Intellect Design Arena Limited ($INTELLECT)

Thank you for joining us today to discuss the Intellect Design Arena Limited financial results for the fourth quarter of the fiscal year 2025-'26 and also for the full year FY '26 ending 31st March 2026. The investor presentation and press release has 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, Chairman and Managing Director; Mr. Manish Maakan, Executive President, Group's Revenue Officer and CEO of the Wholesale Banking; Mr. Rajesh Saxena, Mr. Banesh Prabhu, Ms. Vasudha Subramaniam and Mr. Vikas Misra. Besides some other senior members of the management team are present on the call. Now I hand it over to Mr. Arun Jain for the management commentary on the results. The commentary by the management team will be followed by Q&A, where your questions would be replied by the management team. [Operator Instructions] On safe harbor, I would like to remind you that anything which we say refers to our outlook in the future is a forward-looking statement, which would be read in conjunction with the risk that company faces. With this, I hand it over to Mr. Arun Jain. Arun?

Good evening, everyone. Thank you, investors, for trusting the company over the last 10 years of its journey. We embarked on this journey in 2015. So we are completing 10 years' time in 2026. 2016 was the first result of full product company in [indiscernible], and this is the 10th year of this journey. And I must thank each one of you that you trusted the company over this 10-year period. There are many of the investors who are still in the company for 10 years. Some of them joined the journey in '17, '18, and they have seen the vagaries of building a product company. Any product company in the world which is having a license-linked revenue which has a long-lasting value over the next 20, 30 years because of the technology licenses takes this kind of ups and downs, where, when you build the technology, deploying in a market, and then you have some time to accept the technology by the customer and then getting to the next technology. And in this process, what we adopted in this journey was using design thinking as a core value to understand what is the customer desirability, visibility and viability, which I mentioned to you earlier. We added during this journey, when we found the design thinking is not complete, there may be possibility of adding first principle thinking by which we are able to reduce the wastage during the technology architecture. Then we applied framework thinking. And fourth, we added system thinking. So there are 4 cognitive engineering technologies we use for building the entire product engineering landscape. I know as an investor, you are interested more and more in financial number than philosophical number, but I'm sharing with you this thing because as a product company coming from India, you need to have all the 4 kind of cognitive thinking, translating into impact-driven products. These impact-driven products what we are talking about is first understanding the technology landscape, when it is changing, what point of time we need to invest in new technology. So when cloud was coming in 2014, we invested in cloud in time. When AI was coming up in 2017, 2018, we invested before time in 2016 in U.S. and in U.K we invested in AI in 2016, way back, 10 years back when we invested in AI. This was based not on what revenue we got in 2016, 2017, 2018, 2019. For the first 5 years, we hardly got any revenue from the AI business for which we invested heavy money, and a lot of questions were there. But that prepared us for saying what you can do with AI, what you can't do with AI. And that has helped in choosing the right strategy going forward. When the generative AI hit the market, we were ready for generative AI to take a lead and then we created a platform, which we launched last year. Last year, in June, we launched Purple Fabric as a platform, which is competing with Palantir on functionality and the process. And especially for financial domain, it is very, very appropriate for the financial domain. But if you just go back to 3 years history of eMACH.ai, we launched eMACH.ai in 2024 -- '23, sorry. February '23, we launched in Mumbai along with AWS on a cloud. It's a platform where we put all our micro services. At that time, it was 300 micro services. Now it is 700 micro services are there on eMACH.ai cloud. And then we look at our strategy to be divided into 6 blocks. So every 6 months, we have a -- we don't look at quarter, we look at 6 months. So we call strategic planning cycle, SP1, SP2, SP3, SP4, SP5, SP6. Means we have completed SP6 cycle since we launched eMACH.ai as a platform. In cycle SP1, we understood that eMACH will be more acceptable in advanced market, because they understand the value of the architecture that how architecture can drive their cost of ownership of the technology. And that's the time when we were not entering the U.S. And we mentioned to you that we entered into U.S., Canada, Europe. And those investment we did, we got some early wins like OTP win we got in that cycle, and many other banks, we got CIBC deal and other deals in that cycle. But now this time we are -- now 6 cycles are completed. So this is the time when we are evaluating ourselves against 6 cycles and planning for next 6 cycles. So there are 12 cycles when we looked at it. Transformation is there for 3 years and next 3 years. So next 3 years will be monetization phase. First 3 years was treating the entire infrastructure of my products which are coming together on eMACH platform, my narrative, my go-to-market strategies by aggregating my 6 marketing under Chief Revenue Officer. So this is a time when we try to consolidate the power of LOB to power of Intellect. And that's where it took us some time to see that value each product is bringing, each line of business is bringing so that it becomes a multiplier impact when they come together. And in this process, we