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 third quarter of the fiscal year 2022, '23, ending December 31, 2022. The investor presentation and press release have [Technical Difficulty].

We cannot hear you, Praveen. He may not be knowing that. Sorry for the interruption. Let me continue the safe harbor statement, which has been there in any presentations we make on quarterly results, which speaks about it that this is not all the statements which we make in the series concerning our future prospects are forward-looking statements. Forward-looking statements by nature involve number of risk and uncertainties that could cause actual results to differ materially from the market expectations. There is a full statement which is there part of the deck, which Praveen normally read out to all of you. This time, we will not go through the presentation deck. We want to look at it since our business is monitored on the last 12 months basis, it's annualized business. So our data shows for this quarter, we have last 12 months revenue last INR 2,126 crore revenues, which is at 21% growth on INR 1,751 crore. Our platform revenue has grown at 43% from INR 464 crore to INR 324 crores. Our license revenue has a dip. There's a slowdown of license revenue decision-making in Europe, which was the earlier point, which made as for the U.K. or that there's a business slowdown, which is at minus 18%, slowdown in to INR 360 crore to INR 297 crore. AMC has healthily rose by 14% from INR 316 crore to INR 361 crore in the last 12 months. PAT has come down substantially from INR 334 crore over the last 12 months to new number INR 272 crore because of the increased investment, which I mentioned for moving up just some [indiscernible] platform I take you over there. Our EBITDA margin is minus 4% from INR 437 crore to INR 419 crore. While the gross margin is up from INR 1,000 crore to INR 1,161 crore. Gross margin percentage has come down from 57% to 55%. EBITDA has come down from 25% to 20% and license-linked revenue has grown by 12% from INR 1,000 crore to INR 1,121 crore. So these are top line metrics number. In this what -- the improvement side is healthily growing at 21%. EBITDA is having a constraint of the brand cost investment, which are planned investment. And third thing is that receivable days has moved from -- to 139 days. So that is in other point which we need to be -- explained and this is the -- what is the basis of this 3 different elements. Our quarterly numbers are INR 555 crore. Our quarterly number is INR 105 crore EBITDA. So these are 2 major number and 139 days of the DSO. The first number is moving EBITDA from 25% to 20%. This 5% reinvestment back from moving the business from current to platform. During my April presentation, we mentioned about moving the business from 25% to 20%. That 5% we will be reinvesting back for looking at a very positive number what we are seeing in a platform-based business. So that's one important piece which we are trying to intact. This last quarter number was much lower. This quarter, we have close to 19% EBITDA in this quarter INR 105 crore. And we are looking next quarter will be better than this number. And second point I want to make our investment in people always in is not a linear, it is always happened on a step basis. So step base are $45 million to $60 million quarterly run rate, and $60 million to $75 million run rate. Now we are close to on constant currency, our revenue are $72 million, and we are close to $75 million, which we are looking at it to be doing it. So this number of $60 million to $75 million, we looked at it in last October. Released in 5 quarters, we reached from close to $75 million. And we are expecting Q4 revenue to cross $75 million on constant currency basis. On the DSO days, we have something called contractually not due revenue. Then we sell a 5-year deal with the customer, a long-term deal with our customer. The money gets due after a certain milestone. And those milestones are -- makes up contractually not due number, including GeM. Because GeM also they pay us x percentage upfront and y percent after the product gets delivered within the -- when the payment is marked on the system I shared with you. That number of contractually not due out of the total of INR 648 crore. That number, which is [indiscernible] over INR 250 crore. So that's a -- which is a distort my figure of DSOs of 139 days. If you take it away that number, it's close to 108 days of DSO. And then we look at geographically, this number -- it is -- in America, our DSOs are just 16 days. In Europe, our DSOs are 28 days, APAC is 189 days, EMEA is 177 days and India is 131 days if you remove the contractually not due number from the old DSO reportage. So now let me come to the product versus platform strategy. The platform revenue are growing healthily to INR 464 crore last LTM, which is almost -- we started from INR 50 crore to INR 464 crore. In last years, we were able to move that platform revenue, which is giving a sustainability to that business and platform of -- now let me give a flavor of each business. In GDP, we mentioned our 2 main product lines, liquidity product line and DTB product line, both our leading content products, where we are winning 3 out of 4 deals in the marketplace. Both these products are performing very, very well. There was a delay in the decision cycle time last quarter. Last 2 quarters or last 3 quarters, there was a decision slowdown cycle. We lost some of the revenue like per bank, we lost during the -- after -- on the date of signing the contract [ $20 ] million contract when the team has went for the signing it off on 24th of February, unfortunately somehow that one is there. So those happens, but that doesn't change the business scenario of the compelling business position, which is happening. So in this area, the GDP, if I look at liquidity, we are now getting a good traction. Since interest rates -- global interest rates are higher, there's a good traction. France, we are announcing the second deal in the France after SOCGEN deal last year. Now we have also second largest bank in France is also selected to [ rupee ] and then we have another 3 to 4 deals in liquidity in France. Liquidity is now moving into Canada and then we can look at Spain, Italy and other countries. We are looking very focused way country by country to taking a major market share. It takes 2 or 3 kind of take up liquidity and DTB, then we are leadership quadrant is established. So then we did it in DTB. Same way we are doing it over here. In GCB business, there are 2 platform. One is core banking platform, which is we call IDC. In the last 6 months, our micro services-based API-based, cloud native even driven headless platform has been very, very well accepted in the marketplace. We are able to differentiate ourselves in Europe