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

Investor Presentation and the Press Release have been sent to 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, Mr. Manish Maakan, Mr. Rajesh Saxena, Mr. Banesh Prabhu , Mr. Venkat Saranu and Ms. Vasudha Subramaniam besides some other senior members of the Intellect management team are present in the call. Mr. Arun Jain will brief you on the results, followed by a Q&A session, where your questions will be replied by the senior members of our management team. Once the Q&A starts, you can ask questions by clicking on ‘Raise Your Hand' and we will unmute you, so that everybody is able to listen you. On safe harbor, I would like to remind you that anything which we say, which refers to our outlook for the future to the forward-looking statement. This must be read in conjunction with the risk the company faces. With this, I request Arun to give this briefing. Over to you, Arun.

Thank you, Praveen. It's a great privilege to talk to other investors this quarter. Last year -- last quarter, we had a detailed presentation by all the business leaders and they shared their the view of the future by in detail with you from GTB, Manish has shared the future, Rajesh shared the future and Banesh shared the potential of wealth and insurance, Rajesh on core banking much competition. So it was a detailed conversation the last quarter. So this quarter, we don't want to get into the detailed conversation. We just want to you -- numbers are already there with you and you have gone through other numbers, so I will not repeat any of those data points, which has already shared with you. I'd like to share with you the thesis why we are doing what we are doing and what is our thesis of the belief in the banking and technology industry. So we believe, the thesis was a twofold thesis, which we shared from our Technology Day 2 years back and technology with you. And that if thesis is continuously getting strengthened and getting more and more sharper and more and more referenceable. So based on the thesis, we looked at it that Bank Tech Wave 5 is coming, bank needs, ultra-simplification of their technologies landscape. Banking world we spent $600 billion largest in space and they were fixing banking solution versus taking the solution head-on. This is like in the automobile sector, there is a wave of EVs, the level of autonomous vehicle, there is a wave of simplification of the technology, which we wanted to share last time in each of the business unit. We shared eMACH.ai as a fundamental device of that new wave rethinking. And fortunately, your company is positioned in the front line of the new technology wave. And once you're in a front line, you better best attention from the customer to listen to you. So in this -- just to give you an example what eMACH.ai is there. So people are asking me to question what eMACH.ai meant, why does it change? Let me just take you some few examples of it. Rajesh has taken the example of iKredit360 for research in previous meetings. What does it mean? It means that it in research time, in Sweden is chosen eMACH.ai technology so that they can compose the credit businesses or credit products, the way they would like to cater to their customers. So if they want to embed credit card along with lending or SME lending with something else, or deposit and lending together, they can compose the solution. It's like I see a way of doing the business here. You have a component available and you create your own object what you want to deliver to the customer. That's what eMACH and eMACH as each as far back defines the wave way we will be working. New wave will be working on micro services, its work on API. So micro services and API are 2 levers around which new wave is working. And for experiential learning, we create a wave 12 cloud and headless. On cloud, we provide our technology, which a customer can consume it and he can define the experience. So now another example of the deal, which we have won recently in this quarter is one of the largest bank in Asia Pacific. They chose our technology along with Accenture to create the experience. So the underlying technology of corporate banking will be ours, payment technology will be ours, and Accenture will build in the experience here on the top of it. So that gives an ability for bank to work on eMACH.ai. Similarly, one another bank, OTP Bank, we have announced the deal. The context is OTP Bank is the largest bank in Eastern Europe. It's not only in Hungary, but there are 11 countries, it's present there and GCB, Rajesh Saxena has won this deal. This was a strict competition over the last 2 years. We mentioned 2 years back that we are working on eMACH.ai, that with certain European banks, and this was one of those banks who decided to -- decide in our favor. It was a tough deal from Europe perspective because Temenos is a local player in Europe for the last 20 years. And on other side, thought machine, we are made investment of more than $500 million invested in Google company, they claim as a competition. So it was a 3-leg race where we looked at it. Our core point was -- we are -- on one side, we are a cutting-edge technology like what Google can give, and we had a deep domain depth of the knowledge which Temenos or Finacle can give and that's the best of both worlds we are in a front line of the new wave of technology. So there is the one thesis, which has resulted into the 5 deals for 5 different regions. The beauty is, that we have won deal in Asia Pacific, second deal in Saudi Arabia, third deal in French bank, fourth deal in Eastern Europe and fifth deal in U.S.A. Now it means this wave, we have not localized to a particular one country. This wave is the wave of simplification. And simplification is possible, which is driving value for the banks. So while the banks are getting benefited from this wave, their operational costs can be reduced using Decision AI by 30% to 40%. Their ability for targeting the right customer for the right product segment at the right pricing can be improved by 20% to 30% they can target right. The issue of the banking is whether you target right for the right customer for the right product, that possibility of design using configuration is a second benefit banks get. So bank gets 20% benefit on the top line and 30% on the bottom line on operation cost is an interesting proposition. Our focus move towards distribution now. So in fact, 3.0, our focus becomes moving towards how do we get distribution partners. So after IBM now Accenture has looked at our technology and they evaluated it. It took a lot of time for them to evaluate it. Now we won the first deal with them. It's a very big starting point for winning a deal with