could able to sign up the marquee customers. Almost we have 60 customers whose asset size is more than $100 billion. So they are the customers where we have a great opportunity to cross-sell on eMACH.ai. And that's the reason which I'm saying why we are bullish about future, is, if they are sitting on the same eMACH platform where we are promising there is one source of truth of data, it is much easier to sell second product and third product on the common backbone. Like Salesforce, if you sell the same product, the backbone remains common. That's how eMACH cloud, what you are looking at, it will be relevant for this. This is the part one of our exercise where we'll be going deeper into large accounts. Now second piece which is coming out by connecting Purple Fabric and the product, which we call eMACH.ai. And now in last 18 months, we made all our product AI-first products, AI Core Banking, AI Digital Engagement Platform, AI Lending, AI Trade Finance. And since AI is properly built with a AI-first thinking process, we are able to drive higher number of sales, higher number of pipeline. Because it's an AI-first product, we could able to compete or overshadowed our long customers in trade finance business, in lending business, which was -- initially, when we were selling only eMACH as a trade, it was not becoming the -- or eMACH as a wealth. But when these 2 technologies come together, that created a kind of a moat against our key competitor in that space. And we are in the final stages of a few large wins in this space of eMACH.ai. And -- so first I covered products. Then I covered eMACH plus AI. And then finally, I'll cover role of AI and how the AI is evolving in the world and where are we in the journey of AI. I'll take separate time sometime later on explaining what the AI is all about and where we are looking at it. But in a nutshell for this investor conference, I would like to say that on one side, you are hearing a lot of noise from the Anthropic Claude, ChatGPT, OpenAI and the coding, the cursor and the jobs that is going to place in AI world. And all the things which you are hearing as an investor are all true. It's not that these jobs will not go away. Jobs will go away from IT world and India will be in -- some trouble India will face with the AI implosion. It's a completely new change. But on the other side, many banks, many financial institutions which implemented AI for customer services peripheral areas, they are getting the benefit of implementing customer service area where 80% to 85% accuracy is allowed because they are doing support services or customer service area. So that's an area where AI is giving benefit to the financial institution. But most of the financial institutions are not able to apply AI or productionize AI in core processes or core systems and core technologies. And for that, our research teams have done a phenomenal job in this space. They understood the core issue why AI in enterprise space will not work unless we solve the core systemic issue over there. Intellect research team has done a deep research on it. They applied some mathematical models, some models from physics, some model from mathematics. And using those models, we think, how do we create a deterministic knowledge, which is the core of any judgment or decision AI can take? For financial institution for core processes, we need at least 95% as a minimum benchmark for making it usable for production-grade AI. I call it production-grade AI or enterprise AI. We exactly solve that issue because intelligence accuracy is equal to knowledge accuracy into reasoning accuracy into context accuracy. And if knowledge accuracy is 85% right, which LLM gives me, reasoning accuracy, which I create by agent, is 95% right, if context accuracy is 95% right -- these are best cases I'm telling. You can't get more than 95% right in context or 95% right in reasoning by AI and 85% in knowledge. Now you multiply them, not take the average. Take your computer or take your cell phones and multiply 85% into 95% into 95%. You will get 76.7% accuracy. Now 76.7% accuracy, it cannot be enterprise AI for core processes of the financial institution, and that's the problem most of the banks are facing. So this problem we have filed some 15 patents in this space in last 6 months. We are unique to Intellect where we solve this problem by -- I was applying physics, mathematics and models embedded into my knowledge models and embedded into my data models and entire technology models. And there, we are now able to achieve in many spaces close to 94%, 95% accuracy in the application. We are able to govern it well. So we have signed 2 large enterprise deals in AI, platform deals in India and 3 or 4 -- almost 3 deals outside India on platforms. And their pipeline is growing well. So this is one part of the platform which I mentioned to you. And second way of going to market is I'm doing -- each product is going like PF trade, Purple Fabric trade business, Purple Fabric lending business, Purple Fabric wealth business, Purple Fabric risk and governance business, Purple Fabric customer onboarding. All the pieces are being sold where the banks are ready for only applying use case basis or bank wants to make a change together. So these are the 2 streams of revenue we are building in AI space, and both are looking very, very lucrative. So Manish will tell you all the details of how the year went by, what businesses are done, where we have done the various revenues. And if you have more questions on AI, if you feel that it will be of interest to you, sometime in the next 2 weeks, I'll take a 1 hour session where you can send the questions to us that what question you want to know, especially for investors, where we can have some 90-minute session for all the investors to understand what the AI space is evolving and what is my personal understanding of AI is. So at this point of time, I hand it over to Manish to take you through the results.

