IRIS RegTech Solutions Limited (540735) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the IRIS Business Services Q2 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Siddesh Chawan from E&Y. Thank you, and over to you, sir.

Thank you, Lisa. Good evening to all the participants on this call. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our business risk that could cause future results performance or achievements to differ significantly from what we can express or implied by such forward-looking statements. Please note that we have mailed the results and the same are available on the company's website. In case, if you have not received the same, you can write to us, and we will be happy to send the same over to you. To take us through the results and answer your questions today, we have the top management of IRIS Business Services Limited, represented by S. Swaminathan, CEO and Founder; K. Balachandran, Founder and CFO; and Deepta Rangarajan, Co-Founder and COO. We will start the call with a brief overview of the quarter gone past and then conduct a Q&A session. With that said, I will now hand over the call to Mr. Swaminathan. Over to you, sir.

Thank you. Thank you, Siddesh. Thank you, everybody, for coming on the call. I'm sorry, I have a bit of a cough. So, please bear with me if I cough a little bit. Fortunately, it's not COVID. And even if it's COVID, I don't think it will get transmitted on the phone lines anyway. So, I think we've not had a very bad -- we've been quite happy with the way this half year has actually gone. And it's par for the course, if you look at it that way. And I think the numbers have shown a significant improvement. I think between Q1 and Q2, there's been -- there's not been that greater improvement of Q2 as we thought it could be and that's partly because seasonality revenues [indiscernible] filings. And yes, we really don't have any control over when the filings happen and so on and so forth. But I think that means something give [Technical difficulty]

Sorry to interrupt, sir, your audio is breaking up.

My audio is breaking up. I think I'm quivering with nervousness with whatever. No, no, so basically, if you can't hear me, please tell me again. So, we launched -- I think there were a significant number of additions to the customers in the last 6 months or so. I think the first lesson you would actually see is looking at our business from a half year half year, though quarter-on-quarter may not be the best way to do it. Half year is slightly better, year-on-year is even better. There have been no significant gains on the filing platform side. I think customers are still waiting to evaluate. I think regulators partly come back to office and have started issuing tenders and so on and so forth, floating tenders. So, I think there will -- I mean so the process of screening vendors have just started as far as many RFPs are concerned by many regulators. It's really a matter of your guess as well as mine when it will happen and how it will happen. So if it all comes together, I think it's good for us. But I hope it doesn't all come together, it happens gradually so that we have the bandwidth to be able to handle it. I think the highlight in the last 6 months that I wanted to mention, which is there in the press as well, is the [ actuation ]. I think while we are also seeing people at both the senior level and junior level, the senior level loss is really the one that bothers us greatly because unlike a body shop, unlike a service company, you can't really replace in terms of skill. There's a lot of knowledge that goes into it. So, we've lost a number of people at the senior level and on the people with experience more than 5 years, and they've all gone to excellent paying jobs elsewhere. So, I think the challenge that's in front of us, if you look at it this way, is how to fill up that gap, how to fill up the gap on account of people leaving us. That's certainly the thing that keeps me awake at night. The other big news is we've had a gentleman called PKX Thomas, who was with us many, many years ago. Thomas is a star act. He has joined as CTO. And I think he coming on board will hopefully infuse a lot of new energy into the company on the technology side, will also help us recruit significantly better people than we ever had. So, I think there are some significant positives on account of Thomas joining us. That's a very, very big decision for us. I mean, Thomas spent as much time interrogating us as we would him. So basically, much of the time actually went in his interrogating us to see what sort of a plan we had and whether he really had a role to play. Because after his initial stint in Iris, he has actually worked in very big companies and coming to Iris is a complete cultural shift for him in some ways. So, we're grateful to Thomas for joining us and I think Thomas is on the call that he will talk about what he's done and take any questions. We've also been happy to welcome Thomas on the Board of the company. I think Thomas coming on the Board of the company is a significant addition in terms of the technology side. So, we're again coming to shareholders very shortly seeking your approval for Thomas joining the Board. It will greatly strengthen the company's management. It will also greatly strengthen the company's technological approach. And will keep us on top of new things happening and so on so forth. So, I think -- so there's 2 big highlights is how do we deal with attrition and the fact that Thomas has come on board. I think again, these are 2 things that I would certainly want to highlight. The third thing that I want to highlight is finally, I think we're getting recognized. I think the fact that we won India's best fintech award for which we got an award from Nirmala Sitharaman is a very, very big thing. It's one thing for customers to know about us. It's yet another thing for juries with eminent people to know about us and give us awards. I think this year, it's really been flowing. I think we got this award in the month of September, declaring us to be India's best fintech. Following that, we got an award declaring us to be India's best tax tech. That's an award that came from TIOL, Tax India Online, which is a highly respected tax publication company. The jury consisted of 4 Supreme Court Judges, it had retired CBIC officers and IAS officers, the financial industry who retired. And I think getting an award from such eminent people is huge. The third thing that actually happened is also getting award from Dainik Jagran, basically declaring us to be the best technology company in the area of MSME. But I think each of these awards serves -- attracts a different audience. It gives us visibility in terms of different kinds of people. And I think between these 3, it goes us to do much, much more. And I hope that on the counter that we will be able to scale much bigger heights going forward. We are still waiting for regulators to start scaling up the plans in terms of the new mandates. However, the good news is that following the CAG's recommendation asking that the Government of India starts moving towards data standards, states like Tamil Nadu have actually issued documents saying that we need to move toward data standard. So the Tamil Nadu document talks about at least JSON being used, if not XBRL. The document mentions data standards by name and I think that's a very, very positive sign. I think we've also found that when states -- one state starts the whole process, other states will also follow suit. I keep repeating this all the time. The work that we do is long gestation when it comes to regulators. So, once the regulators actually come in and start implementing the platforms, that's when the regulated entity is coming by our other solutions. So, it takes a bit of time, but I'm happy that is going in the right direction. This on the Chorus Call, I'm told there's no facility to make a presentation as such. It's only that that we can keep talking. So, I think I'll hand over the call to Balu. Balu, you want to take over from here?