Accenture. So this is a first thesis for what we believe that our gross journey, though banking and financial sector is muted for all the service sector. We will believe that our journey of design around 20% -- 15% to 20% is still intact for this year. The second thesis, which is there, which is that we went to the platform mode of design. So we move from product to platform to technology that I shared with you in December 2021. I shared with you on Technology Day too that what is our technology we are embarking on. And we shared details about the technology details, some of the people trusted us, some of the people didn't trust us and resulted into -- and that technology shift of December 2021, we wanted some investments, and we shared that we will be investing our cash into the generating this technology to create eMACH.ai. So we invested extra money during 2022. And that resulted into drop the EBITDA, which has been shared by some analysts that we are losing steam. So it's been interpreted in spite of sharing with all of you that for a good technology company, our -- purpose of our cash is not to acquire company, purpose of our cash is to reinvest that whenever a big changes there. But I think we couldn't be able to provide enough confidence and trust in all of you. So this is our mistake that we've been able to provide that trust to all of you that why such technology investments are there for future growth of the company. For that, in platform, the second thesis that we look at it, we invested into platform first, and then product later. So once you build a platform like we build up the AI platform, and AI platform has got multiple components, one data component and one document component. So these 2 pieces of the technology with close to 30-plus algorithm build on the AI platform for the last 7 years. For the same platform, we are leveraging for ESG with Norges Bank. What does Norges bank use for? Norges bank invest in 8,000-plus companies, they have $1.3 trillion fund. And that fund they want to look at it the company with the investing, they have a right ESG practices or not. Now ESG score they can get from anywhere but to convert practices, which is defined in some annual reports, some published documents some websites, there is a huge amount of job to be extracted that information and align to the questions they had. So they have close to 200 questions their ESG analysts look at it around which they evaluate the company. So our same AI platform is leveraged for that. Same platform is leveraged for magic invoice. Same platform is used for underwriting insurance, same platform used for underwriting lending, same platform is used for supply chain, finance and trade [indiscernible]in iColumbus.ai. So it's one investment platform, which is resulting into 5 new spaces. Similarly, we built up a platform iTurmeric, no code platform, where we can do that, the way data works, the way process works, the rule works, event works, API works and UX work. And it's been leveraged for all the other products. I mentioned in the morning call to AGM that we invested over the last 8 years, close to 16 million person hours, so 16 million person hours in U.S. context at $80 per hour, which is an average rate of R&D dollars such as invest $1.26 billion. No single player in the world has invested $1.26 billion in designing the technologies of the future, which wave 5 or the bank is looking for. So that is the thesis that we have. Obviously, India is underdog. And India doesn't believe that we can do something in product business. But today, when we look at competition in GCB space, where Thought Machine and Temenos are the 2 leaders, we are able to displace them in largely in Eastern Europe. It may be very insignificant in revenue terms in the quarter, but it's so important in sending the message that wave 5 player who is in the front frontline leader in the wave 5. The next message is around our cash transition capability from an investor perspective, our EPS, our cash generation. I think both our healthy. EBITDA margins are healthy. We were looking at a 5% investment, we come back on to the same margin levels what we were invested back. Our investments are now behind us is they're not behind us that we are not less investing in the company. But in percentage terms, they are lower than the existing one. We recommend strongly that quarter-on-quarter, we cannot meet your expectations. So I want to tell you upfront that we cannot meet the expectation of investor quarter-on-quarter. This technology business is a long race of 3 to 5 years where the leadership will be defined. This market size is so huge that it will require the continuous investments, but our investments are very, very calibrated. We have not increased the calibration from INR 140 crores. We are -- we told you last capital that we'll be investing INR 140 crore in capitalization. We invested INR 136 crores instead of INR 140 crore the last year. So all the parameters what we are mentioning, I think that is important for you to record and look at it that we can be monitored on LTM basis. LTM from the last 9 quarters are more than 15% to 20%. We are able to grow from the last continuous 5 quarters. So when somebody says last 2 quarters were bad, it is only from investor perspective, the last 2 quarters were bad because the deals were already, it's only when the deal gets executed and comes to the fruition, and we see as a high value. So that's the point I just want to make in the commentary over here. So with this bank of assets, we see a right kind of talent in AGM speech, I mentioned about it. Our 35% of workforce is more than 10 years' experience. 16% of the employee hold RSCO in the company. There is a 57 country that our footprint is there, out of which 10 countries we have chosen to go deep -- we have a partnership of Accenture, IBM and more people are lining it up with eMACH.ai technology. We have a big partnership with Azure and AWS. We have a top customers in each geography, top 9 customers of Middle East, top 6 customers of Europe out of 10, top 4 out of 10 in Americas, top 9 out of 10 in India, and top 5 out of 10 in Asia-Pacific. So there's no single company with a footprint from [indiscernible] Asia Pacific to Americas and where we are showing the example of our bull's eye on AI and composable and contextual technology, which is driven by design thinking, composability, contextuality and [indiscernible]. So this is the comment. I would leave it now for the question-and-answer session so that you have enough time for asking questions to me, Rajesh, Manish, Banesh, all 4 of us can answer the question beside financial question can be answered by Vasudha and Saranu. So over to question-and-answer session.

