on EPS CAGR and revenue CAGR for the next 3 years?

Next 3 years, we can do the design, how we design the business for 30% EPS growth. That's what we are looking at. But actual design to -- actually, there will be some shortfall maybe there, but 30% EPS growth, maybe 25% to 30% EPS growth in the next 3 years would be what we are looking for design of the business, looking at the -- but it's almost like -- we can't just forecast for 3 years in this current business anyhow. Sometimes a cloud deal may require upfront investment because when you do a cloud deal, which is a 10-year deal, we may land up in investing substantial money in particular quarter, which can impact the EBITDA level of that quarter. But on a total deal value over the 10-year period, if it's large, then upfront investment, we are not capitalizing it, and we are expensing it out. So that will have a fluctuation of those EPS -- 100% EPS on it. But from a design perspective, we designed the business for 30% EPS, the way we designed the business on revenue growth of 20%. We have designed that business for 30% EPS growth. We -- how much we achieved, that tell -- out of the 50 deals that we have, which we have announced as destiny deals out of which more than double-digit deals are in more than INR 50 crore range. If we win few good deals in that area, the 30% can be achieved in this year. If it is a few deals shift to next quarter or next year first quarter, so that is a variation, which is there. What we are tracking is a destiny deals, which are 50 deals, which has grown from 40 -- 44 deals to 50 deals this quarter. So we are showing the pipeline and pipeline has grown from $575 million to $626 million. So both the places, we have substantial momentum there. And how this momentum gets translated because on license revenue, most of it comes to the profit line. And if particular license of 5 million doesn't get signed, certainly my margin can have an impact on it. So that is a -- as an investor, you need to understand this business is a -- we can generate the profit in a bulky manner, but you can have ups and downs on this -- on the margin, but annual margin design is 30% EPS growth.

Yes, let me just add a little bit here. See, as we have said again before and consistently actually, giving an exact number for 3 years is a forward-looking statement, and that's not something we would like to do in any case. However, what is important for investors to understand is that the created trajectory of both EBITDA, revenue, EBITDA as well as EPS. That is the important part. And that greater trajectory of growth in all these 3 numbers is something which we have put on the table. The only thing which Arun is mentioning is that the incline of the growth curve could get moderated from quarter-to-quarter, et cetera, because of these various factors which go into the drivers. That's all. So as far as your long-term modeling is concerned, the growth in both EBITDA and EPS is something which you can model it without giving an exact number. So that is the point. The growth in the trajectory is important. The incline of that growth curve can get moderated for various reasons.

Yes. Manish?

Next one is, are there any direct risk to [ IDA ] from Chinese tech regulations?

I don't think so. We are not operating so much in China or anything to take in China. I'm just reading other question, Manish. This is from Anil Sarin. License revenue continuously falling Q-on-Q. License revenues are not up and -- it's not a sequential linear number. I want to highlight it's a year-on-year license has grown. Quarter-on-quarter, it's not a science that license revenue will grow. If you have to track as an investor the numbers, the license-linked revenue, which is close to 58% now. So 58% is a large number for a product company to have a license-linked revenue, which has got license plus cloud plus AMC, all the 3 things coming together. That's the right metrics to look at it. Don't look at the -- which deal I'm signing as a cloud and deal -- in which deal I'm signing as a license deal. That's not the right metrics to look at it. So those don't decompose these 3 number. We are publishing 3 numbers as of now, but all are license-linked revenue, Anil.

Arun, what kind of investments are we looking at ahead? Will it be through S&M or through balance sheet?

What is -- S&M -- balance sheet means M&A basically?

I guess that's where it must be. Mohit Jain.

Arun, S&M might probably mean sales and marketing and balance sheet would be the acquisition, perhaps.

Yes.

