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

Hi, greetings, and welcome, everyone. Thank you for joining us today to discuss the Intellect Design Arena financial results for the second quarter of the fiscal year 2021-'22 ending 30th September 2021. The investor presentation and press release has been sent to all of you and is also available on our website. Our leadership team is present on this call to discuss the results. We have with us today Mr. Arun Jain, Chairman and Managing Director; Mr. Venkat Saranu, CFO; Mr. Prabal Basu Roy, Adviser to the Chairman and Director on the Corporate Board; Mr. Manish Maakan, CEO of iGTB; Mr. Rajesh Saxena, CEO of iGCB; Mr. Andrew England, Board and Director; Mr. TV Sinha, CEO of iRTM. Besides some other senior members of Intellect management team are present in the call. Mr. Arun Jain will brief you on the results. The respective CEOs, that is Mr. Manish Maakan and Rajesh Saxena, will comment on their lines of businesses. Mr. Prabal Basu Roy will summarize the commentary from the management. This will be followed by a Q&A, which will be replied by the senior members of the management team. [Operator Instructions] On safe harbor. I would like to remind you that anything which we say that refers to our outlook for the future is a forward-looking statement, which must be read in conjunction with the risk the company faces. With this, I request Arun to give his briefing. Over to you, Arun.

Good afternoon, everyone. Thank you for joining this call. So today, I feel proud to announce the result of second quarter 2022. So I'll take few -- 5 sections: Intellect - a snapshot, performance overview, building on market leadership, and some of the platforms we'll slightly go in detail and then some management observations. So starting it with the Intellect snapshot for the new people who are learning for first time. It's the world's only next-gen, composable, contextual fintech platform. We have composability and contextuality revenue model. It's ranked #1 in global IBS, 25-plus years domain, plus 97 countries served, 8012, 30 global partners and 260 banking clients. Now this is an interesting Intellect platform and product overview. The corporate banking, the GTB business, of ours has got now 5 lines of business which are generating revenue for us: iGTB Cloud CashPower 22, contextual banking experience, payments services hub, liquidity management and trade & supply finance. So on retail banking side, again, there are 5 product lines: Digital Core, iKredit360, Digital Cards, CBX Retail and Central Banking. Then we have a similar thing on the insurance side. That business has further matured. We are here talking about underwriting, end-to-end underwriting platform, which has 3 components: one is the underwriting platform, Risk Analyst, Magic Submission, and we have digital wealth, which is going along with our insurance. Our team has got very deep treasury and ALM product and Capital Sigma, which is the asset servicing product. And then we have 3 horizontal platforms, which is iGovernment, which is GeM; iTurmeric; and IDX. The IDX is my AI platform, and iTurmeric is my digital accelerator platform. In this quarter, we're proud to say that we achieved INR 450 crores or INR 4,521 million in this quarter. I think this is a major milestone for us. It is 3x our revenue when we demerged the company from INR 1,500 million at that point of time, INR 150 crore company at that time. We're looking between 13% to 19% growth in the high teens. We are able to achieve 22% growth consecutively in the second quarter, which is again a major milestone over here. Other biggest milestone is our SaaS and subscription revenue, which is jumping 156% in this quarter. License is coming down covered by the SaaS revenue. AMC is growing at a 9% level. Other metrics. Our gross margin is improving to 26% from 24% last quarter. Quarter-on-quarter, it's improving and gross margin improving from 56% to 58%. So it's inching towards 60% gross margin. That's what we are targeting for quite some time. So it's now 2% short of 60%. Investment in the product is INR 290 million. PAT has grown 34%. And another important milestone this quarter we achieved is with -- it's the first fintech company with so many product suite that has 0 debt and a cash balance of INR 257 crores is a significant landmark in looking at it. This is the half year performance. If you look at it, it's seen us 22% complete on $116 million, INR 860 crores of revenue with an EBITDA of INR 218 crore, license of INR 166 crores. SaaS and license now are matching number, INR 165 crores and INR 166 crores, and AMC is also INR 160 crores. So obviously, the engines of recurring -- of the license-linked revenue are now coming to the point of over INR 640 crores or INR 650 crores. Each engine is, annualized basis, driving the engine. So -- which is quite heartening to note that -- sorry, not INR 640 crores, INR 166 crore is half year number. So I just want [indiscernible] it should be 2x. The number is around INR 320 crores. Each of 3 engines is providing INR 320 crore. And the license revenue number, quite good from a licensing revenue. And recurring revenues is also license, AMC plus SaaS, which in itself, is close to INR 320 crores, INR 325 crores. Over here, for the half year period, the PAT has grown to 50%. I just want to highlight over here that Q2, we have a very good EBITDA margin of INR 118 crore but at PBT of INR 90 crore because of the shift of INR 11 crore between positive FX revaluation to negative INR 5.75 crore of the revaluation. It is a purely virtual entry in the books of accounts. So it doesn't make any impact on a half year basis. The PAT has grown 50% in the half year period. So that's the number which is important for first half year, this 50%, because half year presents a better picture than a quarter presents a better picture. We have a healthy pipeline of $649 million, close to INR 5,000 crores worth of pipeline is sitting with 54 destiny deals which is available. So this is another good traction which is happening. This is going from $540 million over last year to $628 million previous quarter and $649 million this quarter. Deal size, deal values are increasing. This is the nature of the slide that how many deals or the destiny deals we won in the quarter. These are some of the numbers, which you might have seen. This is another announcement we discussed in the Board, and we're looking for investing in our platform to stabilize. So just to summarize, our platform was stabilized. We crossed $60 million quarterly number. So last quarter, when I was speaking to you, I was talking to you about $60 million and that benchmark for $45 million per quarter to $60 million per quarter. So last year, we were -- quarter 1 was $45 million. We prepared ourselves for $60 million, and we are seeing that we will jump to $75 million. So it's a stabilization of $60 million in the first 9 months. We did $61 million this quarter. So -- and now we are ready for $75 million capacity. Some of the capacity cost increase in this quarter is to prepare the capacity for $75 million a quarter for the next 3 to 4 quarters. So it took 5 quarters for us to reach from $45 million to $60 million. We'd like to shorten the cycle for the next growth of $60 million to $75 million per quarter. And we are looking to create a AIF Cat III fund for investing into the companies where we can use Intellect technology stack, which is quite substantial to leverage and go to market using those companies in fintech space. So that is a Board approval right now. It will take some time for this to get approved by SEBI, and then our investment will start happening. So today, this is the kind of the deal wins. We did 9 new deal wins, including 6 platform deals. An important point to reiterate, these platform deals, we have 4 platforms now. GeM is the first platform, which is growing 100% year-on-year compared to last year. GeM platform has, in first half year, close to INR 40,000 crores. Sale happening on GeM platform is growing very healthily. Second platform is CashPower 22, which is launched by GTB, which is completely microservices platform on Azure. Then iKredit360, which is the second -- third platform, which is a complete end-to-end open finance platform, microservices-led again, to be launched in Germany and for the Europe customers. This is a platform which is an open finance platform. And the fourth platform is my underwriting platform, which is an end-to-end form document extraction from the mail to driving data enrichment. And then to help complete underwriting platform, which is launched 1.5 years back, now we have signed one more deal in that platform. So these 6 platform deals are very critical because this is going to drive -- and this is what I talked to you about in technology day when I was talking about the biggest kind of technologies, what we have at that time, those technology were nascent in nature. But these technologies are now mature, and we start winning 6 deals. So we announced only 2 platform in last -- this quarter only, and these deal wins are proof that this platform has a good attractiveness in the marketplace. We are getting 8 consecutive deals in every quarter in Europe. Europe has a great potential for -- because a lot of legacy sitting there, and they can catapult their technologies by open -- usage of open microservices and open platform. So today, what we are looking at it, that we can take you through this platform that how different these 2 platforms are there, where Manish and Rajesh will take up both our new platforms, which is there, so that you understand how different they are and what space they are competing. So this is -- they're completely competing in the space of modern fintech in Europe and Americas, like nCino or Thought Machine's equivalent platform. But in corporate banking, it's a very, very unique platform in cash management in the world space. And that's where our bullishness is coming going forward that we can grow over 20% for this year as well as we feel that this can accelerate our journey of growth in coming quarters still better than that. So our 54 deals, destiny deals with us are very, very exciting for us. Besides these 26 go-lives in this quarter, it's quite a record, there are 10 -- out of which 10 are new digital transformations and 16 are digital transformation with upgrades or expansions. Now at this point in time, I would like take -- give it to the iGTB Cash -- Cloud CashPower 22 to Manish. Manish, if you take it from here and tell me to press the buttons.