[Operator Instructions] First question is coming from Mr. Mohit Jain from Anand Rathi Securities.

Sir, first of all, congratulations for a good quarter. And then I have 3 questions. One is average size of deal in the highest bracket that you report, it looks like that we are not capturing the deal win information correctly as an outsider. So is there a change in the average side of the deals over the last 1 year or so? So that is one. And then I have a follow-up on GeM impact, essentially on the GeM working capital. So revenue you have already told us. But on the GeM working capital, what should we expect in FY '25 when the contract comes off? Should we see the rapid decrease in receivables? Or do you think there could be some other assignments as well?

Okay. Third question?

And third is on capitalization as more account fit, I thought I will ask separately. But that is related to, should we see some increase now that you are developing these new tools and tech in terms of capitalization over the next 2 years or overall R&D spend? Or do you think current rate is good enough for us to sort of come out with products regularly?

So let me take average size of the deal, I think the -- we can't calculate like the more versed fundamentally because deals are gearing from 3 years to 5 years to 7 years when the contracts are getting signed, though every deal which we sign is relevant for 15 years. But accounting-wise, is based on the number of years, that we sign the contract and those contracts signed depending on the client-to-client. So that's one area which we are not able to be accurately made. It's only an indicative measure of the average...

Directionally, if you can help like how much it would have gone up? At least the highest bracket, the INR 50 crores and above one?

Yes. The deal values can be -- like was about INR 500 crores a single deal. Some deals are more than INR 200 crores deals are there. So those are the deal sizes which are on large size deals can go up to $30 million to $100 million. So $100 million, we are not crossed right now, but we are in dialogue to initiate $100 million deals on average size. On Second question, GeM working capital, obviously, it will improve. We have a substantial amount is sitting as a receivable and the number of days will improve as we go into the working capital of the GEM as soon as, we mentioned in our press release, that's a single-digit profit business. So it will impact the top line after quarter 4 will have an impact on the top line. But we don't see a significant impact in bottom line. Some impact will be there, but not significant.

So sir, going ahead, international DSO the way you disclosed in the PPT, we should gradually approach towards that? Or do you think that will still be...

That's right.

That's right. That's a fair assumption.

It will be towards international. Then third thing is capitalization. We don't see any -- as of now, the budget planning, we have done for capitalization for R&D, we are in line of close to INR 140 crores it's less than $20 million. Normally, our projects used to $20 million, which means INR 160 crores, but we'll be spending $17.5 million for this year. I know that is a budgeted sanction that we'll stick to that, and we have not deviated it for the last 5 years, anything in capitalization.

Okay. Perfect, sir. And if I can -- it is a repeat question, but if I can have a follow-up. Like is there any difference now, our licenses sort of has caught up in terms of growth over the last 2 quarters. So earlier, we saw this trend where license revenue growth contribution was a little lower, while SaaS was picking up quite fast. So last time you told me that now clients are not differentiating much. So is there a change in scenarios there? Or do you think license and SaaS could go hand-in-hand at similar growth rates?

I think, compare license-linked revenue again from our viewpoint, it's a customer choice to choose pay us upfront license or SaaS. So we don't want to differentiate. We want to give flexibility to the customer what they want to choose, whether SaaS -- SaaS is more profitable for us for the long-term cycle. But if some customer of Europe, wants to impact SaaS sorry License, offering money it's good for us, too. So we want to see how much is License-linked revenue. If license-linked revenue over the last LTM basis, we have close to INR 1,030 -- sorry, we have close to INR 1,200 crores of license-linked revenue. That's the most important figure for you to look at it, whether it comes from AMC, whether it comes from direct license sale whether it comes from SaaS. We are open to that. We are not falling Temenos policy that we only want to do SaaS business, we don't want to follow that.

Okay. And your guidance, growth guidance of 20% we should look at it adjusted for GEM

Yes, that's right. We need to look at adjusted for GEM, 15% to 15%, you can do it at some decisions may be slow or last 15% to 20% anything.

Perfect, sir. And all the best. Venkat sir, congratulations for your new roles

Next, we have Mr. [ Vivek Taruna ].

Are you able to hear me, am I audible?

Yes.

So last con call, you mentioned about -- you mentioned about concentrating on India and putting more focus on India. Can you throw more light on how our products are getting traction in India and which products are gaining?

Yes. So I didn't mention that we are focusing on India. We're saying we're a global player, and we are looking all the countries and representative of all the regions requiring eMACH.ai technology. So India is also among the largest financial engine, which is growing. Today, all the Indian banks are showing a tremendous amount of growth in double digits and high double digits. Good growth region, which is happening. And we are now adapting to that new technology and cloud technologies. So eMACH.ai technology is at right position, whether it's at top for public sector banks or private sector banks. So I don't want to name individual bank over here. But most of the banks have 9 out of 10 banks are our customers. So we are investing into new technology space.