So we are looking at sales and marketing only. Most of the growth is coming from sales and marketing and partnerships. So we are now hiring a full-time person for the global partnership. So this was a question last time you were asking, when is the company right for the global partnership on SI. Manish mentioned on CBX, now we are a headless core, where we have API as trading and Sandbox ready. And somebody asked a question about what the Turmeric means. Turmeric is our platform, which is like an SDK platform for building orchestration, integration, UX studio, API studio is all 4 in 1 box with a Sandbox available. That helps in digital acceleration, where we can be at 30% faster than our competitor on digital acceleration and building a composable banking. So that is...

To migrate legacy to the cloud infrastructure for banks.

That's right. That's right. It's for migrating that platform. So that's a kind of an investment, which is not directly linked to the product, but that's investment which is directly linked to the -- how do you create a POC with a customer. And Rajesh can highlight. Rajesh, if you can bring it that how iKredit360 is leveraging? Rajesh is there?

Yes, yes. You want me to do it right now?

Yes. Share about iKredit360, how are you leveraging this.

Sure. So I think one of the -- and I think we presented that in the earlier part of the presentation. Just to remind ourselves, one of the key pillars for growth for us is Europe -- is our strategy around Europe. And last -- in June of this year, we launched a new product, which we call as iKredit360. It was launched -- it's a purpose-built product for Europe. It's a solution where we curated a couple of credit solutions to look at what is the need in the market. And let me just explain this in 2 simple use cases. So first use case, let's talk about a customer in Sweden, customer of bank x in Sweden walks into [ Bohus ] departmental store to buy a TV, and he wants to use a credit card and BNPL to finance that purchase. Today, the way the solutions are pitched in Europe, this is a fragmented customer journey. Because the credit card platform is different, the lending platform is different. Therefore, the bank can't give them a unified experience. IKredit360 brings it all together. That's a great subscription less journey for this -- from a customer perspective. So this is the market pain and the solution that we bring. Another simple use case is to make investor understand is let's take the same example of [ Bohus. Bohus ] is also a partner, let's say, for this bank x. Today, [ Bohus ] receives payments for the credit card spending differently, BNPL spending differently, lendings differently, and they have a huge issue from a recon perspective. IKredit360 is able to bring it all together, right? So that's the customer, that's the market pain and that's what we are bringing together for Europe. It's a custom-made solution. And I would really urge all investors, we have a website called ikredit360.com. If you have time, please go through that website and you'll be able to see the solutions, the used cases, the POCs that we are talking about on that website.

Rajesh, there's another question. Rajesh, there's another question, maybe you can take this. Can you comment on change in competitive dynamics in the industry? Do you see players like Oracle Financial and Temenos stepping up intensity?

I think Temenos is the -- is by far the market leader in this market, right? So therefore, definitely, they have -- they are also upping their game. We are seeing them from a competitive perspective. We are seeing them in most of the deals that we have where we compete. We either see Temenos or we see Oracle. And in some digital bank deals, we see Mambu. These are the 3 primary competitors that we are facing and we face in these. Now from a Temenos perspective, what we are seeing is that they really have -- they are sitting on a lot of legacy platform. And for them to really change, right, they don't have that agility while we being a more contemporary architecture and having spent investment dollars in creating that temporary -- this contemporary architecture, we have a certain unfair advantage. So that's what we are seeing in the market. Temenos brings with it the brand name, the marketing muscle, the balance sheet, while we bring the new technology, nimbleness, et cetera. So that's where the game is being played now in the marketplace.

And you're actually Rajesh taking into the heartland of Temenos, which is Europe, with the new technology, modern cloud native and BNPL platform, iKredit360, I think and winning deals over there, that's the starting point for any successful journey.

Yes. And I think after we did our auto deal, which we won on basis of POC because we don't have the credentials in Europe. So we are, right now as Arun said, in 2 POCs with 2 large banks in Europe. So that's a very good momentum for us from a iKredit360 perspective.

And you've also established a cloud in Germany as well as U.K. with existing customers, which is bringing the strength and credibility. You're growing along with the U.K. customer also more cross-sell opportunities and upsell opportunities over there on the cloud as you make your offering bigger and stronger.