Thank you, Arun. And good evening, everyone, and thank you for joining us. Like Arun called out, it's been a systematic design of how we will align around the industry and how we focus on growth by design. Clearly, you would have seen the numbers for the year. FY '26 was a very strategically important year for us, which has shown in the results and our strategy. And we've shown significant top line growth and strengthened our balance sheet and continue to deepen our position as an AI-native financial technology platform company. Most importantly, the investments we have made over the last several years in composable architecture, enterprise AI and deep financial domain specialization are now delivering the compounding scale which we really needed. Today, we operate across 62 countries with more than 500 institutional customers surfing that. Arun shared that we've got more than 60 customers with very large asset size. So we are primarily in the Tier 1 business as one side of our business. And on the other side of business, we work with the credit unions. We've been able to design the business model to serve both the segments from that perspective. We continue to maintain strong domain depth across wholesale, consumer, wealth, insurance and AI-led enterprises. That segmentation from a product perspective and the market coverage has really played to what we define as the arena in the Intellect Design Arena, and that strategy is working. The 2 million hours annual R&D, which you look at, at a $50, it's like $100 million from an American perspective. That's the kind of courage we have had to invest in building this. Our advantage is our unit costs are low. But if it was an American company, that would translate that on an annual basis at, at least $100 million R&D. And that's what's kept us edge continuously in the market. I think like Arun called out, we saw the trend early for AI and we started investing in 2016, 2017 around this. AI is evolving through multiple stages, from experimentation to data and AI, data as a platform, to where we now believe we are in Wave 6, where AI native enterprises is what will define who you are and whether or not you'll be able to take advantage of this wave. Continuing to remain in experiments will not help. And that's where we're helping a number of large institutes to actually become AI-first digital banks. Second piece of strategy, like Arun shared, the 2 platform approach create our unfair advantage. One is eMACH from a composability and Purple Fabric from an AI enablement. That's why eMACH.ai together helps us deliver the AI-first approach of who we are. We looked at the 3 dimensions of designing any of the strategy, and part one of that is designing for our products, part 2 is designing the markets where we'll take these products and third was choosing -- designing a customer portfolio. This is a very structured approach, which for the last 10 years we have followed, and it shows up in our results as we go forward. This framework has allowed us to scale on defined strategic focus over multiyear cycles with greater predictability. We call that from an initiation to how quickly we get to cycle 1, where we get about INR 500 crores. We put on slabs of INR 500 crores each from a cycle growth perspective, where you have got the market trust, to where you are preferred in the market, to being a market leader, a category leader. And these 3 cycles, we have looked at it. And as we go forward -- we have categorized also for your information how each of our business lines have got that leadership. The Wholesale Banking business is now fully mature in cycle 3 at INR 1,500 crore plus revenue from that perspective. We started in '16, '17. So if you look at a 9-, 10-year cycle, it's brought us here. Now it's about how the next INR 500 crores can come in a faster time. Two years later, we started on Consumer Banking and now very happy to announce Consumer Banking has also crossed INR 1,000 crores this year. And our youngest business is where we started investing on Wealth & Capital Markets and Insurance in '22, '23, streamlined to take it forward, has also crossed INR 500 crore business. This is a repeatable pattern, which proves that focus, how you go from cycle 1 to cycle 2 to cycle 3. It's not being opportunistic. It is design choices which we have taken every 3 years to invest forward. I think Arun mentioned that we looked at every 6 months as a strategic phase to define innovation growth engines of how we will see it through any of these journeys. So this is just a snapshot of how we have invested 1 or 2 platforms every 6 months and take it forward to scale to support our vision and opportunity in the market around eMACH and AI. And over this period, this has not only been accepted by customers, which shows in our results of the number of customers we acquire, but also the industry analysts and industry awards across the 3-year window. We've got 56 analyst leadership. We are in a #1 or a #2 category, and 18 industry awards where we are leaders in there. So it's a consistency of our performance and vision, which is evident over here across all phases. As we look forward -- I think creating the moat was equally important. So if you just clearly see in the last year, we filed for close to 100 patents, and that's the differentiation. And this is where our company is going to create an edge in the market. We have overall got 125 patents filed and 9 have been granted and the balance are in progress. We are creating this wedge so that the innovation we are investing upon, others cannot -- the disruptive technology, others cannot take advantage of doing from that. So we look forward to this IP mode in our products to continue to go forward. Next. I think from designing our products, we graduate to designing our market presence, and we took a structured approach. Initially, we drew our journey through Europe and then we went into Middle East, Asia, India. Over the last 4 years, there has been very significant focus in building the Americas business. And last year has been exceptionally good growth. You see, this is what we are looking at. Americas business has grown manyfold from that perspective, has got 27%. But the good news is while market share has grown, we've continued to maintain a 20% to -- the lowest market is 13% to 27%. It's a very balanced growth across. So either market, the fluctuations doesn't hurt us right now. If one market there's some geopolitical issue happening -- pivot of focus last year was difficult for Europe. So we pivoted strongly to Americas, and it shows in the result. And we were able to manage the European revenues to where it was, but grow Americas from that perspective. So now, with a decent depth in each of the markets, ranging from INR 400 crores to INR 800 crores, we are able to pivot and insulate ourselves against any unplanned incidents which happen in the market. Next. The third piece is designing a customer portfolio. So we sharpen our products for the market and we choose which customers we are going to grow. We've strongly been a Tier 1 product market space, where we have excelled in. And this shows that we have a -- we today have 500-plus leading global, regional and challenger banks who trust on Intellect. But if you look across geographies, the top 60% or top 10%, 15% or 20%, we continue to grow that. Those are our leader brands where the banks trust us. And as they go global, it increases our distribution and our strength of each of the products. And it follows -- that pattern follows all the regional banks wanting to adapt and then the local banks wanting to adapt. That journey of establishing trust, we may have started with a difficult larger banks, but that's established our leadership in the market. And this is the proof point of our success and we continue to grow this. You would have seen this slide evolved every year from where it was to what we are today. So these are our 2 gemstones who have helped us reach here. Next. I think this is also evident in our pipeline, which has now crossed INR 12,000 crores, and we've got 99 destiny deals, which are available. And in '25, '26, we had 21 destiny deals which we won, which were multiproduct, multiyear programs at marquee institutions. And these deals compound actually. You enter with one product with a $3 million to $5 million annual revenue, and when you bring in the second product, it becomes -- the ARR grows from $5 million to $7 million. So that equation of cross-selling, focusing on your large accounts. You serve them well, you build trust, you deliver on time, that marketplace is very large. Individual customers are a marketplace. And based on that strategy, we are deepening our investments around our existing customer base. They are our crown jewels. This is a snapshot of high-value pursuits we are running across INR 50 crores, INR 30 crores to INR 50 crores, INR 20 crores to INR 30 crores, and these are the 99. So a very focused attempt to play in the larger size. And these are the Q4 strategic wins which we have had, with 4 large wins across Americas, 2 across Europe and 5 across Middle East. So if you see, it's been -- and 2 in India and 2 in APAC. All markets we have managed to show wins across, which are material deals, which have made a difference to our numbers from that perspective. Next. I think the 5 new design choices for the next 3 years where we are looking at is, like we said -- Arun initially mentioned, then I started off with native AI companies. And this is where Purple Fabric scaling is happening right now. And this is truly a platform-led business, which shows also in our revenue that how platform-led business is growing against the conventional just licensing business. A second pattern we are seeing is there's a significant shift to move away from mainframe to cloud, and this is where our eMACH stack, tech stack, both its proof points of having moved multiple mainframe platforms to a cloud platform and the composability of it for large Tier 1 transformations has proved. And we're scaling up our investments behind it and we're seeing a good market traction. The Wholesale Banking platform was our -- we graduated from a transaction banking to wholesale banking. This is an ecosystem play across deposits, lending, cash, liquidity, trade supply chain. So we're continuing to expand on our moat of what a wholesale bank needs and how we can offer that as an integrated composition. Payments is the fastest-growing area across, and multiple things are happening, from embedded to cross-border to real-time. This is where we are making a significant difference, and there have been multiple wins in the last year. And the fifth one is on financial advisory around wealth insurance. This is our youngest platform, but truly leading with AI first for the next-gen investors. And this is making a big difference. Each one of you would be also looking at AI in your worlds. And this is where we're helping, which is giving us the big wins right now. Next. Vasudha you'll take up from here?