Sir, in your annual report, you also mentioned that Lakshya 3 you have done and the accelerated growth in the next 3 to 5 years. I'm not asking the growth rate, but which products and what has accelerated. Is it about SaaS growth or is it platform maturing? So where is the confidence coming from? And what products in our platforms are giving us an indication and which by them the next 3 to 5 years?

So I think we are looking composable and contextual. So we changed the style from product to technology company, what products are giving attraction is about over banking when you have to look at it, deposits, we are looking at it, lending, we are looking at it, wealth we are looking at it, cash management, payments, liquidity, trading, supply chain finance, central banking solution, insurance underwriting solutions. So Today, all these solutions have matured to the level we have indexed for product maturity index, which is a 1,300 point scores. So today, almost 9 out of the 14 products are crossing 1,100 mark. So they are suitable for the market and they're built on a same architecture for eMACH.ai, so that they can buy it. So if somebody wants to buy lending and wealth, they can do the buying of this product, which nobody else can give it to the market. So this is a new wave of delivery new wave. It's autonomous banking. I don't have a better word for it, but something as compared to Tata LLC or what they are trying to position themselves as an autonomous vehicle environment, that kind of technology we are hitting upon.

Next, we have Sugandhi Sud from InCred.

Am I on audible?

Yes.

I just wanted to understand, you highlighted your eMACH.ai wins. In terms of platform revenues, quarter-on-quarter, there's a strong uptick. So there is no significant change in the volume of the GeM contract, and there are no there's no lumpiness there on account. And most of this is coming from new client wins. Just wanted to clarify that.

Yes. As I mentioned, don't look at platform look at license-linked revenue, there will be lumpiness will be there in platform versus license depending on which deal goes into which bucket there will lumpiness. So internally, what we are monitoring and giving a credit to our sales people is that whether you have SaaS revenue or license revenue, all money are green, we love green color.

Sure. sir. So in terms of the phaseout of the GeM contract, will it be done on a -- in a straight time manner over the course of the year? Should we expect it to be lower this year and then completely disappear next year? Or is it going to be similar to last year and then the major impact will come in FY '25?

As of now, it's up to December. So Q4, we do see an impact, but still it's too early to say just a transition has just started, and let's see how the transition is progressing.

And in terms of your receivables, there will be contract milestones and all is they run beyond the maturity of the contract? Or is there we can expect that most of those will get shared towards the end of engaging?

You can't say anything about government here. We'll have to validate everything coming.

You don't see any incremental stress on account on this account I mean how -- so in the past, I mean, just looking at your provisions, your provisions that you do for your receivables and your unbilled for your unbuilt the provisions have slightly trended up, but you don't see any incremental pressure?

No, we are not seeing any incremental pressure. It is the same pattern we have. We do some provisions every quarter on the provision. So that future risk. So we are taking a conservative approach of providing appropriate number or slightly higher than the appropriate number for provisions. There could be, at some point of time, there could be plan required. But as of now, we want to remain the same policy of the provision.

Sure, sir. And I just wanted to cross-check you are guiding for 15% to 20% growth this year.

Yes.

Next, we have Mr. [ Anil Tulsiram ].

I have 3 questions. First, if I look at your history last 10 to 15 years, we have launched many products. And some of the few products have been successful in reaching the stage 5, but many other products, like say, treasury, well, brokerage, insurance are still in Stage 3. So what I want to understand is what are the conditions required to reach for a product to this stage till your -- we ourselves take some conscious decision that -- this product is suitable to reach stage 3. What exactly is that? That is the first question. And the second question is, in the past, we guided that we soon enter USA for core banking products. But it has not entered. Obviously, you have taken some conscious decision that it is not the right time or we are not prepared or the competition is whatever it is. So just want to understand what are the conditions that should be met that before we launch our core banking product in the USA? And the last question is, I think in the technology today, you spoke about the iKredit360 being launched in U.K. and Germany. So what's the progress there? How are we getting the success there? So that are the 3 questions.

So first of all, thank you very much for tracking every conversation and recording all of it to follow it up on. So Stage 3 to Stage 5 products, we have discussed with you, very consciously we take 2, 3 products at the time and move more over to stage 5 people investment, go-to-market investment. So normally, people believe that product investments are product investments are at INR 100 and go to market maybe INR 40 of INR 50. But our learning in last 5 years is, if I'm investing INR 100 for engineering, then I have to invest INR 200 for go to market. And that's where our defining stage 3 to stage 5, which based on the market potential, TAM of the market and investment we are making towards making the leadership products. So now treasury and brokerage was in a Phase 3 of our phase right now. So this year, we are taking this product maybe, but brokerage, we are not taking forward as a product. But our other portfolio, which is too big in size, core banking, lending, credit card, central banking, wealth, liquidity, GDP digital transaction banking. I think our basket too big a basket for us to look at to worry about treasury our brokerage as a product to we look at it. So we don't see that at any barrier for our next 3 to 5 years growth in the -- about second question on U.S. for core banking. I don't think I've ever mentioned about that we want to go U.S. for core banking. We said we want to be looking banking in U.S. So our U.S. market strategy is around the insurance underwriting -- that is our core strategy for the U.S. and GTB product, which is a DTP or liquidity is a strategy for the U.S. and we are on track of it. We suffered 2 losses last 2 quarters. The 2 banks which have gone down both of the places we lost substantial sales traction. We had deals in both the banks, and both the deals got delayed for -- so deal completely bought Silicon Valley bank completely done, those deals would have been a few millions dollars of deals would have been there. And similarly FRB, we were looking for a complete digital transformation for FRB and they have already selected us. It was almost on a paper of signing a paper -- so we lost 2 traction in the U.S. on that bank. So that's the update on U.S. But no, it was not related to core banking. We believe that core banking is a great opportunity in the U.S., but we need to prepare ourselves. As of now, we are seeing a lot of opportunity on core banking is Europe with OTP back signing it up. And our focus is more on that side. We are spending more time. We hired a president for Germany. K. Srinivasan, he will be moving to Germany in month of August. So Rajesh is focusing on iKredit360 for Europe, et cetera. Thank you for asking detailed question.