and America or Canadian market which is headless is a great proposition. We are working in at least 7 deals over there in Europe market on MACH compliant or MACH bond, I would not say compliant, MACH bond core banking system. One good news to the investor is now we are in top 3 -- one of the top 3 players in core banking now. When we are looking at survey, and one RSP we are participating, we are part of Thought Machine. Thought Machine is a new competitor emerging in a new technology space, and Temenos is a 900-pound gorilla sitting in Europe, which is a large customer site survey implement. So these are 2 more competition into the banking. But core banking market space perspective, getting qualified in top 3 is a very, very big success from our viewpoint, and we are seeing that we are able to compete head on with Thought Machine and some of the deals Temenos is coming third, is it very tooling proposition. Those deals may not have closed during the last 6 months. Deal closing in core banking takes 12 to 24 months, so cycle time for changing the core banking maybe like engaging the customer can go like just 24 months. We implemented business solution for one of the German clients, which we announced a deal 2 years back, our second largest retailer of Germany. That system is working smoothly. In November, they are processing 300,000 comp on a single day using our micro services architecture. I think that's a kind of power we are able to get a referenceable client in European market, which is giving us a acceleration on this business. Second business of GCB under GCB is iKredit360, which is designing semi product. It's a company in 360 products where all the credit portfolio of the bank from retail loans to SME loans and the SME loan to credit card has a -- secured and unsecured loan can be processed on this particular platform. This platform deal we announced 3 quarters back from another Swedish largest financial institution has selected us for their platform leases, and that platform has a very good traction because using the iKredit360 one can design their own positions. So that's our second digital platform. Third platform, they have GCB has Quantums. Quantums, we had a good deal till June. The last 2 quarters, we had a slowdown. We are having a pipeline of more than 7 to 8 deals which are there in central banking. The best part is we are fighting this battle in an advanced market now. So Central Banking each have moved from not only in the Africa market, it moved to the advanced markets. So which is very, very heartening to know. When we look at IntellectAI. We consolidate our business into 3 units from 5 units. So we had an RTM unit and a wealth unit. So RTM unit has been merged with GCB business. So treasury business has been merged with the GCB business and wealth business has been merged with IntellectAI. We renamed Intellect SEEC to IntellectAI. So there are 3 units now. We have GTB, GCB and IntellectAI. Policy unit has been merged with -- and the thinking process behind all of it is Intellect Design Arena when we set up, Arena was at eased when we say that there will be incubation system, and there will be an ecosystem in the company and there will be a scale company. So when a product is getting created and first 5 customers are there, it is in the incubation stage. We give a final -- a lot of freedom to the team, which are under city. They work like a start-up company in that particular space. Once it reaches the first 5 customer, we believe that it's a time when we can use organizational resources at a scale level and global reach of the company. And that is the time when we merge with larger units. So that's a strategy which we announced sometime in 2016, 2017, that's how it is done. Now the median business is in these 3 units. There are minor products in the retail space and some other spaces which are running, which are not significant. So we will be talking about those products in any of this conversation. So IntellectAI Space Magic submission, which we launched in U.S., which we mean -- Banesh has highlighted to you, 3 things it. It does the extraction. It does enrichment. It does transformation. It does validation. The entire piece, which is there on underwriting policy now have matured to a level where is moving in a design thinking regularly. There are 3 circles are here. First circle is called lean startup. Second circle is called ecosystem. And third circle is called scale. So this business on a Magic Submission is moving from lean start-up where we are selling [ items ] clients to be working on a platform. Now to the ecosystem space, the 3 element for differentiating between start-up, lean start-up and ecosystem is in lean start-up, it is desirability, feasibility and viability. Once the viability gets established, then it needs -- moves into feasibility, value enhanceability and adaptability. So it move to the value enhanceability and adaptability in this space which is disrupting the BPO space significantly. There's a very, very heavy pipeline. And here the -- we will be hiring and investing more money in this business. Second business, wealth. We took some time under the leadership of Jaideep Billa. Some of you know him. After he did a lean start-up, he handed over to the patent to Banesh and Sudhir to run this business, and this business now has a great traction that largest Indian bank SBI is the customer of this may be going live recently and other 2 large wealth managers have also chosen. One of them is in this quarter. We are announcing the deal with the largest client in this quarter. And there is a pipeline of almost 50% of banks are considering to replace miles with our intellectual wealth view. So that's a second line of business and very, very exciting journey because we are focused on RM office as a key strategy there. And third thing is the AI platform, and that's why the IntellectAI name come from. And in this platform, we have 2 core technology, which I mentioned to you during our Technology Day. Both the technologies are now getting combined to deliver ESG and delivering corporate governance. At the end of the presentation, maybe 10 minutes' time we will just demonstrate how one of the outcome of the product, this [ PL ] platform, we launched Magic Invoice on this platform. We launched the industry platform, in this platform and third product on the same platform is [ Sherlock ]. So [ Sherlock ] demo I will be giving you once we -- after pushing on the session for the last 10 minutes, anybody who wants to stay back for asking questions, they can stay back. That is a preview, very, very small preview. We are working on it. It will take another 6 months to get to the -- go to the market. But that's work which we'll be doing in preview in the end of the presentation. So with this, I leave the platform for question and answer.