Thank you. Thank you, Manish. Good evening, everyone. Happy to take you through the financial highlights for the quarter and the financial year '25-'26. So the financial year '25-'26 has been a year of strong growth, improving business quality, disciplined execution, healthy collections and sustained investment in long-term strategic initiatives. For the full year '26, Intellect reported a total income of INR 3,161 crores, representing a 23% year-on-year growth. License-linked revenue comprising platform license and AMC revenues increased to INR 1,667 crores, representing a strong 34% year-on-year growth. Breaking this down further, platform revenue increased significantly to INR 580 crores from INR 241 crores in financial year '25, representing a 141% year-on-year growth. And license revenue stood at INR 517 crores. AMC revenue was INR 570 crores, reflecting continued strengthening of annuity and recurring revenue streams. Moving to profitability. Gross margin for the year stood at INR 1,786 crores, representing a 19% year-on-year growth. EBITDA for the year was INR 703 crores, representing a 16% year-on-year growth. The non-GAAP EBITDA, which excludes the stock compensation cost, was INR 756 crores, which represents a 24% of the income for the year. PBT before considering exceptional items was INR 493 crores, while PAT stood at INR 369 crores for the year. PAT after considering exceptional items stood at INR 345 crores, and the exceptional item comprises of the gratuity provision for INR 30.84 crores and the resultant deferred tax impact of INR 7.76 crores, which we have accounted in Q3. Collections remained strong during the year at INR 3,043 crores as compared to INR 2,371 crores in financial year '25, which represents an increase of INR 672 crores year-on-year. We closed the year with cash and cash equivalents of INR 1,257 crores, an increase of INR 236 crores over financial year '25 from INR 1,021 crores. So Intellect continues to maintain a strong balance sheet and 0 debt position. Talking about our deal wins in digital transformations, 59 new customers selected Intellect for their transformation journey and 91 digital transformations went live globally during the year. Another positive trend during financial year '26 has been the continued strengthening of our balanced geographic revenue portfolio across developed and growth markets, which Manish talked about. Moving to Q4. Total income for the quarter stood at INR 884 crores. Platform revenue for the quarter was INR 162 crores and license revenue was INR 152 crores. Our ARR for the quarter stood at INR 1,247 crores as of Q4, up by INR 870 crores as of the same quarter last year. We achieved an EBITDA of INR 221 crores for the quarter and a PBT of INR 162 crores. Collections for the quarter were INR 791 crores. Another important indicator of our operational discipline is our working capital efficiency. Our DSO for the quarter stood at 126 days as compared to 137 days for the same period last year. We also continued to strengthen leadership capability across the organization with 23 senior leaders joining Intellect during financial year across strategic functions and markets. Let me briefly cover the important Board and organization announcements for the quarter. In line with the company's dividend distribution policy, the Board has recommended a final dividend of INR 4 per share, along with a special dividend of INR 3 per share on equity shares of face value of INR 5 each for the financial year '25-'26, subject to shareholder approval at the ensuing AGM. The record date for determining shareholder entitlement has been fixed as July 24, and the dividend upon approval will be paid on or before August 29, 2026. On the organization front, the year marks an important leadership transition phase for Intellect. Mrs. Sudha Gopalakrishnan, Chief Assurance and Governance Officer, will retire from the services of the company effective 31st May upon turning the age of superannuation. The Board has placed on record its sincere appreciation for her valuable contributions during her tenure with Intellect. As part of the leadership transition, Mr. Krishna Rajaraman, currently the Chief Technology Officer, will transition into the role of Head Customer Delivery Experience effective 1st June. Mr. Vivek Gupta, currently President and Head of Consulting, will be redesignated as Chief Customer Officer effective 1st June 2026. In addition, Mr. Prashant Lalchandani has been appointed as the Chief Technology Officer of the company effective 1st June. Prashant brings over 3 decades of experience across product engineering, enterprise architecture and global banking platforms and has played a vital role in shaping Intellect's AI native engineering and eMACH platform evolution. These leadership transitions further strengthen Intellect's long-term execution capability as we continue to scale our AI-first and platform-led transformation journey globally. Finally, here is our investment thesis. We are leading through 5 key differentiators. Number one, AI native leadership. Our Wave 6 infrastructure is live in 45-plus global institutions, giving us a massive first-mover advantage. Secondly, we are a 0 debt company. Our growing cash reserves and recurring ARR engine provide a stable, compounding foundation for high-margin returns. With 30 years of expertise across 62 countries and 500-plus clients, we possess a deep domain mode that competitors simply cannot replicate. Our pipeline is robust, featuring 80-plus active pursuits valued at over INR 20 crores each, ensuring strong revenue visibility and momentum. The synergy between eMACH.ai's composability and Purple Fabric's intelligence creates a compounding effect moving us from linear growth to exponential platform value. So as we move into financial year '27, we remain confident in the company's long-term positioning, business quality and strategic direction. With that, can we now open the floor for questions?