Next, we have [ Nimesh Shah ].

Yes, am I audible?

Yes, please go ahead.

Congratulations on good numbers. So sir, in your opening remarks, you mentioned that now you are at a phase where you start looking to add distribution partners. And you have already partnered with IBM and Accenture. So just wanted to understand how will this impact our implementation revenues going forward? And the -- we've always maintained that over a longer-term period, we -- the business has been designed for a 20% growth. So just trying to understand, is this -- is this growth is for the company as a whole or for licensing for us?

So this is for the company as a whole. So obviously, when you are choosing a partnership network, how the implementation revenue can be available for the partner to succeed. So that's definitely. But this the size of the pie increase substantially. Mani, you want to answer?

No, that's the answer. Wherever we've got the system integrators involved, actually, the pie has gone up 5x almost, and we get more money through those because this is not just at that stage automation of the existing system. It's a much larger digital transformation where they look at a customer impact, the customer growth, the operational simplification. So the value added is also at a different order. So the customer is willing to pay that.

Right. And does this change our margin profile in any line?

It will positively.

Okay. Any -- some direction sense, sir?

[indiscernible] a couple of quarters to communicate, but I think it will impact because license revenue goes up and the margin, obviously, will grow as the license revenue will grow, the margin level will grow.

I think the positive side, a number of these large partners are willing to work with us enabled by like Arun called out eMach.ai. They looked at the technology, they looked at our footprint and the customer trust and analyst endorsements given to us, and then they looked at especially the technology enablement, extensibility, composability that makes the magic portion happen. So we are referenceable, we are extendable, we are composable. And now the partnership, we've always said the indirect distribution will help us grow to the next order. So we're taking those early steps and building that. We don't want to just run through it and blow ourselves up. We want to design it for right scale and deliver, then once we hit the scale, we don't have bumps.

[Operator Instructions] Next, we have Mr. Amit Chandra.

Yes, am I audible?

Yes.

So my question is on the funnel that you have shown. So there is quite a significant improvement in terms of the funnel for the year. wherein the number of deals, the total number of destiny deals have also increased. So is this increase because of -- we have been seeing like delays in decision making in terms of deals? Or is it because there is higher spending from our existing set of clients? So -- and also if you can break this funnel in terms of how is the mix between transaction core and also the newer products that we have launched. So just to understand the funnel better?

Amit, it's difficult for you to understand the funnel because we don't understand the funnel so well. The question is that it's over of a cycle time for much variables are there in the funnel. That is difficult to capture the texture of the funnel. We give an indicative number to you right now. And the market size is a $600 billion market, which IT spend happens. How much will they get translated to new wave 5. The new wave 5 will tell. So now if you say how much petrol vehicle will convert to EV, time will tell how much it will mean, everybody will make some projections, then how much it will be. So market is not a limitation. Limitation is our delivery capacity. That's where our partners will play a very critical role on distribution in coming months. And the current funnel is integrated, it's growing positively. Our lead generation engine is growing. We had close to 15 workshops detailed work front clients on eMACH.ai. They are trying to understand what does the new wave means for them. We are having this workshop in Seattle with AWS, we are going to have it workshop with Microsoft in Seattle around this. We have a workshop with Accenture in New York around eMACH.ai. We have close to 25 more workshops lined up in next -- till before 30th September. I said exciting numbers. So we don't know how to quantify this number as of now, but it's an exciting time to look at it. And that's why I don't want to put some color to that. this funnel right now, Amit.

Okay, sir. And in terms of what is the confidence in terms of eMACH.ai in terms of the acceptability that it will have in the industry, because it seems to be quite an exciting product, but can it reach the kind of success that we have received in, say, our traditional formation banking kind of products, which are very mature and are contributing or they are in the maturity phase and like in the monetization phase? So how we see the growth in eMACH.ai? Also from the perspective of the partnerships, we have been trying to scale up our revenues from the partnership on our ecosystem, but we have not seen a lot of success there over the last few years. I don't know how it has changed now. But from the perspective of eMACH.ai, what kind of growth you're seeing from there? And also what is how we are dealing with the kind of partners now versus earlier?