Now we are opening the session for Q&A. [Operator Instructions] The first question is from Mr. Pratap Maliwal from Mount Intra Finance.

I just had one question that last quarter, I believe that we had a contract of around $3 million that the revenues had not flowed in. So have we started booking those revenues now in this quarter?

Yes. That revenue has been booked into this quarter for getting the current numbers.

And those revenues are flowing into which part of our business, that platform revenue, license revenue and perhaps if you could just maybe tell us the quantum of how much we booked out of the $3 million?

And that $3 million is booked in license revenue. There are 2 deals to which it was there, the license deals.

The next question is from Pradyumna Choudhary from JM Financial.

So I'm just trying to get a basic understanding here, like traditionally, my understanding is that the BFSI focused product industry has been very slow growing, like there have been phases when there's been a lot of investment and the growth has accelerated, whereas in other phases because of the tendency of these banking customers to stick to their old softwares, the growth has been slow. So I just wanted to understand, currently are we entering into a high-growth stage like because of the entire COVID, which has led to digital transformation. Are we entering into a higher growth stage? And is the demand coming back for the industry as a whole? I understand you guys have grown at a much healthier pace. But overall, for the industry, is it coming back?

I will not say it's coming back for the industry. The product space will be slow growth only because decisions around changing the platform are very difficult decision in a bank. The cycle time of decision are very, very long. And they are long because they are more than -- in some of the contracts, just to highlight to you, we have 21 signatory in a one single contract. Even contract was 21 signatory for a one single contract that they are changing the platform. It's a difficult business. Some things are -- there are some tailwinds for us. What is -- we invested into cloud technology, we are ahead of time. So in 2017, '18, '19, when our stock was lowest, we were in investing phase of the product. And we are moving to the cloud technology and micro services technology. We kept on highlighting that this is an investment phase of the company. But that's what we did it. [ Bold ] to say that we will build up this cloud technology. And because we build this cloud technology, today, we are in a very healthy position where entire GTB business, GCB business, AI business is all can be consumed and composed to deliver a specific solution with a contextuality built in. So we promised the customer 3 things, composibility to design their own solution. Contextuality to make decisions -- appropriate decisions for themselves and for their customers by using AI. And we help them extend their solution using our terminal workbench. And that helps us out in growing better than our -- our promise to the market was our design of the -- not promise, internal design loss 20% growth year-on-year is our design of the organization. And we always mentioned that it can be -- last year, we grew 25%. This year, we'll be growing slower, but 20% is our design -- the strategy is designed around 20% year-on-year.

Okay. Just a couple of follow-ups, sir. So one, so as such, COVID hasn't really been that big of an inflection for the industry is what I understand from your commentary. And second, so other players that we have, like we have Temenos, the likes of even Oracle Financial Services, the FLEXCUBE company, they are not really offering this cloud-based solution, is it?

We are having a lot of -- [ the guest is ] sitting there. They are communicating with the market that they have our technologies. But with some architect sit down with them. There's a -- we should not comment on our competitor, but it's more of a buy more share than a core cloud bond solution. There are 2 kind of thing, cloud bond solution or -- you make some solutions compatible to the cloud. I think we saw the trend ahead and it was still ahead and they are going to [ fast ] that game. That's why they didn't challenge. We are -- we'd along with Thought Machine has to be best companies. So that's the difference.

Okay. Understood. And second, although competitive intensity, definitely from your commentary as well, it's still we've been doing well. But overall, even if we look at like somewhere I had read that Oracle had won a customer where initially we were serving in Uganda, I believe. So like -- what is really happening in those terms? Like are we witnessing significant competition in the industry as a whole? And are we gaining market share, especially in the consumer banking product, are we gaining market share? Or are we maintaining or are we losing market share?

We have kind of more deals over there in core banking now in the Uganda, Zimbabwe or -- all the African circle. But I think our focus is more towards Europe to fight the battle. I don't know whether you are tracking the company. If you track a company, you should track submission. Thought Machine has invested $550 million investment in the last 7 years in building that product. Our corresponding investment is that $50 million [indiscernible]. They invested $550 million about the evaluation of $2.7 billion only on core banking by the last investors is taking in there. So that will help you in positioning them provide understanding.

Next, we have Mr. Moez Chandani from Centrum Broking.

Two questions from my side. Firstly, you've mentioned that you're seeing decision cycles recover in Europe and that Q4 looks digitally better. So could I just get a little more color on this? What exactly are we seeing in the European markets right now in the short term at least for Q4?

Rajesh, would you like to answer?

Sure. So I think as you look at Europe, what we have seen -- actually, we are seeing there is a play for, let's say, Tier 1 banks and large regional bank players where -- what Arun talked about, our IDC platform, which is MACH and based on composability and extensibility is what is seeing traction and we are competing in many deals in Europe as we speak, where we are competing 3 competitors. We are in last 3, where we would have Thought Machine, Temenos and us. So we are seeing us and our solution and the way we have architected resonate with most of the banks in Europe. So that's the good news. Which also, as we have implemented and created references in Europe, we are seeing more and more opportunities in Europe, banks coming to us. Customers are recognizing us. And the word of mouth and the references is building the brand image for us. So we're seeing good opportunities come to us. We are seeing that in these opportunities, we are in a head-to-head fight with one of these 2 other competitors that I talked about. So we are seeing a good traction from a Europe perspective, both in U.K. and in Continental Europe.

Okay. Okay. My second question was on the U.S. So I did notice that you've won a large deal with a U.S. bank. So are we seeing more traction in the U.S.? And could you maybe give us a little more color on the U.S. market?

Yes. So U.S. market color, U.S. and Canada, is a common market we consider, so North America market. And with this solution, which we mentioned about liquidity, accounts, platform on the dimension side. Magic Submission is on insurance side. And our digital solutions on GCB side as well as on GTB side. There are 4 product lines we are putting in Canada. We just have -- energy strategy was Canada. And then going to U.S., so now we are getting a good traction in U.S. now. U.S. is for next. From a incremental growth perspective within U.S., U.S. definitely will be growing at 20% plus next year, so that's the kind of a number we can put on the table, but it can be faster than 20% of the U.S. market. So -- and U.S. market in insurance, Magic Submissions, Banesh, if you want to cover -- highlight how the U.S. market is playing with the overall.

So I think getting a very strong traction on Magic Submission. I think we've already this year have over 8 clients since a very, very good healthy top line of customers. I think Magic Submission in most of these or 2 of these clients are top insurance companies. I think we're also seeing the replacement of one or 2 of our key competitors. And therefore, this sort of gives very good insight into how we will be disrupting the space around AI related to Magic Submission, where we are effectively eliminating the BPO companies and improving the speed of being able to process transactions very well. As a matter of fact, one of our clients came back and shared his number after implementing Magic Submission, whereas revenue is almost tripled for that month. So I think there is a very positive capability of AI tools available to help customers, take decisions around submissions of underwriting documents in a much more efficient way and much faster and active way to help the underwriting institutions go for. So they're seeing excellent traction in the U.S. and business side.