Sure. Thanks, Arun. So this is a brand-new platform, iGTB Cloud CashPower 22. This is built on our current footprint of serving 55 customers across 37 geographies across the world, and this is about creating that experience and creating the availability of the software on a managed services basis. So the CIOs don't have to worry about what is the CapEx as an opportunity, integration technology as an opportunity and how will the operations experience be. Arun, we can skip to the next one. This is the first platform in the world which is truly answering the challenges each of the CIOs are being challenged by the fast-moving tech world as well as the demands of the growth of the transaction business. So we've taken away the challenge of where do I find CapEx from by promoting this on a subscription basis. Instead of rip and replace, banks can actually look at starting new business trade on this and then migrate the platform from it. And then the CIO doesn't have to worry about running his own data centers. It is, straight away, bring new business in, get started and then migrate the business. And you pay as you grow. That's a very significant advantage from the customer's perspective that this will take away the challenges of moving to a new platform. And from our perspective, this is a great growth journey. You truly grow along with the banks as they grow. This is the SaaS business we've been looking at. Arun, next one. We've configured this product into serving -- Arun next slide, please, yes. Serving all the needs of cash management from a business banking, SME and large corporates, we've created 3 packages from a CashNow to a CashXtra to a CashPower. This comes with ready user journeys and comes with ready APIs, and they have market integration frameworks already pre-integrated. This gives a significant advantage of time-to-market for any new business manager to be able to go out to market and realize the benefits reasonably fast. These are market ready, already proven into 55 customer bases across multiple geographies. Arun, next one. We're able to now roll this thing out between 10 to 25 weeks using our iZoom methodology. This comes with 130-plus ready interfaces, and it comes with a test pack of more than 6,000 test cases. Banks can actually pick the software and configure their business' use cases to validate their integration with test packs, automated test packs and get going. So there are 2 business accelerators, integration accelerators and IP technology accelerators. So we picked the challenge of what the CIO was facing and gave to the business manager the time to market really after conceptualizing where they want to go. Today -- in today's world, the business managers had to wait for 12 to 18 to 24 months. So converting the months into weeks is the challenge we have taken, and this is what we are now -- right now driving in. Going to the next slide. You've got, for all market competitive products on the core bank side, pretty robust Intellect integration layer built in. And this is already live with all of these environments from that perspective. So if you picked up any of the core, be it Intellect, be it Finastra, be it Infosys, Flex or Temenos, it comes prefabricated for you to get on to it. API integration, I mean, integration has been a big challenge for most CIOs, and they burn a lot of money. Consuming cash power has been made very easy with ready iTurmeric interfaces which have been built in. Arun, next one. Along with Microsoft Azure, we built up the iGTB cloud, which is now going and covering close to 70 countries. If you would look at -- we've already announced this on 16th August for available in Middle East and Africa. Over the next quarter, we are announcing APAC, Europe. And in the subsequent quarter, we are announcing Americas from a go-live. We started configuring the data centers with these instances. The asset is ready. And over the next 2 quarters, we will roll out to the next 70 countries. It significantly improves the TAM available for us to cover across these 70 markets. If you go and look at in 70 countries, there would be at least 8 to 10 banks, leave aside the large countries. So it multiplies the available market space significantly for us to go and cover. So I believe we have a new space to go after 1,000 banks on commercial banking or business banking, SME or large corporate through this announcement. So this unleashes truly our capacity. And whatever investments we've made till now, it's about monetizing and scaling that up. I'll hand it over to Rajesh to talk about iKredit platform.