Yes.

Thank you.

Thank you, Vasudha.

Now the forum is open for Q&A. [Operator Instructions] First we have Mr. Rahul Jain from Dolat Capital.

Congratulation on very strong numbers, and excellent presentation as well. Just 2, 3 aspects I wanted to touch upon. One, is we have talked about this next 18 months of monetization that we will see on the [indiscernible]. And on this particular offering, do we see the mix of product being from the license side of it? Or it will be more on the subscription side of it? Any trend if we could identify for this product? That is question number one.

Okay. If you look at it, our implementation revenues are fairly decreasing in percentage terms as the growth is increasing. License-linked revenues are growing faster than others. You are asking subdivision of license versus subscription. Our focus is to get to more subscription revenue, which is long term in nature. But we are not letting go the license revenue. As the large customers are there, so license revenue. So forecasting that will be difficult, which number will grow faster. Our intent will be to get more subscription revenue, but outcome will determine based on the market situation.

Understood. That's clear. From a growth point of view, this 5 key reasons that we have highlighted clearly sets up for a growth acceleration thought process. So do you think that next year onwards, right from FY '27 onwards, we could see growth accelerating? Or we are more thinking about this from a medium-term perspective and not necessarily from an FY '27 perspective?

We are getting good traction. INR 12,000 crores of pipeline we never had and this pipeline is qualified. We always mention to you that predicting anything of this nature of the revenue modeling on quarter-to-quarter basis are more difficult for us than projecting the trajectory of the company. Trajectory of the company moving from INR 500 crores a quarter to INR 600 crores a quarter to INR 700 crores a quarter to INR 800 crores a quarter, we are able to forecast that, okay, we will move from INR 700 crores to INR 800 crores in 2 to 3 quarters or 3 to 4 quarters, and that we are able to sustain. But which revenue, which particular piece will come from which geography -- so we have a complex business of at least 6 markets and 3 LOBs and 10 product lines. So from an investor perspective, it's a very well-balanced portfolio. From product side, there is sufficient capacity to grow. So saturation is avoided at the product level. Saturation is avoided at a market opportunity. Market risk is avoided at a market level. So we are looking at the whole business into 2 pieces. One is product on product side, market on market side. We are preventing the market risk on one dimension and we are ensuring that we have sufficient product in the market so that we don't hit the saturation button, which many companies with a single product company button, they reach a saturation point where they become cash companies but not growing companies. So ensuring the cash and growth both comes together is a strategy when we look at Arena model of business. Now we have demonstrated in the last 10 years that this model works. It takes 5 years to get into the sustainable model when we start investing GTM money. So the R&D space of Purple Fabric we are investing between 2016 to '21, but go-to-market took '22 onwards. So you take almost 5-year cycle time. And things are below the...

Iceberg.

Iceberg. It's not driving any numbers. And those investments like INR 92 crores investment in AI business last year -- we said INR 130 crores. We land up into INR 92 crores investment. And we have an order book of over $50 million on AI business we booked last year and a revenue of INR 160 crores in this year. So I think that's what we are able to project, Rahul, that we are saying we are growth by design and margin by design.

Yes. Just one last aspect from my side and then I'll go back into the queue. One thing we've been articulating well is that how well we are positioned in terms of the kind of an offering that we have which are best suited for the customer. But purely from a demand side of it, you think is there an incremental traction even from a demand side of it? Or most of our success or pipeline is getting encouraged because of our better qualification and our better offering and winning market share?

Manish, you want to answer?

It's a combination of -- Rahul, you answered it yourself. A combination of all the elements over there: better qualification, better market rate, better acceptance in the market. We continue to win big with our own existing customers. Our portfolio is designed for that perspective. So there's less anxiety in the portfolio. Year-on-year, we said we have a certain band we want to operate in. And I think this year, we managed to demonstrate that and keep up that consistency, where I'm looking at helping contribute towards.

Right. And just to -- the engine that you talked about, so we should refer it as 15% to 20% from the growth point of view and 20% to 25% from a margin point of view. Is that the right way to think about?

That's the same story -- which I told in '16, '17, I have not changed the trajectory. I say we have designed always growth at 20%. Because when we are running a company, we design the business for 20%. There are some -- external factors are there, win rate are there. We achieve 15%. We achieve 14%. We achieve 17%. But I will keep that -- why we are running Arena? Because we would like to see that we don't get saturated and we don't come single-digit growth in that. And that's our design part of it. How much we succeed is a factor of -- not factor of market. Factor of some situation to happen. Some elements happen, but it covers up later on. So on a growth trajectory perspective from INR 600 crores trajectory to INR 3,000 crore trajectory. In last 10 years, 5, 10 trajectory. I think we are not disappointed any investor over the last 10 years from INR 600 crores trajectory to INR 3,000 crores trajectory. But again, forecasting FY '27, FY '28, we are designing definitely for 20%. Again, design-wise, we are still looking at 20%. Whether we achieve 15%, we achieve 14%, we achieve 12%, I think time will tell.

And we are taking it in bite sizes, grow by INR 100 crores over a 2, 3 quarter, keep driving, keep succeeding on that. And that is now predictability showing up.

Simple metrics, INR 800 crores to INR 900 crores. So now the next milestone will be crossing INR 800 crores. This quarter, we are INR 880 crores. If we retain INR 800 crores plus for next 2, 3 quarters, that will be our challenge right now.

Sure, sure. Just last bit, sorry -- on the investment side, last year, we accelerated because of the AI offering that we wanted to take it to the customer. Any update on that in terms of do we need to continue the run rate to accelerate on that? And on the monetization side, how you are seeing it?

Investment will continue, Rahul. Again, I'm saying last 10 years -- we want to keep the margins between the 20% to 25%, EBITDA margin between 20% to 25% range. And that's a trajectory we are looking at it. And we would want to reinvest back into either creating a delivery capacity or creating a sales capacity or creating a R&D capacity. So those investments we take a conscious call 2 quarters in advance. When we take a call of increasing the capacity, suddenly the margins drop happen, which gets recovered after 2 quarters. So there is a lag between when we invest upfront. Like in quarter 1, we invested. Then there's a sudden drop in the margins in quarter 3 we experienced. And this has happened not one time. This happened multiple cycles, if you look at the books. We have invested, and after 3 quarters if you look at the same number, you will find suddenly margin goes up to 27%, 28%, and they say, "Will this be margin sustainable?" And then we reinvest back that money. That's how the trajectory moves from INR 600 crores to INR 700 crores, INR 800 crores. If we focus on margin, then I will be able to manage the margin, but may not be able to manage the growth.

Next, we have Mr. N.G.N. Puranik from Enam Securities.