And if I can ask, what is the contribution of U.S. to the total revenues for Intellect?

Are we publishing the number?

We are not publishing that number. And then in coming months, it will be -- coming years, it will be good.

Okay. And my last question was on margins. So I mean we've seen a sequential improvement in EBITDA. So what is your outlook on margins moving forward? Do you see more scope for improvement in margins? And any steps that you're taking for further improvement?

Yes. Next quarter will be better.

Okay. And any specific drivers for this?

Average top line our license has come down from $14 million last year. Quarter-to-quarter if you see it was $14.8 million and this time $8.8 million, that is a $6 million shortfall is just a margin So for us the -- let's look at it, what kind of a license deal we win -- that we should win to get the margin. Besides the operational efficiency, which we are reinvesting in is stepped by the investment. So now between Q2 and Q3, our operation cost above the EBITDA line has moved from INR 442 crore to INR 450 crore, only INR 8 crore increase in the operational cost. Why that caused us increase between INR 375 crore to INR 443 crore for the 3 quarters over there. So that 3 quarter was as of January to September for a phase of substantial investments. So this cost will surprise us for [ $80 ] million run rate around $320 million run rate. This cost will surprise. Then if we had to shooting for another $100 million from $80 million, we may require another step-up costs and that cost will be there for 2 or 3 quarters and we take a decision. It will be there for 3 quarter, this cost will be there, then margin will come down. So you will observe the company will get into high-margin space, but we reinvest that -- investment money back to step-up the business.

Next, we have Mr. Mohit Jain from Anand Rathi Securities.

Yes. Sir, 2 questions. One -- and both related to revenue growth only. So one is that, is there a slowdown or some sort of softness you've either seen on the SaaS growth for this year, meaning this quarter or 9 months? And the second related question is when do we see revenue momentum building up again when we look at it from a Q2 Y-o-Y perspective? Last 9 months have not been so good, and we are way behind the 20% trajectory that we often spoke about in the last few years. So when do you think we can catch up to that? TCV wise also it appears that our deal wins quarter-on-quarter are sort of segmenting it in the large ones. So in that context, what should we expect from the top line?

Our projection is the same, 20% on design. When we had last year, 25%, we didn't change the -- anytime Mohit, you should understand that we are -- we celebrate the 25% growth. When license growth come, there still we will be looking for 20%. So 20% [indiscernible] business, a few quarters will be 15%, a few quarters will be 25%, that variation is a part of the business plan itself. So we are moving on that trajectory.

But sir, with license revenue is going down, you still think 20% is something we should target?

We are saying that LTM basis is still 21% growth, Mohit. LTM basis. We think always monitor...

You are referring to rupee growth probably. We are looking at dollar growth.

Yes. You need to pick up some point, which is to beat that company down but in the 21% growth is 21% growth, yes. We're investing -- so we're not investing in dollars, yes.

No, no, no, we are not. So we should -- basically we're targeting 20% rupee growth is the point?

That's right.

Sorry, I missed one part. On the SaaS growth, is there any slowdown in SaaS revenue growth?

In this quarter, last quarter, we are coming to a highest class for pricing comes down over there. So the GeM growth, which is normally driven much higher, has come down there, where the price ends. We had cost cross INR 1 lakh crore. So after crossing INR 1 lakh crore after discounting you have even higher.

Okay. And outside GeM, you do not see any slowdown in SaaS, right? We could see that pickup...

No, no, no. Only GeM we have.

Next, we have Sugandhi Sud from InCred.

I just wanted to verify, as you mentioned in your initial remarks that you are looking at a $75 million run rate, if I got that number correct, in the coming quarter. And also, just looking at your -- the disclosures that you make on funnels. And I wanted to get a sense in terms of deals. Is there any extension in the term of contracts that you are experiencing because our deal momentum has -- deals in momentum on the larger deals has been improving at the margin. But on the revenue growth front, I understand there are offsetting factors in traditional license probably. But is there any change in the tenure of contracts? Yes, those 2 questions to begin with.

Yes. To kind of a deal, these are based on license plus AMC, which we offered term license. So earlier, we were using perpetual licenses. Now we started offering only for term license of 5 years, 7 years term license so that there is a increment revenue after 7 years can be approved to the company. So that's one policy came here made in the company policy of giving a term license as in perpetual license, which are offering after 7 years, which will not be visible now, but this will give us a future protection to our revenue stream. Second is similar platform-based revenue, which has got 2 kind of a pricing strategy. We call it -- even in my license revenue, we call [ V2 ] is my subscription based-revenue, where it gives us platform to the customer and charging him $50,000 per month to $200,000 per month is the relation of the platform when they will offer to the customer, which means between $600,000 to $2.4 million is a kind of a number which variation which is based. And this is on a subscription basis as long as he uses. So for that, we need to make very high upfront investment of POC, proof of concept to the customer to sell it. Once you sell it at $2.4 million for 10 year, that will become $24 million. And that after 30 year, our margin on those deals goes up to 70% on [ 3rd-year ] time. But first 2 years, our margins may be as low as 20% for those deals. So that's a second respect. These are 2 constructs which is there.

For the SaaS contracts, is there a contractual duration for these? And is there beyond which point we negotiate terms?

The initial typical SaaS contracts 3 to 5 years. But normally SaaS contracts are lifelong. They're difficult to move out in banking system.

It's in a core infrastructure, not discretionary thing to switch on switch off.

Sure, sure. My question is more maybe on just trying to correlate the traction in deal wins with the revenue recognition based on the tenure of the contract. So basically, what we are seeing is, in fact, the tenure has shortened because of the policy change. Is that correct?