Thank you, Manish, and good afternoon and good day to all of you. It's a pleasure to speak to you again today. Today, I'm going to talk about iKredit360, a custom-built platform that we made for Europe and launched in July of this year; and our open finance IDC platform, how they are helping Resurs Bank to be a market leader in sales finance. Arun, next slide, please. So to just set this from a context perspective, Resurs Bank is a Nordic bank headquartered in Helsingborg, Sweden. Helsingborg is a small town, beautiful town at the southern part of Sweden, and this bank has had a legacy of growth and expansion over the last 40 years that it has been in business. It is, by far, a leader in consumer finance business in Nordic region. Not only is it a leader in consumer finance, it's a leading partner for sales-driven payment and loyalty solutions both in retail -- physical retail segment as well as e-commerce segment. It has best-in-class in-store credit. If I may just want to compare them with Bajaj Finserv in -- from an India perspective, something similar to the model that Bajaj Finserv have in India. And it prides itself into having a very agile business model. We can go to the next slide, please. So when Resurs Bank started in this journey, they looked at what were their various pain points. And their pain points was, and I think Arun talked about it, is they were sitting on legacy. And as they were sitting on legacy, cost of development was very high. They were having manual processes. The other thing which the Nordic region is seeing now is a very dynamic change in the payment landscape. And any change in payment landscape, the bank was having difficulty in coping with those changes because of the limited flexibility that their legacy system had and, of course, the operational risk. So they looked at this agenda, and they said they wanted to move into a digital transformation. And the digital transformation goals that they set up were establishing a foundation for a 24-by-7 bank, becoming a self-service bank with very fast time-to-market and, very important to them since they are in the sales finance business, enhance customer and partner insights. It's very interesting to see how we got into this deal. So Resurs Bank, when they started in this journey, they actually approached Gartner, their analyst, to -- and talked about their digital transformation goals. And Gartner actually suggested to them that if these are your goals, why don't you look at Intellect as one of the partners for choice? And we went -- and that's how we got into this deal. We went through a very rigorous 18-month sales cycle. We had more than 30-plus workshops, 3 months of very detailed proof of concept. Remember, we are relatively unknown in Nordic region. And what started as a long list of 21 vendors at the start of the 18 months, we finally won this deal against Temenos, Mambu and Thought Machine. Not only is this deal important to us, it's also very important to Resurs, and this can be seen by the way they advertised or they marketed this deal in the Nordic region. They had a press release. They had a Capital Market Day and with many of their senior team members talking about this deal and why this deal is so important to Resurs Bank. And they talked about this. And I want to highlight to you, these are some of the snippets that we have picked up. But I want to highlight the last line on this where they're talking about this deal as "Resurs Bank invests in the Nordics region's first cloud-based banking platform." So they're calling this as the first cloud-based banking platform in the Nordic region. So if we can go to the next slide, Arun? What are we delivering to them? So what we deliver to them is actually an open finance headless platform, and let me spend a couple of minutes talking through this to you. If you look at the top layer, the mobile and the Internet channels, this is going to be developed and managed by Resurs Bank. They also -- as I mentioned earlier, they are in the sales finance business. So they have partnered ERP systems and e-commerce marketplace, all managed by the retail chains. All of this is going to talk to our open finance platform through 300-plus compliant open APIs. And if you look at this shaded box, this is really a platform, the -- what we're calling as the open finance IDC/iKredit360 platform. If you see the first horizontal layer, this is the Turmeric layer, which is providing us the extension SDK, the API management tool and process orchestration layer. The second layer that we're developing for them is the customer 360. This is the assisted customer 360 channel. We're going to give them origination, which is on lending, cards and sales finance as well as partner system and integrated invoice processing. From a product processor perspective, we are going to give them core, lending and cards. And this is important for us because this is the first time we will be giving a client a platform which cuts across core, lending and cards. We've done deals which are earlier with core and lending, but this is the first time we are doing with core, lending and cards. And this puts us in a unique position because none of my competitors have the cards capability. We are also going to be using marketplace for payments and document management. We are tying up with 2 players, 2 marketplace players to give us that capability in the Nordics region. We also will be integrating other resource systems like SWIFT, Gateway, Card Switch another 20-plus systems, all done -- all this is done through 300 APIs plus PBCs, microservices architecture and real-time event-driven architecture. If we can go to the next slide. This is the first cloud-based Nordic banking system, which is completely container-based, microservices-driven. Interestingly, this is going to be hosted in AWS Germany managed completely by us, which has auto scaling and demand spread -- spurts. It is multi-entity, multi-country, multi-time zones, multi-branches, multilingual as well as multi-currencies. It's a very flexible system. If we can go to the next slide, please. Innovation and agility is a key ask for Resurs from their technology partner, and we are going to be working with Resurs Bank to provide innovation as a service. We are going -- what this means to us is quick response time, accelerated release process, conceptualizing and creating, test and launching partner products on the fly, very critical requirement for Resurs, and in a rapid mode from code commit to build using CI-CD models. So as I talked about this that Resurs made sales -- the majority of their business being a sales finance business, they had key relationships both with physical stores as well as e-commerce market players. And on the right-hand side of the slide, you can see some of the big chains that they have tie-ups with, big and important chains in Nordic region which are important to them like BAUHAUS, Miles & More, et cetera. So we are going to help them to be hyperconnected with their marketplace ecosystem, which involves quick onboarding for developers and partners. Our API-first architecture will enable them to embrace and extend this relationship to their partners, event-driven architecture as well as partners can go from concept to test to launch within days. And that's how we want to help Resurs play in this market space. Next slide, please. So this slide actually talks about, I think I've mentioned this, about 100 PBCs. So let me talk a little bit about PBCs. I don't know if all of you are aware, but what a PBC is typically either a single microservice or a combination of certain microservices, which can deliver a complete business function. A PBC can be independently deployed. It can be version controlled. And most importantly, it can be independently sold as a function to a player. So here, if you see this chart, we have over 100-plus PBCs. And if you can just go through some of this, for example, in deposits, we have a PBC for deposit operations. That means this is a complete operations functional PBC that we have, completely isolated, can be deployed and can be sold separately. You can see how we have composed our businesses through this PBC. We have PBCs in deposits. We have PBCs in payments, account operations, customer management, lending, marketplace, enterprise services as well as iTurmeric. If we go to the next slide, please. This is what we have from Intellect public open APIs. We have today 300 -- more than 300 open APIs, Intellect open APIs. These are published on our portal, and this is what we are using from an open finance platform. Not only do we have our 300 own APIs, we also have 90-plus partner APIs. So all these APIs are helping us in building the system. So you'll see this -- again, these APIs cut deposits, our card systems, lending, payments, accounts, enterprise services as well as partner API. So I thought I'll just today give you a little bit of glimpse of what is under the hood of our open finance platform and how it is helping us to win deals in Europe. That's what I had. Thank you so much for giving me the time to today, and I think I'll hand it over to Prabal now for a quick summary.