So Amit, we're just saying your trust in the -- we never mentioned that we are ready for partners. We always said that we want to do our implementation unless our product partner ready, eMACH.ai provides me the partner ready for us. We started focusing 18 months back around the partnership. Before that, we were not even hired our partnerships on [indiscernible]only 18 months back joined us. So we are -- it's not that we are not successful in partnership. We've not chosen the partnership as a distribution lever till the time we are ready for by the ready product. So that point I want to clarify that you saw that we are not successful in partnership. It's not that we are -- we didn't make it price to go to the partnership because we want to establish our referenceability of the customer base and then as part of user strategy since 2018 Amit I always explained that first period of our growth will be only ourselves so that we ensure that referenceability is available in that, and we don't want to take a risk with a partner for screwing up the customer relationships. So that is question foremost we want to highlight to you about the partnership that we are choosing now, and we will not be using many partners. We'll not be celebrating more is more. We don't want to celebrate less is more. We want to have a few partners, but deep relationship with the partners. We'll be committing the deep relationship over there. The second question you asked about -- what was the second question?

EMACH.ai question.

eMACH.ai is a new architectural form. It's not that DTB, banking -- now this -- all these products which are their best products is there, which Banesh is there for Wealth force. They are all now moved to the intact 3.0 where everybody has a microservices list. So we have 285 microservices. So GTB has to move in the next phase of investment, which we made last year is to move them to microservices-based article. So since they moved to micro services, eMACH.ai is a common platform which is getting expressive itself to construct DTV solutions, liquid disposition, cage finance solutions, supply chain solution, core banking solution. Each solution can be designed and we are giving us the flexibility of customers or he wants to design. And that's what the new wave of technology is all about. Rajesh, do you want to add anything to that?

No, sure. So I think you said it, Arun, I think the eMACH.ai gives us the architecture and it stands for event APIs, micro services, cloud and headless. And that's the way all our platforms are constructed so that the banking can become completely composable. And we talked a little bit about what we are seeing. Let me take an example of, let's say, Europe, what are we seeing in Europe? In Europe, we are seeing a good traction in the core banking space. And what the customers are looking for is really a composable solution. So our eMACH.ai architecture, along with our iTurmeric platform gives us that edge. And that is what we are seeing as a traction in the market.

Also like Rajesh, if you can comment on the competing products, which are there in the market, which you see as a competition to eMACH.ai?

Yes. So I think the way I see competition, and let me put this in the context of core banking space. So core banking traditionally, we have seen competition from players like Temenos, Flex Q, Finacle, et cetera. And then there are new age players like Thought Machine and Mambu. Now Thought Machine in Mambu come with an architecture, and what Temenos and Flex Q, Finacle would come would be the domain, the depth in the product. Intellect has the great advantage that we have the depth as well as the architecture of these new platforms. And that's why, for example, we talked about this OTP deal and this OTP deal that we won against Temenos and Thought Machine was really because of both our architecture as well as the depth that we have. And that's what is resonating in the market.

And Arun sir, my last question is on the GeM project. Obviously, the GeM project will be there till December. But in terms of the bids that kind of came up for the project were substantially low in terms of what you're operating at. So how do you see that? And also in terms of our receivables, what part of our receivables is from GeM?

There are some substantial receivables, as we mentioned earlier. So that should cover it. And second is, at TCS value, I think we will not be doing that business here. We don't want to be in loss-making business for we don't see TCS can make money on it. If they want to manage it's their joy of selling the products. But we don't sell it for 4- 5 years, we have taken to on financial from so Gem is no regret product for us. Gem is cleaning it up for eMach.ai. I would have expected some investor to ask question on AI. I thought AI is a hot topic right now. and the kind of capability that Banesh has built for AI is phenomenal. And that is not coming out as a separate space, which we are differentiating along with composite enterprise contextuality in operation space. And this is a decision AI. Decision AI is very different from information AI. So when you talk about ChatGPT, it's an information AI. You can't lose for any business decision from ChatGPT. We can only take some information and converting information to knowledge and knowledge to decision is a 3-step process of the AI. And our 7 years investment in AI, if you step into the Ai company, it should be most valuable company in a global marketplace from that perspective. So this is where the Ai platform, which I mentioned in the beginning that fabric platform on AI, that platform I described in eMACH.ai substantially. That's giving entire boost to the entire, all the product lines.

And also you mentioned about the AI thing. So are we selling AI as a separate capability? Or are we embedding AI into our existing products and platform?

Yes. We are selling a separate product like magic ESC, is a separate product for the ESG. Norges Bank $1.8 trillion to $1.3 trillion on management. It's a separate product. So Banesh can highlight more on that.