No, Sugandhi. It was perpetual. Now it's 5 to 7 years. So the company actually makes more money, that's the first one. The second side you are seeing, the funnel is growing, which means there is demand. It's just the frequency of closures. Those are [indiscernible] but there is demand getting business case approved, which is taking time at times.

And sir, would it be possible to give an idea of the AMC revenue, how much of it is on account of legacy and how much would be from platform?

AMC doesn't go to platform. AMC is only for the [indiscernible].

It's only for the non-touch-on revenues, yes.

Exactly.

Next, we have Mr. Harshil Shethia from AUM Advisors.

Sir, first question which I had was on Slide 15 of our presentation, where you mentioned that our current funnel is approx INR 70,000 crores. So how do you calculate that?

[indiscernible] [ $5 ] million is the funnel, that's what we are looking at it. Yes. $55 million, [indiscernible] $7,000 something longer here in a -- is the $9 million per just at it may be some because it was mentioned in the medium, and that's the number it takes -- [ $1,000 ] million. So they've put in so -- sorry for the accounting as $70,000 million is our number. So when you are moving between million and crores, these kind of errors will happen. So that explanation is INR 700 crores is on the funnel side, what we have as of now. Because what -- when we qualify the deal where we know client has needing a solution, there is criteria called bank criteria. The client has a budget, client has authorities, client has -- and the client has a time line. Once the fourth parameter has established, that funnel we bring in to [ $55 ] million funnel. That's a system which we have. Then there is a weak pipeline which we don't report here. The weak pipeline could be similar size, which is we are the budget or time line for the customer is not defined.

Okay. But is the INR 7,000 crores or $70,000 million, is this contract in our hand executable? Or do we have to bid for it and then the client will select out of the top 3 or whatever it is? Or how we will.

We are saying these are the pipeline, this is contracted. On contrary, these are bids out there. Prospective going to be giving a bit shortly.

Okay. And how much is generally the conversion ratio for us.

The conversion ratio varies. We look at it conversion ratio on destinies in the next slide, [ 56 ] views are there. We look at it the 6 year deals in this time. We had it was 57 deals last year same period. Out of 68 deals, we look at [ 60 ] closed this quarter. Every time 10% every quarter, 10% to 15% is the closing rate.

Okay. Sir, secondly, where one of the previous participant asked about the 20% -- that we are building a 20% growth rate company and you said -- and the LTM number for us is 21%. Out of the 10% is due to the ForEx exchange rate. Do we also take a call on ForEx rate to justify growth?

We do take some -- we have a hedge loss of INR 5 crores this quarter. We do take a 3-year hedge which was around -- we take 60% of that forward on a hedge fund and 40% we leave it for them.

Sir, actually, my question was not on the hedging end of our business or how do we hedge our revenue. My question is that when we say 20% growth company -- So shouldn't us being a product and dollar-wise company, shouldn't we take it on CC basis?

We are taking constant currency basis. So constant currency is $72 million. But since we are comparing all our earnings, everything under crores, we want to just simplify our migration -- Indian currency average multi currency confuse systems. Because every currency that there is keen moving from one currency. So we are not a large exposer -- and Europe currencies, which has got a large fluctuation from 1.24 to 1.03 unit as -- So that's -- it's a huge reporting issues.

So when we say that it is a 20% growth company or that the company you are building, should we take it in terms of constant currency only going ahead that we'll be on a longer term the year, we'll be able to deliver 20% on a constant currency basis.

That's right. That's right.

Next, we have Mr. Rahul Jain from Dolat Capital.

So firstly, my question is related to your profitability. As you see your pipeline right now and you already have a fair bit of hang in terms of where the mindset moving in terms of SaaS versus license kind of a deal. So is it optimum time to understand a gradual shift towards the SaaS model and the eventual impact of that on the profitability to arrive at the potential profitability of the business? Because initially, I think the growth-led operating leverage was an obvious factor. Now since growth may be slightly slower than what we were thinking earlier given the macro and also because of the mix of the SaaS both could come as a headwind. So is there a realignment that we need to do to our margin bank?

Yes. That's a good point Rahul. We have to work it out for the impact, but still the jury is not clear because we are getting a client which is asking for license revenue in Europe and Americas as well as license revenue in Asia Pacific. So this is still -- the jury is not fully out. We have just 50-50 kind of a jury. We have a few customers having CapEx based and few customers are in OpEx based businesses. So it's difficult as an immediate impact but your suggestion is good, which we're working on. However this is impact of SaaS versus license model.

Right. And any -- of course, I know you don't know which deal within the pipeline you will end up winning and the mix could be -- eventual mix would be very different. But any range you would like to give for next year? And the potential swing in the SaaS revenue that can happen versus this year?

We can only say that the Magic Submission had a very good pipeline with a growth 50% plus year-on-year. So that is the one thing that we know that SaaS been -- of Magic submission can grow 50% in the U.S. market. Whereas [indiscernible]

Right. And just one more question, if I may. Regarding the growth, of course, a lot of people have asked in a different way. But the way this year started and what we were expecting out of this year in terms of growth and the way it has shaped up. And also based on the minimal input that you have at this point from your client conversation, is it fair to assume that next year at this point also looks like at best be at the current pace? Or you think there are some reason to think positive -- more positive than what this year was?

We are more positive with the MACH compliance software and AI solution. So we are differentiating on 2 things for the architecture and intelligence based We are the company which is architecture based and intelligence base, these are 2 key marks to which we are helping our banks to grow fastly. The exact number the next quarterly call. Looking at the first 3 months of the new financial year, the new calendar year as to strong clients we'll able to be better. We can get it better at that time.

Sure. Sure. Just one last bit. On foundry, if you are aware about this development in Temenos where the CEO and Executive Chairman are about to leave the organization and the new -- is there any opportunity for us? Or do you think these are part and parcel of the business and there's not a major advantage or disadvantage because of that?

A part of the business that people are selling by a company much is okay. This is like that only -- [indiscernible] need to be put in ourselves to create value for our customers. All these things will happen.