Brilliant quarter, brilliant year. I think looking strong on the momentum. You are mentioning about one important thing, accuracy as a competitive advantage in a model when it comes to selling solutions to banking industry. Perhaps I would add energy, aerospace. These are all accuracy sensitive. So how did you achieve this? And how do you sell this accuracy to the top 60 customers you talked about?

Yes. So a very good question, Puranik. My favorite question. That last 12 months amount of hours I spent in researching the AI, I would not have spent that much amount of time personally in last 10 years. It is becoming -- using the [ Indics ] system of knowledge systems to Western system of knowledge systems. So I have to use [Foreign Language], I have to use [Foreign Language], [Foreign Language] and I have to use some of the global system of knowledge of Harvard, MIT, published papers on mathematics and physics to see what is the knowledge system means, core of knowledge, how knowledge get designed, how the knowledge gets constructed. A shloka is a deterministic knowledge. Shloka knowledge -- you can't make a knowledge change in the shloka because it's embedded with an encrypted knowledge. Shloka is encrypted knowledge is there. Now that is a deterministic knowledge which is required for any institution to work on. And that I call deterministic knowledge. In physics, there is a word called probabilistic and deterministic.

Deterministic, correct.

So now we need to look at the -- for providing a right solution for the industries which are focused on deterministic paradigms -- the industries which are not deterministic -- like health care is not deterministic. But banking, financial, aerospace, defense will be deterministic in nature. And for that deterministic nature, then I have to apply how the classification of knowledge happens, which [Foreign Language]. So [Foreign Language] talks about classification of knowledge. [Foreign Language] talks about judgment of the knowledge, how the knowledge -- how do you make a judgment that this is right knowledge, this is not a right knowledge. And once the judgment is right, then only you can convert into intelligence. And my advantage is, using the western tools and eastern philosophy to work together to make it better knowledge accuracy.

A great combination.

And this is what we are now finding in the institutions which we went in July, August, September. They said, we have 100 people MIT team who are doing AI work. Now they're calling us back, tell us how are you doing it? That time they said, no, no, no, we don't need you. We don't need your platform. We already have our own teams working except the 2 financial institutions, those who are doing experiment maybe earlier. And they realized that they're not able to get it. So these IIT engineers or MIT may not be able to get an accuracy because they are not in this industry.

So my question is how will you sell to these 60 customers?

They are coming, they are coming. They are coming one by one. We have submitted 5 RFP already out of 60. So we are working with them.

Over time, you can see at least 10, 20 of them buying for accuracy?

More than that I think it's there. We should be getting almost 30, 40 customers buying right now -- in next 2 years. It's matter of time.

And an average -- averages deal sizes of what? Average age?

It is related to the monetization. As of now, the pricing we are starting to be lower end of $0.25 million to $0.5 million, but idea is to move to $3 million to $5 million. Idea is a platform sale. Just like salesforce when they enter in India, they sell the salesforce in $100,000. But today, Bajaj pays $100 crores for a single instance. So that's how the platform sales happen.

And you also mentioned about that you are in the final stages of large wins in e-commerce in the eMACH space. What exactly is that?

Yes, these are the core modelization space which is there, mother of all the deals. So those are -- people are -- because what we are bringing is a lowest TCO and fastest delivery. That space of mainframe to cloud is still -- the biggest cost is mainframe cost in Americas and Europe, and they need to move to cloud. So M2C delivery model which Manish covered is a very big opportunity for us to demonstrate our capability. We are working with Kyndryl, we are working with IBM, we are working with other -- AWS as a partner that how the eMACH stack is most conducive to sell to these large deals. But the cycle time of these deals would be varying from 12 months to 18 months. We have made OTP, which we went live, which we won the deal 18 months -- 24 months back we won the deal, 2 years back. Today, both the places -- eMACH.ai is live in Hungary as well as Bulgaria. These 2 countries are live with eMACH. So we demonstrated that within 18 months we are able to put the system live with eMACH, which is a good reference point, which will accelerate our journey going forward.

And this eMACH space you're talking about is also in the 60 customer category you're targeting?

For that, the new customers are also coming in, not 60. They are all new customers. Because we don't have too many large customers in America. America is a big market from -- more than -- actually 70, 80 banks which have $100 billion plus assets in America alone. So that market size will open up because now we are close to INR 1,000 crores in Americas, INR 800 crores. So we are touching $100 million business in Americas. So that's a good traction. And you always used to ask, when are you going to America? So we always said, we'll go to America last. And then once we go last, we are ready to go to hit the market. If we would have gone earlier, which -- a lot of investors were anxious that why you are not going to America in 2020, 2021. And we kept on reflecting that point that we will go as per the strategy. We'll not push just because America gives more revenue because they penalize the vendor also if you're not working out well.

And you also talked about keeping hoards of cash versus growth. So that means there is an acceleration in R&D dollar?

Yes, that's -- definitely R&D dollar will go up because now we have designed R&D. Now we have a patented -- now 100 patents we filed last year. This momentum will go up to 150 to 200 patents in coming years. So R&D spend will go up. And today, we have a -- net capitalization is less than INR 450 crores for the company, which is getting a license revenue of INR 1,000-plus crores, plus my net block is INR 450 crores.

So what's the multiplier you have in mind R&D dollar to potential sales?

The multiple is too much, if I can start calculating. And that's why -- so each investment which we make INR 100 crores in R&D, we generate INR 1,000 crores in the next 10 years, as simple as that.

Arun, I want you to some time articulate on this power of this 127 patent. So some point in time. Maybe -- it may be difficult for you to do it now. Some point in time. Because a lot of value sits in the patent. And if you can articulate in your Chairman's annual report and what that means, what are the production patents, what are the productivity patents, what are the revenue patents, what are the defensive patents. So if you can just articulate that, that will be wonderful at some point in time.