Thanks, Rajesh. Thank you so much. So I will just take probably a couple of minutes in order to essentially -- for the investors, for the investors old and as well as new, in contextualizing and summarizing where we are on the journey of building Intellect. As the Intellect 1, as you know, the older investors know, FY '15 to '18 was all about making large investments of almost INR 3,000 crores in sales and marketing and technology and R&D, building the brand of Intellect in the heart of advanced markets, in London, building an MNC team with domain experts and, of course, most importantly, figuring out that niche product strategy of liquidity, which was a gap in the international markets. So this is what we did in the first -- of course, these main figures, trade on the balance sheet, cash flows, and it was funded essentially by rights and promoter funding. So that was the Intellect 1. Intellect 2, FY '18 to '21, was about industrialization of processes, design-taking, making investments ahead of the curve in cloud technology, data, AI/ML-related technologies and the beginning really of the monetization phase, which is what saw positive cash flows, profitability and so on and so forth. Intellect 3, which is where we are now, and that is of -- what you have keen interest to most of you, is this period of FY '22 to '25. Now as you heard Arun, Manish and Rajesh sort of speak about, this is the phase in which it can be all about transitioning Intellect from being a stable product company to an open fintech platform. And this is -- investors, you will understand, this is a nontrivial transformation and something which we have alluded to in all -- in many of our previous calls, and especially I, when I was telling you about the potential which an IP-led company like Intellect has in where we control the -- we essentially control the IP of the products and thus have the inbuilt flexibility of leveraging the IP for creating newer business models, product offerings and essentially using all our inbuilt levers to create significant nonlinear value creation over a period of time. You would recollect these statements which we had made consistently over the last 1 year or so. So now is the time where, as you heard, that we'll be migrating to a platform, an open platform, a fintech platform, which is very, very exciting. So in the context of the financials, which Arun took through, I think at a high level, I would say we are continuing on our guided strategic path, which is calibrated growth with predictable profitability. So you have seen for the half year 22% revenue growth in dollar terms, 39% EBITDA, 50% profit after tax. So all the effects of operating leverage of the standard model are coming in place. More hearteningly is the fact that the quality of revenue has improved significantly with the SaaS revenue going up to 127%, et cetera, in this period and is now almost 20% of the revenue pie. So that is on the regular business. So I would suggest -- sorry, I also forgot. I mean, in terms of cash balances, I think we probably are the only product company which is investing into platforms, investing into products and yet are -- and yet is a totally debt-free company today. It's a very far cry from 2 years ago when we used to meet all of you, right? So that's also an [ extreme ]. So I would think net-net on a high-level basis for investors, especially for investors who are willing to look at us, I would say that we are in the phase of where we are about to take the benefit of our inbuilt ability of leveraging our IP to open up new vistas of growth and nonlinear value creation, while we continue on a strategic guided part, which is calibrated growth with predictable profitability and keeping a keen focus on the balance sheet. So you can see it's a very well-rounded financial strategy, which embeds with the technology strategy of the organization. And therefore, all the trust which you have given us over the past many years, I would hope this is the time now to actually reap those benefits. Thank you.

Thank you, Prabal. I really appreciate the 3 presentations. And I'm delighted that it's a debt-free company, fintech platform where you are looking for a single product to be a single platform, cash cost almost $300 million, $400 million to platform. As of our 4 platforms, plus there are 2 more platforms in the making, so around 6 platforms since last 7 months we exposed the technology there, we just opened the bonnet to see what technologies we have. So it's not just a product what we have -- that we have. It's a beautiful team at Intellect, a talented research team. I take pride in my research team, the way they work together across the business line and also our digital technologies. I think that said, my dream that we can create a Silicon Valley-level teams of research and development out of India, these are the outcome of last 7 months. It's quite surprising. Even winning the deal in Europe against Thought Machine, where their investments between hundreds of millions of dollar and to compete in those deals, our CashPower has -- CashPower is like a completely new platform for 1,000 banks. Suddenly, the TAM has gone from 300 banks to 1,000 banks. It's an interesting way how technology can drive a change for the marketplace to adopt a new technology. So with this, let me open it for question and answers. [Operator Instructions]

Thank you, Arun. The forum is open for Q&A. [Operator Instructions] Mr. [ Jagdish ], please ask a question.