Next, we have Mr. Anil Sarin from Centrum Broking.

So I think first half, it's been a good kind of a recovery in this quarter coming off the base of the previous quarter. So congratulations on that. My first question is on the Banking as a Service. I think there was an initiative along with a large tech company to go in the U.S. Is there any update you would like to provide?

Sorry, Banking as a Service was the.

Yes. No, that's the demand in U.S. That's where we're working a lot on the 12 providers. Still on our one of our growth journey right now, and that's where the U.S. is saying between this Banking as a Service as well as adding some share post.

virtual account -- like a banking -- a valid finance.

Okay. On Magic Submission, I mean, there is a fair amount of enthusiasm. First off, it's a platform. It's a SaaS solution or it's a license solution?

It's a SaaS solution. It operates completely on AWS and the offering to the client is in AWS, fully hosted Magic Submission, which includes injection of documents straight from emails through fulfillment and into the underwriting platforms. Some of them will use our underwriting platforms, some use other underwriting platforms. The ability to enrich the quality of data and to the whole AI capturing of information from documents or every people from various commercial line business or insurance process, partner and more accurately is the heart of the suite. It is fully a SaaS-based solution. Subscription for the solution is normally charged at a minimum subscription level, depending on the number of submissions the client wants to start with.

Got it. And is it -- like there is -- we have GTB, we have GCB, so one license sale of Magic Solution, how would it relate to one license -- sorry, one kind of a subscription-based sale of a GTB or a GCB? Like how big is this product?

Yes. So initially we launched its Magic Submission last 2 years. We were looking at being value clients close to $0.5 million. Now we are getting it with the Magic Submission, which can go up to $3 million ARR, not even be valued. So we have leased in the pipeline, which is a year of $3 million submissions, single client base. Similarly, U.S. currency is 200 million submissions. Just to give you a picture of the size of the market.

Okay, okay. So that's very helpful. Again, still going on with U.S., I mean an earlier participant also asked this, but I just wanted a little bit more clarity is that generally, when we speak of Intellect, there is a feeling that, oh, very strong in Asia Pac and Africa, getting quite strong in Europe, but U.S. is AWIP. And on the other hand, now we have this Magic Submission. So how would you sort of at an overall level, describe your progress -- recent progress in the U.S.

It's a part of strategy, Anil. We communicated from 2017 strategies at central Europe. And then we entered into the U.S. The U.S. has started focusing only 2 years back. So we are getting a very good traction as we are able to master the technology in Europe. So it's a part of 2015 strategy. Nothing good is the U.S. business has been in a platform subscription business. So it's not keeping into new business. So these are new products and new markets being grown. So the are baseline.

Okay. So again, on the core banking, that process that is going on, which can be a lengthy process, as explained. Earlier, you were mentioning Mambu also within those top 3. Now the name has been dropped. Is that -- I mean, if you can just throw some light on that?

Mambu is moving out. We cross on for the Mambu. Rajesh can answer on that.

Yes. So I think what we see, we have -- when we are competing in the kind of opportunities that we are seeing and typically, a bank would start with a long list and then go to a short list. And as I said, in the use of the -- especially in Europe and advanced markets, we are seeing Thought Machine and Temenos as our competitors. We do see very -- in 1 or 2 opportunities in Mambu. But Mambu is more tuned -- what we are finding in Mambu is more tuned for a start-up digital bank with limited user journeys. So we are not really seeing them as a big -- at least at this point of time, as a big competitor as we go and compete in some of these markets and some of the clients that we are competing with.

Okay. Okay. So first of all, I mean, congratulations on making it to the elite group. I mean, especially since the kind of funding that has gone into one of your competitors and the size of the other competitor and the history of that other competitor for you to move into the top 3 is something for all of us to be proud of. But given the -- I mean there was a reference that Arun made about valuation of Thought Machine also. So would you just attribute it to the frothy nature of the previous funding round? Or is this an indication of what Thought Machine can actually achieve? And from that, I'm trying to draw some conclusions regarding Intellect also.

Well, Anil we don't know that reference on the funding a very late in the last 2, 3 months of frothy point was not there. And we're also making the business case -- that business case of core banking is so large. When -- like today, FIS, Fiserv, they are into $5 billion, $7 billion kind of the market size, and that is what we are attacking. Obviously, it is difficult to attack America, FIS and Fiserv are so competitive in the system and then Temenos is a various systems are there. But a market at $5 million -- if you take -- it's a $5 billion market. That's us and every bank needs a core banking system. And liquidity can be taken by top 3 Indian banks, but core banking will be taken by all the 1,000 banks -- 5,000 banks, as Manish corrected me.

5,000 banks, so -- so good. You've made an entry into the thing. So I just have 2 more questions, if I may sneak those in. One is your SaaS now run rate -- SaaS stroke platform run rate is now crossing INR 100 crores. Now there is GeM's component in that, as you just explained. But that I can say that's a INR 400 crore kind of a revenue run rate. So based on the momentum that you're seeing based on especially Magic Submissions will be a contributor to that. I mean, when does it start becoming $100 million per annum, such that you can even absorb the POC cost, like it's very strange in SaaS that firstly, you take a revenue hit. Second, you take a margin hit because the business acquisition cost remains the same, but the revenue is a fraction. So with the naked eye, to an outsider, it appears like, oh my God, the business is suffering. Whereas you feel the business is doing very well. So where is that inflection point where -- there is enough money coming in from SaaS high-margin revenue coming in, which pays for the POCs and all the beauty pareds that you have to do.

$50 million to $60 million, as you say, INR 400 crores, which is $50 million to $100 million maybe on the 8 to 12 quarters to get into the journey of $100 million -- And -- but I really appreciate a little understanding the nature -- underlying dynamics. So you understand the business dynamics of not -- that, let me time the word business -- of the SaaS business, which was -- SaaS business is having a -- it is s kinetic energy, which drives the growth of our business. So what other POC costs has a double on us, that gets countered by the size of the -- so when we have on value limitation, we have 40 clients -- sorry, pipelines, then we are able to get into the 50% margin growth. As soon as it becomes 50 clients, we will be getting to the 70% margin growth.