So I'll -- thanks for that question. Let me sort of explain it in 2 different ways. One is eMachi.ai. We heard a lot about eMACH. I think the combination of eMACH.ai, that is the architecture along with the AI intelligence is embedding this intelligence into our product lines in a way in which the customer can actually achieve a much higher level of AI implementation, whether it is in hyper automation or in personalization. So I think, for example, I'll give you a wealth perspective, right? So from wealth -- and as you probably have already heard, we won an award for the most exceptional usage of AI across PAN Asia, which covers Asia and India, from the wealth briefing awards. And one of the interesting things is MACH gives you the composability that Arun mentioned of being able to compose for different segments, different product capabilities. For example, we've just recently gone live with one of the largest private banks in India. They are using wealth for this first part of the launch is about mass affluent wealth. Now clearly, we all know that the penetration of mutual funds in India is growing significantly. And how do they actually provide a technology architecture. And by the way, this architecture is on the cloud. It's on AWS. And the scale is very large, the ability to actually consume our eMACH architecture for wealth, along with the AI components that can actually make a difference to seamlessly deliver either do-it-yourself capability or a very personalized capability for the customer is one sort of example of how we can actually consume for different segments, whether it's mass wealth, whether it's ultra-high net worth of a private bank. So the architecture gives them the power to be able to consume for different clients, different products and different capabilities and experiences. Some of them are driven by financial advisers or relationship managers, some are just do-it-yourself. So I think that's the power of the combination of intelligence embedded in what we would sort of say, embedded AI for wealth. Similarly, in the U.S. insurance, the underwriting insurance, recently gotten a -- had a underwriting -- they don't have a quadrant for underwriting, but they have a very detailed paper on underwriting. And Intellect design came out as probably the best digital engineered underwriting platform for using AI. There, we embed data in such a way that the underwriter can actually improve his speed and decision-making quality. And therefore, we've embedded AI into the underwriting workbench. So not only is it operationally efficient, but more importantly, it brings intelligence actually into the product for different lines of insurance business. So AI coming together, it's a good point AI here today in the market where it can be a huge difference to improve both operational efficiency as well as helping the client achieve our revenue targets and compete more efficiently with their own competitors.

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

Firstly, my question is if you look at the commentary that we hear from a lot of services companies regarding the spend cuts and discretionary cuts by the banks versus what we see in our case for software companies. The view is quite divergent. So my 2 questions here. One, is it that bank now finally realized the importance of investing into core technology, which is keeping this as a priority aspect for them right now. Or is it also a function of we being more present across global market, which means that our exposure to more troubled economies are less, and that's why it reflects into a better growth for us while services businesses are more concentrated to 2 or 3 markets, which are in pain?

Very good question, Rahul. It's pointing the right thing. So not on the IT spend, which has gone up in the last 3 years, which was the disproportionate increase that happened in last 3 years was unnatural. This was to me, I mentioned in one other call, it was like a banking digital, due to the digital, which looks nice on the face of it as makeup, but you don't make it change infrastructure digital. In structure digital you need to make a change in data design. You need to make a change in a data layer, you need to make a change product. You need to make a change in a process layer, on or to go together. So your question is when COVID happened and everybody wants to sit at home. They did a very quick and dirty solution, and they wanted hundreds and hundreds of people to solve that problem. So it's a good for Indian company that we made a lot of money out of this common statement of banking digital. Now banking digital or structure digital, which Manish was mentioning, structure digital and the deal which we run in Asia Pacific Bank with Accenture. That's a structural change. We are looking for a business transformation to digital transformation to the data transformation all 3 come together, and that is the deal value multiplied 5x compared to the banking solution where the deal value is limited to 1x. So that's the right analysis you had around. That now bank, If I don't give them an option, like Electrical vehicles, there's no option for all of us not to go to electrical vehicle. When we make a decision, it is your choice.

Right. Right. Secondly, from a market perspective, do you think India being now becoming very center stage from a global demand point of view in many, many industries? Do you think that would be true for your business as well? If yes, then what's the strategy out there?

In what context?

Yes. Even if you look at what's happening, other kind of credit proliferation is what the regulator is now pulling into the UPI ecosystem or small consumer loans or banking the unbank, data-based collateral. These kind of things are now coming with lot of NBFCs and banks are getting into the digital solutions with the lending partner, partnering the lending or fintechs rather. So one side of the story is where these companies would simply partner with fintech to distribute their lending solution or BNPL solution. And the other aspect of the story would be where banks will try to modernize their solution and try to do it directly like what possibility Bajaj is doing in India? So from that context, you think credit being a center stage aspect in India, is that leading to a lot of opportunity here?

Yes, that's true. I think the 2 things are around. I think this is the question here. We are undermining the security issue of the banking solution. Let me take more fintech players a lot of people as it in India, like HDFC Bank or ICICI bank, will take a holistic decision of buying the right solution at the right pricing. Today, still India, and we are not investing sufficiently on the cloud technologies. They are not investing into structural changes. And security is so complex a topic in eMACH.ai world that we are undermining the investment, which required in -- there are almost 170 elements are there in security architecture, how you buy the security along with the transactional work, which you do. And that's there -- still, I would say, India will go through 2 phases of investment. One phase of investment will happen as a banking solution. And then the second phase will happen in structural solution.

Okay. So at best, we will see the first banking one where our software companies would have a limited participation, but then we may have a larger piece of the cake eventually?

Eventually.