Yes, sir. Are you able to hear me?

Yes, [ Jagdish ].

Yes. Congratulations for a good set of numbers. I've been probably owning the stock for a few years. So my question is ripe. So we have recently announced an alliance with a particular partner, right? Sorry, I just forgot the name. So in future, what are these alliances and partnerships, right? So are we going to do many alliances, partnerships and driving the growth in this way? So could you please throw some light on this?

Manish, you would like to?

Yes. This was currently for artificial intelligence, for trade finance. I think it's about building a marketplace where we can consume a lot of fintechs as we offer our offerings to the customer. We don't necessarily need to build 100% everything. There's ready available APIs. There's ready available assets. Our goal is to be able to serve our customers and give them offerings. And we have -- a big focus is to become their fintech, cloud-native, leveraged data, AI and be able to expand their offerings.

Yes. Recently, one of the Indian MNC, right, they did a partnership with Finastra to -- for this network to drive their growth there. So are we dealing with any GSI, global system integrators, to implement our product? Maybe we are focusing on product platform, right? So maybe is this -- do you think this is the time to add on these partners, maybe like GSIs like our Indian MNC and other available MNCs?

Yes. [ Jagdish ], we are working on the same thing also. So go deep into large accounts is where we're going to try and do ourselves as well along with these large system integrators. And go wide is where platform will help us do it. Rajesh, you wanted to add something, I think.

No. No, I just wanted to say that we have a strategy wherein we have decided what is core for us and what are the things that we will tie up with the marketplace partners. So from an IDC marketplace perspective, we already have 30 partners who are giving complementary services. So when a client comes to us, he has not only services from Intellect, but he can also take up partner services. So that's the complete story, ecosystem story that I wanted to talk.

Yes. And since now our platforms are headless and composable, that's where banks can cocreate along themselves or along with the large system integrators. So we're working with some of them right now in a couple of bids.

Okay. Great. And there's 2 platforms are in the pipeline, right? So just maybe as a layman, from product to platform, right, so what is the changes as for the bank, right, who are using our services? So if we are providing one product or a platform? So in simple terms, what is the change they are having? Maybe can -- you explained greatly. But still, for us, in layman terms, could you please explain that part also?

[ Jagdish ], simply, like a platform, you're part of a network where you consume services or you can be consumed to offer an offering to a third end customer from that perspective. Because of the architecture of microservices and API, we can consume anything and as a network, become a network and offer that extended to the customer base.

For a bank to onboard, so it gives you a subscription-based revenue. So we can charge a bank $50,000 a month, $200,000 a month for our services. For us, we don't have to reinstall the software. In that side of product, we need to go to bank. It takes 12 months to 18 months to implement the solution. In a platform, it takes 3 months to 6 months to implement that platform. So platform is an accelerated way of driving the change. And this gives you the SIs, what you are talking about, global SIs, the ability to cocreate or compose our solutions on it. So now we have a Head of Partnership, Kannan Ramasamy. And he is building partnership with in Indian multinational, what you're referring to.

Thanks, [ Jagdish ]. Next, we have Mr. Mohit Jain from Anand Rathi Securities.

I have 3 questions. One is related to this investment, if you could help us understand where is this INR 100 crore investment suddenly came into play? And how much would be the cash outflow with respect to this and for what reason? And second one is related to the -- to double -- sir, actually, he was talking about quality of revenues in the opening remark. But it appears that our working capital has not resulted into cash flow generation in the first half, in the last 6 months. So how do we exactly measure and what is the expectation from a cash flow perspective for second half or for FY '22? And third was that you -- or I could not find the regional breakup. Earlier, you used to disclose what is happening in advanced markets, such as India versus emerging. But this time, I think this number, I could not find. So if you could help me direct the numbers in the old format, advanced markets and others, that will be great.

Okay. So first, moving to your question, it's about AI, what is the purpose of AI. When we are now building a platform in a marketplace, in this marketplace, we have a core platform where there's a core banking platform, a lending platform, cash management platform. We are experiencing the opportunity to invest in some of the companies which can consume these platforms and go to -- take to the market. Now this could be -- we can acquire the company or we partner with the company or we take a minor stake, not a majority stake, but a minor stake in this company to leverage this platform. So that's an AIF application we will be applying. It will take another 6 months to get the application through. And then we can work towards the partners which Rajesh is mentioning. We have a 30 partner in -- for our IDC marketplace. All these marketplaces, we have access to their customers. Some of them are B2C. Some of them are B2B partners are also there. So there, we can leverage our platform to be more -- in an efficient manner for the purpose of AIF. About second question, you're asking about cash flow generation during the...

In the first half.

First half, yes. So cash flow generation in the first half has some of the -- GeM payments are struck right now. So that is -- have getting some of the distress for the cash flow generation compared to the -- what we expected to do it. So we are now looking at -- in this quarter, we should get some significant change from government. So that's one possibility. So the effect number, we are not able to project for this quarter or next quarter. But I think cash flow positive is there. As of now, our EBITDA is at INR 118 crores. So that's more important is from INR 100 crores to INR 118 crores, 18% jump in EBITDA is a major jump in this quarter. And then the third question?

Sir, just a follow-up also, advanced market DSO has also gone up for some reason.

It's a [ 2-day ] -- between 122 to 132 days since we started, it's not a mass market. It's a global market. It's at 122 days, and the Indian market is 214 days. So it's an advanced -- it's not an advanced market DSO. Advanced market DSO, they are less than 90 days.

The third one was related to advanced market, regional breakup of revenues, which we used to give till last quarter.

Okay. We missed it on this quarter. Andrew just wrote it down. He will just send it or even type on the chat box.