Right. And my last -- absolute last question is, you had started this journey of enrolling partners in Europe. And a few quarters ago, you had mentioned. But the way I look at it, I mean, there are many powerful Indian system integrators. So why have you not gone with Indian system integrators, which can really lead to faster sales growth for you?

Yes. [indiscernible] As of now, with Indian as well as, we don't have a differentiation between Indian But I think global relations client relationship and important. So our core value for the partner is bank relations with and delivery capability, their constituency there are 2 factors there looking at it. And we are not having saying Indian is different from international, but Accenture or IBM has a deeper relationship in meaning influencing the core systems verses strategic system versus some of the service providers who are deeply in relationship with CIOs. So we are looking for both most of that.

And as a corollary, I mean, has there been any progress? I mean, you've got into relationship, you have committed people onto that relationship. Have they also committed senior leaders? And is there any traction?

Yes. Microsoft has committed to senior people. AWS committed senior people into this relationship. We are doing the event in Bombay on 21st February, where the senior most person from AWS is bank down for the event.

Okay. And is there a pipeline building as a result of all that senior management attention on to that?

It takes time. I think I would say pipeline is building in there's a direct pipeline and reference-able pipeline. So reference-able pipeline to start building at phase I and the direct pipeline start building in the Phase 2.

Thank you Anil.

One demo for the -- one of the AI businesses tools since you are there and you're looking at Indian market, we just want to give you a preview of 5 minutes. So the investors on corporate governance, the ESG corporate governance. We call this product under [RAS] -- Right now, we named it -- the internal name right now is Sherlock, which is for the corporate data investigation. Banesh will take over some 10 minutes time for you.

Yes. Yes, sir. Yes. just if you could present the page. So Sherlock, so what we'll be doing with the ASG business clients that we're dealing with them as probably mentioned to you earlier, one of them is the world's largest sovereign wealth fund. They basically use data to be able to access questions related to ES&G which is all the 3 elements of environment, social and governance. So we are going to sort of touch on 1 governance capability that we have also available. Deepak, who is the CTO for Intellect AI is on the call. He got to actually take us through well quick waste, you will relate to this very easily. This is done obviously for investors. So it's people like you will actually be able to relate to it in a easy way. So we just -- he's going to sign in and show it to you. And then I will -- is there any thoughts or questions, please free to. If you don't have the time and send it over to us.

And Feedback also.

Yes. So basically, what it to do is if you take on a SIG number of a company name, and it would give you a lot of specific information about governance of a company. Right now i am typing in Tata Steel. And that's already something that we have access. So you need an idea. Deepak Go ahead.

Sure. I think here looking for the company details, right, from a corporate due diligence perspective, every information that you require, it is as simple as doing a Google search, looking for the company. You can search either on the company name or is a company unique quantification number. So what did it was we just -- I just typed on Tata Steel Limited and I got a SIG number and based on that I selected. This is typically when you search further for the first time, it will take you anywhere between 3 to 10 minutes, depending upon the size of data that is required to be acquired across. And we connect to the multiple data sources, largely both public resources and other sources. And here, what you can look for is say, the company information -- and basically, where the company -- whether the number of the company, tax identification number, where it's registered and also the charges, basically, what are the loans that company has on. So in the case where Tata Steel has loans from the various bank from Central Bank, Industrial Development bank, Andhra Bank and everything. And also the status of the particular loans, whether they're open, closed and all. So you have a complete the book of loan information of the particular company. And also the financial statement, probably whatever is the recent statement that they have, we have, and we also can do historical statements also. And what is the ownership looks like from mutual funds, promoters and everything. And also, the subsidiaries of the companies, again, there are -- there could be I mean domestic or international, and then also the related companies, especially if there are any -- and the related not be direct, it could be from indirect also where the directors of these particular companies are also directors in another company. So we'll be able to kind of triangulate and arrive at a particular information. And then finally, moving on to the -- who are the existing directors of this particular company. If you look into that, I mean, this generally, if you want to just take information, for example, Koushik Chatterjee, who is an existing director. We also can get the complete view of where else, Mr. Koushik Chatterjee is a Director. I mean, Centennial Steel Limited, Tata Steel, so we can get into the complete view. This is the picker view, but we also the details of where else, Mr. Koushik Chatterjee is a Director at present and also in the past, when the directorship has started and ended also, we can get a complete download of the particular information. And what also is possible here is, in this case, not only the present Directors of this particular company and also the past directors of this particular company and their nationality and all other particular details also we can get. And then what is another important information is we'll be continuously doing a social listening about this particular company. And whether there is any governance-related things that can be flagged out and it could be positive or it could be negative. And this is where we use our sentiment analysis to understand. If there's -- again, specifically on the governance thing, anything that probably requires an attention. So that will -- that also we can do. So this is a complete end-to-end aggregated information of the company on the financials and their subsidiaries, the directors and their current relationships with the directors of various other company, and also the news about these companies.

So this is a picture you get across all of these dimensions in a single place. Because we've already actually accessed and put together data both from various data sources as well as the optimal, et cetera, on this. And this is done on the fly, just like a Google Search. [indiscernible]

They don't have too many subsidies, but we don't have too many.