Yes. So -- and the last piece from my side, which is related to wage or any other investment. If you want to say that from the current base, what are the investment required for this part of the -- later part of this year in terms of wage correction or people investment or any other investment from a cost point?

Fortunately, because software industry is in trouble, we are beneficiary of that storm. We don't that one on that particular thing. So -- but on the other side, on the investment side, just not to take it likely, your question is that how much is the forecast on the cost structures. Cost structures are stable now. Last year, our prospects have become unstable because of COVID time and the industry issue, which has happened. Our investment will be distribution. Our focus is 3Ds, distribution, distribution and distribution. That's what we are now looking at it, hence spending time on it. So our management team is in the U.S. starting from Monday. So Banesh is sitting in New York right now. So our focus is deeply on distribution right now.

Right. And this increment, if what -- maybe whatever correction needs to happen is already baked into the current cost run rate at this point?

At this point of time, yes.

Okay. Okay. That's it from my side. Congratulations to Venkat for the new role and also congrats Vasudha for this position.

Next, we have Mr. Narendra. Okay. he's not there. I think he's left, it looks like. Then Arun, we have only the 2 follow-up questions. There's no new questions. Can we take them?

Yes.

Mr. [ Anil Tulsiram ]?

Yes. I have again, 2 questions. First, I understand existing customer base accounts for almost 80% of your revenues. So what I want to understand is what happens at the time of renewal. So how easy this renewal are or again, we have to go through the RFP or other things? Or to put it in another way, how easy or difficult is for the customer to switch to another vendor? And what are we doing to make these customers more sticky. That is the first question. And the second question is around 2021, we spoke about cross-sell opportunities that we will go deep in the top 10% of the clients. So what's the progress here? That's the 2 question.

Manish, would you like to answer?

I think like Arun briefly shared, we are tracking the top 10 banks in each of the markets and what is our -- we today have the top 4 of the 10 American banks, top 7 of the 10 European banks, top 7 of the 10 Middle East, African banks top 9 out of 10 in India, 5 out of 10 in -- and this consistent focus right now to be able to do cross-sell of each of our products. difference between us and some of the other vendors is those term contracts our renewal goes in, because they are not -- they are just selling the license and they get away and they're not partnering in the transformation of the bank and the growth of the bank, that's when the RFPs kick in. We've consistently been sharing. We are regularly upgrading our products and capabilities with our customers. So we face less challenge from that perspective. There are sometimes you have from a procurement process, there's a closed bid done just to ensure that compliance processes are taken care of. Our journey is to be with long term for customers, it's a 15-, 20-, 25-year journey. And we have last time also shown some of our customers, the lifetime revenue, we're coming from that. So it is always consistently keep investing in customer success. You don't come -- when the moment comes to renew the contract, we are not then letting procurement takeover, it is an extension of what you're doing.

Then we have a follow-up question from Vivek Taruna.

Yes, sir. My question is on the U.S. Last year, Arun said, we have lost 2 deals. And given the current conditions, do we expect a similar growth rate in last year, I think [indiscernible] 50%. And how is the outlook on that -- both the time to deal closure and also the insurance partner and Intellect AI partner, which were very positive last year?

We are as positive on Intellect AI, it's more positive on Intellect AI on U.S. growth. U.S. with a setback on the stories, we are looking at North America and the market. So Manish looks at U.S. together. So from my market, we have a good potential and USD 11B. So at least this year has started very well all in the U.S.

Canadian reasonably well, and you just announced that for 1 of the large Canadian banks, the USP so we're doing -- we were doing the Canadian now we're doing the U.S. side of it also.

So the things are not like because the last quarter because of the SPP crisis, you were just unclear, that's why I was just trying to understand the outflow.

We did lose 2 deals. First Republic has become JPMorgan. So we were doing some work for First Republic. So it has gone into becoming JPMorgan. We're running that platform. We were already working with JPMorgan before. So it gets our relationship the pop side is with our relationship with JP has become a little better -- bigger, sorry. And -- but the commercial revenue loss on these 2 large deals would have given us another bump in this quarter, but that's the game we all play, managing risk and portfolio. And I think as compared to some of the other software service providers you're seeing, their dependence on U.S. is very high. We've always, Arun's always talked of a portfolio, which is balanced across products as well as markets that hedges us from these seasonalities. It does give us a bump on the road, but it doesn't create a panic that we have to stop hiring and have to get rid of people, have to create panic.

So Intellect AI, we grew 50%, like you said last year, sir, this year also. Last question, sir.

It's growing substantially, how much we come in the books of account because Intellect AI business comes as a SaaS model better the multi business, but these ideas are increasing. So we are getting even double-digit million dollar lease in Intellect business, which will be -- we are at least 7, 8 deals are there. This is the double-digit million, some do $10 million to $20 million over the next 5 years TOC value. So those deals, we are now getting Intellect AI. How much will be translated that will come between 15% to 20% percentage.

Arun, can we close the call now?

Yes, please close it.

Thank you all the participants for participating today. In case you have any follow-up questions, please do write to us or call us. Thank you. Now we can log it off.

Thank you.