Beautiful. I think that the journey will happen after 2028. We are looking at patent monetization journey sometime in '28 or '29. So that is the next phase of our journey. This '25, '26 is going on. So after 3 years -- now we are filing the patents. We'll create close to 500 to 1,000 patents in the next 3 years. And then licensing the patents will be -- another revenue stream will start. But that will be after '29.

Next, we have Mr. Krish Jain from NAFA Asset Managers.

So looking at the revenue ex other income, we've seen 21.5% growth this year. Could you please highlight what was the constant currency growth this year?

It will be 16%. You can say 4% or 5%. You reduce 4% or 5%. So it is 16%, 17%.

16% growth. And looking at the revenue by geo, so we saw Canada, U.S.A., there is a huge jump there, INR 442 crores to be exact, that's 115% growth. So I wanted to understand how much of it is attributable to the Central 1 acquisition that happened last year and how much of it is organic growth?

Central 1 growth could be 50% of it. The rest of the 50% come from organic.

Okay. Just final question. Can we expect any M&A deals happening? You've got good reserves. Maybe not spending it on R&D. Maybe like something similar to Central 1 or even cash deals that can happen in the future?

Yes, you want to share?

That's not our core design for growth. If we see right appropriate, which adds complements to our customer's strategy or a product or a market strategy, we'll look at those things. But that's not our core growth engine which we are designing for.

But since we are investing in the market, we are looking for those companies where IP has been dead. So we want to look acquisition for those companies which will give us a market access in Europe, market access in U.S., market access in Australia, where product set is 30-year old, which we can replace, like Central 1. So I need a Central 1 equivalent, low-cost acquisition so that I can replace them with the eMACH stack. And those we are open to. Since you're in the market, all of you are in the market, if you come across those companies which are -- I don't want to compete with the latest in the nature, but those acquisitions will give me the customer access on eMACH.

And I think an important point also to share from a Central 1 perspective, while we got initial customer contracts, we're cross-selling them the EP right now and bringing them on to our new platform. So within a period of 18 months, all of those contracts I would have resold -- re-signed them and I'm cross-selling multiple other products to them. That was, like Arun said, an access to the market and old technology which here we could cross-sell. So it worked for us.

Next, we have Maitri Shah from Sapphire Capital. Okay, it looks like Maitri is not there. Then we have Mr. Mayank Babla, Mayank Babla from Carnelian AMC.

The first one is on the operating expenses. I see that software development expenses, SG&A and R&D expenses have increased by 28%, 28% and 17%, respectively, on a Y-o-Y basis. Can you give some clarity on that, please?

So some of the expenses have gone up because of C1 acquisition, because that cost has gone so just -- the margins are almost breakeven points on C1. We mentioned in the beginning itself that it's a very low margin business. It was basically almost like 0 margin. So that has all gone into the operating margin expenses. So if you take it out, then the difference will be much lower in which -- SG&A definitely we increased the expenses for getting better market accessibility on Purple Fabric. Investment on AI, we increased the expenses. So these are the 2 major areas where we are looking the expense to be increased. R&D expenses obviously will go up. So there's no -- it's in proportion to the revenue. It's not necessary the revenue has gone up.

Sure, sir. And an interesting point you made on R&D expenses going up because that essentially provides fuel for the next few years or decade. I just want to understand what will be the accounting for this R&D? How much will be capitalized out of this? And how much are the...

This is how much? INR 160 crores?

INR 160 crores. Last year, we -- I mean, in the year '25-'26, we capitalized close to INR 160 crores. And what has been charged off to P&L was INR 235 crores.

Okay. And you mentioned that this will increase...

So whatever is related -- yes.

Sorry.

Go on, please. Go on, please.

You mentioned that this would increase. So what should we -- what is the estimate that we should take going ahead?

I think if you look at that, we are maintaining investment to dollar, yes. $20 million we keep investing. So around -- if you look at last 10 years, all the time our investment was INR 120 crores, INR 140 crores, INR 160 crores.

INR 190 crores.

Now it will close between INR 180 crores, INR 190 crores, INR 200 crores, between INR 190 crores to INR 200 crores now. So this is giving us a bucket for investment. In dollar terms, it still remains $20 million. But in rupee terms, it goes up by INR 30 crores, INR 40 crores.

Last we have Mr. Vivek Arora from [Indiscernible].

Vivek, I see you already unmuted. You can start speaking.

Sir, my question is regarding like -- one request is please do that AI session for investors because there is a lot of confusion going on, like how Intellect per se and how -- because if you see the stock prices even in U.S., irrespective of whether it's a service or a product company, they have taken a huge beating. So with respect to that, how is the buy versus build dynamic changing? Do you think will change? Because today, it may not be -- everything may not be reflected in the market as of today, as of now. But how do you think it will change given banks can put up their own small IT teams and do their own coding and white coding? And that buy versus build dynamic, will it change or -- because of the domain expertise and that vendors have accumulated like Oracle, Temenos and Intellect. This is difficult. Only very large banks can do some plug-ins, but not the core software. So if you can -- if have any views on that, sir -- Arun Jain sir?