Again, a seamless information of Paytm. Paytm, I took a subsidy already, so -- but it could figure out the related companies of the Paytm, like 197 and everything. Paytm payment bank is the one that I took. While we didn't have the subsidiaries, but again, here, similarly Paytm, who are all the directors, who are the existing directors, for example, Mr. Madhur Deora, again, he is actually a director in many, many other companies and so we can see all the company details of that particular director. And again, similarly where exactly he is already a director and all. At this moment, he's Director President at One97 and the parent company and many other companies. And again, directorship is also with various other companies. So this is an example of Mr. Madhur Deora. Again, similarly looking into the social listening feeds, right, while probably nothing happened recently, but again, it picked up in the past year. If any other incident happened on this particular thing. So we can -- for example, in last year March, RBI has taken action on against the Paytm payments bank under Section 35A. And also is there anything that comes into the governance-related thing, whether positive or negative. Again, our AWS model will pick up and give the alerts to the end user.

Yes. So this is an example. Of course, obviously, we keep building on capabilities as we go. But this is a very, very comprehensive way for anyone who wants to govern a particular status of a company or something else. And obviously, there's a lot of noise around governance building up quite aggressively across the world. So this is just one way. We can take Sherlock as a platform and help in people, either government companies, whether they are banks or asset managers or even investors and so on and so forth, even the regulators and our auditors and so on. So I think it's a very, very broad-based capability. Thanks Deepak.

Thank you. Deepak. So ideas to show a small review of it. This can be enhanced with the ESG compliance. We can have a ESG support tomorrow, but to be converted into support total for company. These capabilities are already there with the areas of the intelligence company. Any comments on anybody has or we can move to the next question.

I know there are a couple of more questions. Can we go ahead?

Yes. 5 more minutes, may be.

Next, we have Mr.Vivek kumar from [indiscernible]

Arun Jain I'm just asking from your commentary, your last con call, you have mentioned that the 3 wide areas like Banking as a Service, this GCB, where we are becoming one of the top 3 players. And then Intellect AI. You asked us to look at these 3 other new growth areas. You have been giving extremely good comment qualitatively. So my questions are, like you have mentioned in this result press release that -- there are almost 10 that you are going to -- you are very content of signing up in the next 6 months in Intellect AI. So how much of the other participants about that you're being the top 3? And also how confident are you that this will turn into quantitative? I'm not seeing immediate quarters, but how confident are you about your qualitative comment turning into this quantitative in the coming 1, 2 years?

I have to just tell you that I show the symptoms where we are talking about going 2 places our IT has given us a leadership. To get into the corner of patent of payments among 30 companies of payment and 2 leaders -- I think that based on that. These panelist not recognizing us just based on some money we paid to them. [indiscernible] how many companies are the payment space, which is there in the last slide, Slide 29 on the debt. We are all the respected companies, including IP and rotate and other part outside circle. They are not inside circle. There are 2 companies we are putting in inside circle, which is Intellect and -- And others in liquidity management, it's only one company in the indirect circle. If you don't make it in just and it's our project.

I'm just asking. So the second question following on this last sentence that you asked -- Intellect payments has been implemented is India's largest private bank with cross-country corporate payment coverage of 60% expected to scale to 100% of transaction. Can you just like really going to understand what you mean by 60% of the country or corporate payments in the country or -- I'm not asking the -- but can you explain this? Sorry?

Yes, go ahead. Manish. The larger side the.

No. The 60% of your payments have moved on to this platform. And it's going to grow. It's valuating from the other platform, and it's going to grow by 100%. That's just to talk about the scale. But it's also at a country level, our game plan in India is to reach to that level basis what we have signed or what's in pipeline. So that much amount of corporate payments will flow in our network in the next 12 to 18 months.

So corporate payments of the country is what you're saying. You guys are whatever.

That is our goal for this specific bank.

Next, we have Mr. Nishid Shah.

A good set of number, Arun and your team. And also a special congratulations for the fifth third bank deal win. Now with this, how many banks in the U.S. we have on the platform? And how many we have in the pipeline?

With this, we have done North America 10 banks platform, and then we have enough number of insurance side. [indiscernible] 50-odd on the insurance side, again are in the banking segment. So we would be close to 25 customers in.

So would we say that we will be at an inflection point in terms of benefiting the banking customers in U.S. with these number of reference sites?

Not any impact on infection point. I think we are building the pipeline because references when you get a point -- we believe that 18 months -- to get an inflection point. We believe that 18 months, we can be...

I think Nishid, our previous references was a lot of global banks. Now we're getting U.S. domestic banks as reference. That's the journey like Arun said, 18 months more. There's some in implementation, we'll bring more. That's when we will get to become a local domestic player.

I understand. And how is our partnership with Microsoft and Accenture and AWS progressing? That's not just confined to U.S. I understand it's global, right?

All 3 are global. We are working with all 3 of them. We are working in multiple division with each once of them. So some of the -- so in IBM, we are working in one of the large central bank in -- and Accenture, we are working in other few deals with Accenture. We are working with general commitment is there So all the 4 of them are we are working right now. So we are all playing positive for us because the cross-reference are -- million deals. So some time, we are directly working with them, sometimes we work as a cross.

That's great. And on the GCB side, we had a lot of deals in the pipeline, especially in Europe, where -- we were in the top 2 -- Are we closer to the kind of cat there? Or are we still aware on that?

Europe is slowing down. Digital cycle is slow, so that's -- But I think you've seen we have announced a very large European bank of $3 million, where we have closed a deal in this quarter. French bank. Before I mentioned valuation cycle much longer.

We can have one more question. Vibhu Gupta from GSS.

It's a very good quarter this time. Sir, are you planning for buyback?

So the stock price has fallen from INR 9.50 to INR 4.50. It's a good time to buyback.

So if are suggesting something, we can -- I'll put it to the Board, yes. Thank you very much. Thank you for advising us on some of the strategies is good dialogue with you. So I would call this investor conversation at an investor dialogue in the coming months. Because this time, we have more time for conversation than presentation, since we roll a -- no point as we're seeing a time. Even if we not turn off whether the market will be looking at it, you right and well and seen. And anybody who wants to have more detail of standing we may do some session on technology sessions -- any of your customers. Thank you very much. Thank you.

Thank you, everybody. Now we are closing the call. Thank you.