Sir, one follow-up on this investment, the nature of investment that you spoke about in response to the first question. So you will be investing in those companies which will sort of implement Intellect for client? Is that what this AIF is all about?

Not necessarily. I think the marketplace concept is evolving, Mohit. The marketplace concept has an element where you want to go to the -- next to the customer. You have some potential to offer partial service to the customers using Intellect assets. So there are many opportunities out there in open marketplace. Where these opportunities are, we are experiencing it. And it would be an investment of 5% to 30%. Anything would be possible based on those companies. So this is an ecosystem development AIF. So the next stage from product to platform is the ecosystem. So all of the -- whether Salesforce.com, if you look at it, they acquired Mule. So they invested in nCino. They invested in MuleSoft. These are the typical ecosystem player companies where they invest in early stage and help the MuleSoft to come up and become a core player with them or they become an nCino. They invested in early stage. These are the new model on ecosystem development. It's a very small money we have committed right now, INR 100 crores, not a big money committed. We can...

But from a cash flow point of view, INR 100 crore will go out in FY '22. Will it go out in '23? How will it...

It will all go out in FY '22. By the time it will get approved, we are [indiscernible] itself. It will take a lot of time there.

Okay. Okay. So we should not take this impact in immediate financial, right?

That's right. That's right.

So Mohit, I mean, let me just add a couple of points to what Arun mentioned for your benefit. The way to -- we are looking at it, and hopefully, you can also sort of empathize with it, is this is the financial win for the enabling system -- for enabling the ecosystem he's talking about. So this is the part which will give us the financial leverage to do that. It was not necessary. At the same time, it can be a great force multiplier as we go along. For example, I mean, you have a clear case, for example, our business models in India. Internationally, you have many like Cisco, et cetera. But in India, you have this -- what Zomato did, for example, Info Edge had investment in Zomato. which was an adjacency in some form. In our case, it will be much more closely linked because it's -- it will help us in financially leveraging partners who are willing to join the ecosystem. So look at it like that.

Thank you, Mohit. Next, we have Mr. [ Vivek ] [indiscernible].

Sir, in our journey from $60 million to $75 million, how much of the cost impact is already factored in? And how much -- and do you expect the full impact to come in by the next quarter or 2? And then the operating leverage question, I just want to understand how do you expect that cost increase to show up in the numbers and by when?

Yes. So [ Vivek ], if you look at the numbers, we looked at it, EBITDA to be 30% EBITDA. That's how we forecasted the company from last 1 year. So that we'll be moving from 20% to 30% on EBITDA line. We reached to close to 26%, including ESOP costs. If you take ESOP costs out, it's 28.5%. But let's take 26% number. So this $75 million, we are quite confident that costs will be increasing on quarter-on-quarter. So the operating, it cannot be taken into account because that is -- which have come up in last quarter, which has provided a new head count for closing the delivery portion of the team. We are investing into sales systems in countries like CashPower, which is available in -- it can be available to the world. Those investments will be there. And I think working -- and so working actual number, I think we are guiding towards 30% EBITDA margin. And that's what our reduction is there in next -- whether it takes 2 quarters or it takes 4 quarters, that's the number we are looking at, 30% EBITDA margin, offtaking all the costs inclusive.

Sir, just -- and by -- and you mentioned that you want to shorten the time period from which you want to go from $60 million to $75 million. I mean, is there a ballpark? I mean, should we expect that in the next 5, 6 quarters or much before that, like maybe 4 to 5?

Definitely, we want to look at it, if it took 5 quarters or 4 to 5 to 6, then maybe we should take 4 quarters, so minimal. And the management team, we can take a goal to ourselves. We need to reduce by 1 quarter to this -- to $75 million. So -- but we don't -- making a promise of this later, but that's what we are having, again, directional view on this because I think the way we are seeing the market and the pipeline, not just -- like it could be achieved in 4 quarters.

Sir, just one slightly longer-term question. In the last call that you had mentioned that, I mean, as a company, we intend to double our top line in the next 4 to 5 years. So should we take this 20% top line growth as a one-off? Or do you expect that maybe our potential growth rates has jumped from, let's say, a 14% to 15% to more like an 18%, 19%? I mean, are we more confident on hitting those numbers maybe a year before, slightly longer-term target?

Maybe I'm confident on 20% plus now. So we are cautious about -- when we announced in July, we are cautious about it, whether we'll get to the 20% or -- that's why we are seeing mid-teens on the number. Now we are confident of 20% plus for -- at least the next 3 quarters, we are confident about 20% to be maintained. Beyond that, we haven't looked at it, [ however ].

Thanks, [ Vivek ]. Next, we have [ Ankush Aggarwal ].

Yes. So a product question on the possibility of long-term operating leverage that can play out in our company and our business as a whole. So if I looked at one of your peers, Temenos, over the last decade, they have been able to improve their margins year after year for near a decade now. And they have been guiding that they'll be able to continue to do so over next 5 years as well, right? If I look at Intellect, we have seen operating leverage play out sharply for the last 6, 7 years, [indiscernible] from the time COVID started, right? Not very sure how much of that was due to cost savings on account of COVID. But if I see now, the costs are starting inching back higher, right? We are already back to pre-COVID level costs, right? The cost has jumped 18% this quarter. So I wanted your thoughts on how to think about this profit level sustaining. And do you think that we can build on this operating leverage year after year like what Temenos has been able to do so?