Yes. So [ Puranik ] has asked a question, what is the capability to sign more than $50 million deals. Can we put a hat in $50 million deals? Do we have the capacity to do a bid for $50 million deal? [ Puranik, ] yes, in few cases -- we have at least 2 deals in that bucket of $50 million deal bucket when we are saying. So -- but all these deals are -- both the deals are very, very requiring too much of management attention. So your question is very appropriate that we need to increase our leadership capacity to pitch in for this $50 million deal, and that's what IBM plays a key role for us to have a headless core kind of opportunity. But that's where our aspirations are. But I think we may win or we may not win this $50 million deal as of now. But the idea is that once we participate and prepare the organization for $50 million deal, so when we are preparing your organization for $400 million revenue from $200 million revenue, that is the time I would like -- between $300 million to $400 million when we are there, that is the right time when we are able to aspire to win such $50 million deal. But a very beautiful question you have asked.

Arun, we're close to 6:00, maybe a couple of more questions. Can we go for more media presence and interviews? Our company has been doing good. But if you can have a good number of investors and analyst meets with the mutual funds and so that we can update our future growth strategies, thereby increasing the presence of strong investors.

Sure. Thank you very much for that advice, and we are working on to create more opportunities to meet and there are more interest from Japanese investor and Europe investor coming into the company now.

Maybe one last one. Are we implementing projects in less time? How it will impact our profit growth as we consume order back book much faster than previous years? Please explain on this.

Yes. So I think lesser time is -- our implementation revenues are not going up. So that's a signal that we are able to finish and give a very competitive pricing to the -- for winning the deals. That's one advantage of winning the deals. Our win rate where we do a POC is close to 80%. Once we are in POC stage, our chances are quite fast on that area. These are 2 advantages.

And in such deals, the license number tends to be 60% upwards of the deal value. So we've been competitive and we passed that credit back to the customer. So it's a mutual success, success. Maybe Arun, we could do another one and then maybe we could offline, Praveen could respond to these.

Yes. I mean we can take for 5, 10 minutes if we have such a big audience sitting here.

There are a couple of questions on partners, Arun. Do we have partners for implementation? If yes, then how much of implementation work gets done? And any plans for partner enablement and shape with global systems integrators, Accenture, Capgemini, et cetera.

Yes, I think we have not open for implementation partner, which we shared earlier that we want to look at it our brand name, not to be compromised by the partner's implementation partner in the Phase I or Phase II or -- Intellect 2.0, we don't want it to have a partner for implementation. We have partners for getting the deals or partners for working some program management of the deal, but if complete implementation, I think we are preparing us a very different strategy for partnership. Now with the open finance platforms, that's what which Rajesh mentioning, with APIs, we are looking at partners who can compose a solution. So we want to look at composable and contextual banking, where partners will compose the 2 deals which we have done, 1 in auto Germany and second what Manish was mentioning to. Both of them are implementing [indiscernible] will be done by the client themselves or third-party player, which will be doing that composition of the solution. So that's the strategy we are approaching, not a conventional product implementation partners. So it's a completely new space, which is there. Go ahead TVS. What is the next question?

Yes. Can we quantify what kind of margin we make on implementation? Temenos has stated 10% to 12% EBITDA margin. And how is the revenue recognized on implementation service.

The margins are upwards of 20%, 25%. In some implementation, it varies. It varies from 20% to 30% on various implementations. And revenue recognition policy is completion -- point of completion of -- POC basis.

The same question, there is another one from Ankush Agarwal. As an overall percentage, license-linked revenues are increasing. How does this affect the company in terms of margins and DSO?

Just repeat the question?

As the license-linked revenue increases as a percentage of overall revenue, what effect does it have on the overall company in terms of margins and DSO?