Yes. Maybe it is a good topic for all the investors to look at it that what IT is going to make a difference to the IT industry, to Indian industry and to global beneficaries of the bank who can invest into IT. It's not about AI which is a problem of the banks today. The financial institution -- why a large American bank have 50,000 people on IT is not because of the banking issue or IT issue or AI issue. It's because of their multidimensional, multilayer problem which they have created over the last 40 years of their growth. They have created a multidimensional complexity, which is multilayer. So typical complexity when we define could have a 15-dimensional complexity and having almost 8- to 10-layer of complexity. So 15 x 8 layers of complexity is a 120-dimensional complexity. To me, AI can solve some pieces of it in a block way. But if they want to really look at the solution, they need to look at it a zero-waste architecture to start from. Yesterday, there were some customers came visiting us. I think you can't solve with RFP model. You can't say product by product. I'm simplifying with AI. AI will not simplify your product. If you're an AI digital bank, maybe you can do it because you're taking from the fresh slate, but existing bank may be facing the problem. A lot of IT companies, we have internally started doing AI development life cycle projects internally. We are finding because of determinist knowledge, which I was speaking to Puranik, we are able to achieve significant amount of success on accuracy. Till the time I was working on LLM model, I was only getting 80% accuracy for support calls and other things. Now I started getting 90% plus. And then the impact starts coming in. At 80%, I'm not getting the impact of the AI. So that's why bank is frustrated by copilots. It's a big failure of copilots and banks are realizing that, that is going to give me some individual productivity, individual performance means, but 0 outcome from a perspective of making a banking system become efficient or operational system becoming efficient. So I see there are 2 patterns which I'm observing. One pattern, there will be feeling -- management will ask, what is the copilot outcome? If we spent $20 million on copilot last year, how much is the outcome which is there? And there is disillusionment will come in. So the same hype cycle curve, it will come down and people will start questioning that AI is working or AI is not working. And that's a place where some of the players will move out of that window where they are supplementing their Java resource and bundling as a packaging as an AI resource. So many IT services companies are packaging their existing engineers as AI engineers. And that is not the way AI will be working. To me, it's a transition phase where companies are repositioning, repackaging on the cover of the person that you are AI native engineer. AI native engineer has to think very, very differently. I'm personally going through the training program to AI engineer within Intellect. We have close to around 500 AI native engineers out of 6,500. So we have a long way to go within Intellect. After 3 years of struggling, we are able to convert only 500 AI native engineers. But the throughput of this AI native engineer is 3x the normal engineers which are there. So that's the kind of a change industry will see. And if this is truly happened at '28, '29, Indian IT industry will face severe issues, Indian service, IT service in -- and number of jobs will reduce substantially in '28, '29. Nobody speaks about it because it's a fearful agenda, because if IT services job goes down, then entire industry, financial sector and the automobile sector also get impacted. But that's what we need to prepare ourselves for that unless we change quickly the model of the way we work. So this is not a [Foreign Language] I'm giving. I'm just saying this is my observation. Maybe I'll be wrong. Nobody can forecast the future what will happen tomorrow, and the change is happening in AI very fast and many companies will be able to do it. But routine job, redundant jobs, which is a worker job, the blue-collar worker or the white-collar workers, I think those definitions will change in the next few years.

Sir, I was more coming from buy versus build from banks. Because of using these AI tools, can they -- will it shift or it will be a short term? So that was my -- you don't see that happening...

[Foreign Language]?

Yes, sir, please. I'm not from -- but I can understand. Please.

[Foreign Language]

Okay. And sir, my second question is last con call Manishji has referred to we are in advanced stages with, I think, IBM or global mainframe infrastructure leader, and you said you will update on that. Any update, sir, on that?

Yes, we're working on this M2C deals with them. And even the OTP was along with Microsoft which we did and we have now gone live with Microsoft. Arun announced that.

So we are not ready to mention the name. Is it IBM, sir?

It is all the 3, AWS, Azure, IBM.

And Kyndryl.

And Kyndryl.

Sir, one small request apart from your AI session, please. We are diluting around 1% of our stock every year. And if you can use the cash to buy back, it would be much better for investors in terms of wealth creation than -- I'm not saying I don't want dividend, but -- because free float enters the market and we see -- because this sector, as you said, is having so many other issues going on. It will be better for investors both from value accretion also stock market for free float that -- if you can do a buyback, it would be more -- it is your wish. But if you can consider that as a investor's request. Because a lot of free float is getting created and dilution is happening year-on-year.

Sure

Sir, can we assume that given like 5 tailwinds that you mentioned, if I'm assuming those are the tailwinds in the presentation that you have given, can we assume also -- can we assume that 20% growth is higher probability than the last 5 years because we had more headwinds in the last 5 years in terms of Russia war and COVID, and then you had tariff issues and all these things? And now that we have U.S. as -- the market opened up, high probability of 20% growth should be higher? I'm not saying give certainty, but we are entering a phase which are more clear than the last 5 years. And given that...

Let's hope with the people like Trump sitting there.

We just delivered a year with 20% plus. Let's celebrate it.

Sir, please conduct that session, sir. It will be helpful, because we are not tech people.

Arun, we have -- 2 more are there. Can we take at least one?

At least one you can take. But just don't close the window.

Shall we close it?

Take one more question, yes.

Okay. Next we have Mr. [ Srinivasu K ] from TIA.

Thank you, Arun, for explaining that accuracy gap between that 76 points -- percentage versus 95% at enterprise AI expectations. Actually that really answered most of our investor concerns. Thanks for answering that in detail. My question is about AI revenue that we had, INR 160 crores this year. What is the exact ARR on that? Can we expect it to be double next year?

We love to have it. That's what we are struggling for. Let's see what comes out. But that's what we are -- because our revenue will come twofold, Srinivas. One is in the area of direct Purple Fabric and all the Intellect product with now having AI-first product. So any product which you are selling -- now in core banking product we are selling, we are creating a knowledge layer and intelligence layer on the core banking product. There is no single product out of Intellect now going without AI-first. So if we allocate 12% of those revenues to AI effectiveness, then those revenue also will add to the whole investment bucket. That's what we do internally, but that will not be visible to you otherwise. But that's where the value of AI will be.

Okay. And my next question is given that Anthropic and OpenAI are launching given their patents every month, Purple Fabric is LLM agnostic? Is it...

Yes.

It is agnostic?

Yes.

Along with -- other OpenAI models are there, Open...

All our LLMs are agnostic.

Okay.

That's how we designed it. We knew that models will come and multiple models will come. There are more than 2 million models in the world.

So there are a couple of people who might be interested. In case they have any questions, please do write to us. Since our time is over, so we are closing the call. Thank you for participating, everybody. And thank you to the management team. Now you can log off.

Thank you.

Thank you.

Thank you, Praveen.