[ Ankush ], in a product and platform company, operating leverage is a very natural part of it. So it's not something we need to do. The -- my all recurring revenues, which are there, they come at a cost structure of much higher margin levels. So cost leverage is available year-on-year. So INR 118 crores EBITDA and the 2% increase in EBITDA margin, which includes the talent cost, which has gone up in last quarter, where every Indian IT company has decreased in their EBITDA margin, we have increased by 2% EBITDA margin. So this is an operating leverage which is visible right now. I'm saying 30% we are looking right now, and we want to reinvest more than 30% into building the business and accelerating the business growth from 30% and higher. And that's what our agenda would be and to look at the cost leverage. So my suggestion to the investor is it's not about cost leverage. It's about the market share. The opportunity size is very, very big. The market size of Europe, what Rajesh has mentioned, on open API platform validation from the customer who has 21 vendors and being selected as one of the last vendor out 21 vendor on open API platform is a very, very big story. This is like against Thought Machine who has invested millions and millions of dollar against that. We are bidding with a very low shoestring budget to get into the new country. It is something amazing area. So the cost increase of INR 10 crore, INR 20 crore, INR 30 crore quarter-on-quarter, I think that is not -- should not be a concern. A concern, I think, question should be, how do we get the legacy opportunity market and lead this business from 30% to 30% levels? And that's what our questions in our boardroom is, can we increase this 20% growth numbers to 30% growth numbers? That is our question, which you are saying [ '22, '23, '24 ]. Those are the questions you are asking. As soon as these growth numbers increase, margins are a natural part of the outcome.

All right. So right now, as you are trying to move from product to platform company, that's fine. But given we haven't seen [indiscernible] more on their top line market share or grow Intellect as a business exercise?

We couldn't hear the full question. The question -- it was a breakdown on...

Okay. So what I was saying is -- so it would be clear, I can assume that now being as a company, you are not much focused on getting the operating leverage to [indiscernible] but more on growing our top line when we [indiscernible] product platform. Would that be a right understanding?

[ Ankush ], 30% margin is a very good margin. We are not compromising the margin. 30% margin, EBITDA margin is a great margin in a global company for investors. And then we are looking for PAT growth of around 50% in a 6-month period, and even if 30% PAT growth is a very good growth for any investor.

[ Ankush ], let me try to address what I think I'm hearing you say. See, as I mentioned in our financial strategy overview, we are moving to this platform phase, building the ecosystem, all of that, but not at -- not by compromising the steady cash flows as well as the steady financials which we have built up over the last couple of years. So while the EBITDA will continue to grow from 20% to 30% in that range, it will continue to grow. We will continue to sell products. It is the allocation of that costs -- the allocation of the excess cash flows which are getting generated, some part of which will go into building this ecosystem or platform so that the future will be far more exciting in terms of creating a nonlinear expansion of profitability. Unlike, let's say, OFSS, a company which all of us know well, right, i-flex, they are not expanding yet, but their profitability is still very high because of the AMC revenue streams at a percentage, right? Now what would you rather have? Would you rather have a company of this nature which does not expand but basically rests on his laurels of the past, which is perfectly legitimate as a strategy? Or would you have something which continues to build their products pipeline, continues to populate the marketplace with its products and then move on to a platform? Because they have their own money. Their growth capital value should [indiscernible]. There is no capital dilution at all in the scheme of things. So the capital allocation will be tightly controlled, and that's what I mentioned to you. While keeping a keen focus on the balance sheet, we will be doing all of this. So it's a tricky year. It's a very tricky year. But I mean, investors like many of you who have been with us in the past, we have been saying this from FY '18 onwards, and we have delivered on each and every parameter. So the issue is to have trust that this is the path we have designed for ourselves and which will be ultimately creating hopefully immense value for our shareholders.

So secondly, on capital allocation. So from the first part, you [indiscernible] want to invest in businesses to expand or to accelerate your journey to a platform. But sir, generally, [indiscernible] access to capital pipeline? I mean, you have been vocal about the fact that Intellect wants its [indiscernible] products [indiscernible] in the market. So don't you think you would like to use some of the cash to buy back at current levels? I mean, it would be [indiscernible] investing in Intellect than sell at [indiscernible] that you have currently.

[ Ankush ], it's too early a game here. And this is -- I think we are strategically building a [indiscernible], not getting into this financial gain and not on the cost side, not on -- we are a technology company and not just a technology company. We are just saying we are a 0-debt fintech platform in the world, which nobody has. So I think that's our message I want to leave it to you rather than getting into the financial maneuvering of the company.

So just the last one. I mean, on the opening [indiscernible] that you're talking about, so can you [indiscernible] for example, for managing the simple open architecture platform, which you have done already well obviously [indiscernible]. But on the banking side, what other use case that -- some of the use case that [indiscernible] happens would add value to a large number of companies for business model?

Like many of them, we can have a technology due to -- I think we are planning some time in the last week of November or December some technology days where we can explain you those use cases.

Then next, we have Mr. Rajeev Agrawal.

Yes. I have been a shareholder for a very long time, and it's great to see the confidence that the management is displaying now and the results. So that's wonderful. Can you -- now the company seems to be moving from the products to the platform. Now this transition, can you talk about how you explained in the Cash 22, how the TAM has gone from 300 banks to 1,000 banks? But what is the broader vision that you see of the company in terms of what are the possibilities, let's say, 5 years out? Like just I want to understand because this seems like a step change in terms of how the company is looking at itself, right? Earlier, we always used to talk about the product. And now we are saying we are an open source -- not open source, open API platform. And therefore, we can easily be embedded in many of the use cases of different financial institutions. So I would just want to understand, from your perspective, what is it that you are thinking of, let's say, 5 years out?