Our gross margin, as you've seen, it's moving from 53% to 56%. So where license-linked revenue grows, our target is -- our gross margin should go up to 60%. As of now, it's 56%. So the gross margin is a clear main metrics of a license-linked revenue. Somebody asked a question about U.S. strategy. I think we shared the U.S. strategy around 2 places. One is CBX link and second is insurance underwriting space. These are 2 levers we are leveraging for getting into U.S. So I think Manpreet Gambhir has asked this question. Somebody asked a question that promoter has been [indiscernible] this is a transaction if you -- is mentioned in SEBI ruling also that Arun -- I've given 100,000 shares to my daughter to equalize. I purchased that share. It happens to be the same day IBM partnership announcement happened in 2018. So there was a -- it's being construed that it's insider trading, but it was after a Board meeting where trading window was open at that time. But since SEBI has brought in this point of gift of 100,000 shares, which I have gifted to my daughter, they necessarily engaged. So whatever it is there. We didn't want to fight unnecessary distraction from the current scenario that -- and this was done by my family office and family office did this 100,000 purchases. So which they didn't know IBM press release when it's coming up. There was an increase of some 4%, 5% price increase on that day, which they construed as insider trading. So my lawyer's advice or my family office advised to settle it better than fighting the case. Last time we won the case 2 times, but this time we settled it. So...

Yes, Arun, I'd just like to add 1 point here, which is since this question has been asked. You see what is unpublished UPSI? What is unpublished, price-sensitive information. It's actually known only in hindsight, apart from things like financials, board meetings and so on and so forth. All right? Let's understand this one. That's number one. Number two is the fact that this was a normal announcement of a strategic alliance without any financial implications. It was a statement of intent. And you have seen for the last couple of years, there has been -- it justified that. So we make about 50 such announcements in a year, of which this happened to perk up the stock prices on that date. And therefore, SEBI rightly maybe in their wisdom said this is price-sensitive, and hence, there was inside information. But there have been 49 other announcements of a similar nature of alliances, order intakes, et cetera, where the price move does not react. So this is not a typical insider trading or UPSI in that sense. If you really go. Legally, yes, definitely, legally, perhaps yes. That is SEBI's point of view. But it is not a Board meeting. It's not a mergers and acquisitions announcement. It's not an announcement of those nature, which is completely sort of UPSI, which can move prices either way, which we know will move prices either way. So that was the situation here. It was a string of coincidences. And frankly, I mean, when you say trading, I mean, fine, the legal definition of trading, this comes under that. But a promoter who has never sold his share till today in the last 30, 35 years that I have known, I mean you need to put this whole thing in context for what insider trading really means, legally versus intent. That is something also which I would like to leave with the investors. And so I just thought I will add that.

Yes. Another question -- sorry, do you want to answer more on that?

Go ahead, go ahead, go ahead, please.

No, no. Is GeM project profitable now?

Yes, it's profitable now. The GeM problem only thing is DSOs are higher. So which we are talking to the GeM team. So that's a problem of collecting from the government, but project is profitable now.

Which product should reach monetization phase in '22, '23?

We are looking at treasury in 2023 and the monetization -- treasury and wealth, both the products to be in monetization phase in '22, '23. This year, the focus as we announced SEEC was an area where insurance business of SEEC, AI and machine learning was in this year's focus, last year was GTB. Next year is RTM. That's how we are looking at it. Okay. Anything else?

No, no. There is a question. [indiscernible] is growing at 20%. When do we reach such faster pace?

This is always a race. This -- 20% -- this quarter, we did 20%. If all your wishes of investors are there, we should grow 25%. We all love to grow 25%. We need all your wishes as a shareholders to drive that 25% growth rate, but we don't want to be optimistic, but we want to be calibrated. That's the answer I would like to give. Okay? Thank you.

Thank you.

Thank you, everybody. In case there are some questions are there, please do made it to us. We'll reply to you on one-on-one. Thank you so much for participating.

Thank you.

Thank you.