5 years out is an amazing potential, which is there. If you look at it, the amount of spending, it's a long conversation which I'm passionate about. You pick upon the service company. When they're growing 15%, 16%, 20%, how much of a value addition and business impact they're making to the customer or they are doing the same job in a workshop format. We say that our business who are keep repeating -- repairing some digital solution on top of their legacy platform. You can't change a legacy house by making it -- issuing trade on the top of it. Issuing trade can be there on any house, which is a 20-year-, 100-year-old house. And still, it will have leakages there. We are saying it's an open API platform with a cost of a technology per account, which is close to $100 per year for a European brand to build this technology. Resurs is -- showing why the Resurs is so excited? Because they feel that the cost per account will come down by 1/10 because they don't have to spend in hardware. They don't have to spend in middleware. They don't have to spend in networks. It's all on cloud, and they are getting a composability which is available to them. Now this model can be taken up in 5 years' time. It can be taken like a SAP journey. We have multiple SIs start consuming my APIs because you asked a question 5 years from now. There, they can consume bank and consume my API directly. So they will pay me the subscription of, let's say, $2 million a year, $1 million a year, $3 million a year, that's a big number. If I get $1 million subscription a year, $2 million subscription a year, if I have to build up this platform on the cloud for $100 million business even in going the next 2 years, it's not a rocket science to get 50 customers on this open API platform with an ability of what Rajesh mentioned. We have a core banking, lending and cards on the same APIs. No single player in the world have got these 3 platform layers. I can book a loan. Loan can be booked in loan book. A loan can be booked into unsecured credit card book. It has the ability to design those services and products. Or for cash management, I can have a collection. I can have this collection and having a bills discounting coming on to the same platform. I think there's a huge composability there. Our excitement is humongous going forward, but we want to be ensuring that we are calibrated so we don't make any error in this journey. Because the market size is $100 billion market size. We need to service the business from [indiscernible].

Okay. It seems to me that with this transition from a product to a platform, you will have a lot of incremental improvements in both in your revenue, profitability and so on. And it will become a lot more consistent versus in the past where you used to depend on a few big deals. And therefore, it was a lot choppy sort of results, let's say. But now with the platform thing that you're talking about, there seems to be -- because it's a smaller and much wider market that you're looking at, suddenly, you will have a lot more consistency and a gradual improvement in your numbers. And sort of the J curve that we always talk about in the technology, maybe that enables you to do that.

Yes. That's it. Thank you, Rajeev.

One more question I have, which is you are investing in this AIF. Now I wanted to understand your thought about why AIF versus investing directly from the company directly rather than do an AIF? So just -- is it a taxation issue? Or what is it that you're trying to do while you're creating an AIF versus investing from Intellect directly into the ecosystem of companies?

Basically, consolidation becomes a major issue. When we have to publish our quarterly result, annual result, each time, you need to do a consolidation if you have a direct investment in the company. It's a painful process of getting the small companies who doesn't have a proper accounting system to then give us their accounts. And then it becomes a regulatory and accounting issue. AIF keeps them away, and we don't have to -- I mean, it will only be a part of our consolidation issue. That's a simple way to look at it, Rajeev.

Thanks, Rajeev. Next, we have Utkarsh.

Am I audible?

Yes.

Sorry for asking again, but can you please elaborate a little more on the purpose of the AIF? And number two, if I heard you correctly, did you guide for a 20% top line growth and a 30% bottom line growth for the next 3 years?

Yes, Utkarsh. So purpose of AIF, just to explain again, there are -- we need to move in next 3 to 5 years in the ecosystem of players. Salesforce.com, if you observe, more than full story, this is not a product trade. Otherwise, there are many CRM products in the marketplace. Instead, it became an ecosystem player. So the journeys from product to platform to ecosystem, IDC has signed up 30 partners on IDC marketplace. GTB has signed up more than 15 partners on their marketplace. So it's a marketplace game. So what happens is that when you are putting somebody in the marketplace, we have a portion to invest if I am giving a technology to the player, the way Info Edge has given to, let's say, Zomato or Salesforce has given to a MuleSoft or nCino. Please study that Salesforce and nCino model. nCino is their only lending platform. So if you're looking nCino valuation and Rajesh Saxena with iKredit360, these 2 platforms are competing in the space, which Salesforce invested into their platform. So that is the model of it. To answer the second question, 20% top line growth for next years, yes, we are looking for 20% growth. This is a common message which we are giving from last many calls, and we are looking for a PBT growth of 30%. So tax numbers will go up. I don't know if it's in the range of 12% to 16% numbers. If next year when the tax credits are not available, may not be available, then we will be consuming it. But it will go up 20%, 22% numbers with a PBT growth of 30% in the digital. That's what we are guiding.

Thanks, Utkarsh. Thanks a lot. Arun, we can take one more question?

Just take one more. Who is this?

Next, we have [ Suyash Somani ].

I have a simple questions. For your SaaS business, for every INR 1 of SaaS revenue that we accrue, how many rupees of AMC revenues to be forego for, let's say, theoretically? I just want to sort of understand that ambition a little better.

[ Yash ], if I'm doing a deal of license plus AMC, if you take a deal of $1 million with AMC of $200,000 per year AMC, in 10 years' time, we will be making 9 year of AMC plus $1 million, $1.8 million -- 9 years is $1.8 million plus $1 million, $2.8 million. If I have a subscription revenue of $600,000 -- $50,000 per month, I make in 10 years' time $6 million. So that's the benefit of our subscription revenue over the AMC revenue. So it's almost -- it's a $2.8 million value realized for the company. It will get $6 million revenue realized for the similar kind of a deal.

So that is very helpful. What I meant is actually, so in year 1, you would forgo some revenue, right? And you accrue a lot of these later on. So how should we think about it in terms of the transition period in terms of what license AMC revenue we miss out on, let's say, year 1?

[ Yash ], whatever the results we have published with 22% growth, it is bundled into that. So whatever discounting has happened, it's happened in 20% growth. So if we just plan for 20% growth, that will be happy to have the 20% growth number. It's because of those forgo numbers are built into it.

Thanks, [ Yash ]. Arun, can we close it? We have a couple of participants.

Okay. We can close it.

Okay. Thank you, everybody, for joining us. If there are still some questions that are left, please do write to us or call us. We'll be able to help you. Thank you for joining today.

Thank you. Thank you.