Sure. Everybody can hear me?

Yes, we can. I can.

Okay. Great. So, thank you very much, Swami. I will make it very short, but good to meet with all of the investors after a gap of 6-odd months. I hope some of you would have seen our investor presentation that we uploaded on the exchange website say a few hours ago. I will quickly run through the highlights of financial performance for the first half of the current financial year. I'll talk more from the moment of the 6-month numbers than the quarterly numbers since our kind of business, which we have been saying again and again, it's more appropriate to look at a longer time frame. Now coming to the numbers, firstly, you'll see that we grew at a good clip in the first half of the year with top line moving up by about 27%, while overall expenses increased by about 22%, which led to a sharp EBITDA growth of about 74% with EBITDA touching around INR 4.4 crores for the first 6 months. If you look at expenses a little more closely, you will see that employee expenses moved up against the corresponding H1 period by about 17%. While we saw a reasonably good jump in other expenses, mostly due to an increase in partner costs, because our partners help us in execution, travel cost, because we start traveling much more compared to the previous year and finally, hosting charges because our application is on the cloud, it is getting more and more used and the charges are going up as well. So, this has to be seen against the rather subdued numbers in the corresponding half period a year ago because those were again COVID years and we were very conservative in terms of spending. Let me now come to segment revenues. You will see that the Collect segment revenues grew in single digits this year as well, while the Create segment did quite well and continued its robust growth by clocking as much as 46% growth. The profitability also of the Create segment is much better compared to other segments. And that's because we are getting -- slowly getting the economies of scale, more and more people are using the platform and therefore, our margins are improving as well. At the same time, we are spending on sales and marketing product enhancements. But having said that, the profitability is quite decent. The average or annual recurring revenue is now at about INR 50 crores, while the share of recurring revenue is quite flat at 79%. And this particular point we mentioned in the press release as well that as and when we get lumpy orders on the Collect segment, this particular metric could go down a little bit as well. So, that's pretty much a story from an overview point of view in terms of numbers. I would say that the trend is pretty good. The growth numbers and the extra trajectory is something we can manage well. It's a matter of executing and getting and riding with the demand conditions, which are expected to improve. So, that's from my side at this point of time. Thank you.

Deepta, are you there?

Yes, I'm here.

Can you please bring in your perspective? Add some color?

Sure. So, I mean, nothing -- thank you so much, Swami. Nothing dramatic to add, except that we've -- it's been a good first half, a long way for us to go, of course. But both in terms of the performance if you compare with the corresponding half of last year as well as in terms of growth in our customer base, the awards we have received. Overall, it's been a satisfying first half. We, of course, recognize and we keep stating that we -- there is much that we need to achieve, but pleased with taking a pause for a moment and pleased with this performance. Thank you. Over to you, Swami.

Gautam, are you there? Gautam? Hello? Gautam, there?

Yes, Swami, I'm there.

Gautam, can you talk about the LMS software?

Yes. So, at IRIS GST, we have launched our product called IRIS Litigation Management System. It's an application which actually helps large corporates to manage their entire GST litigation life cycle, starting from the time an audit is initiated through various stages. So, it's a very custom-built application because GST itself is new. And it basically helps especially large companies, which have got a large number of GSTINs to centrally manage all the litigations. And with 5 years of GST now, the compliance pieces is sorted out, people have all well-established process in place. The next big jump or the shift that's been seen is in the space of litigation. And that's where we feel this solution is going to play a big role. It's been really appreciated well. We have got -- started getting some confirmations on orders. And the next phase after this would be adding some additional intelligence and tagging it to various case laws and various repositories, auto drafting replies and all. There is also a requirement that if this can be extended to include direct tax litigation, which we are actually considering.

Gautam, can you also throw some -- especially one the IRP license that we got. We talked about it last time, but what has been happening?

So, we are one of the 4 license holders for IRP, which is an invoice registry portal. So we, along with NIC, the 4 private players along with NIC would -- will be allowed to -- are authorized to generate an e-invoice. The current mandate for e-invoice is INR 10 crore and above turnover -- taxpayers who have a turnover of more than INR 10 crores. This mandate is going to come down to INR 5 crores from 1st of January. And from 1st of April, it's expected to be -- the threshold is expected to be lowered to INR 1 crore. So, a significant number of new taxpayers are going to come under the e-invoicing mandate, and that's why government is looking at additional private players to build capacity as well as build resiliency. And as private IRPs, we will be also allowed to provide value-added services on top of it, which can be charged. Right now, the integration with GSTIN is completed. We are in the UAT phase. Stress testing, load testing is happening. We expect the private IRPs to go live sometime in the first week of December.

It's gotten delayed significantly. Could you say why?

There are multiple stakeholders and multiple requirements. So NIC is -- the existing process had to be merged with the new process. So, NIC had to do the deduplication setup. So, while the private IRPs were ready, GSTIN had to build some new systems and applications, some new APIs to test, ensure that there is complete reconciliation and the [ debug ] system is able to handle this kind of a load. So, there were multiple, I would say, stakeholders and multiple participants. So, the whole integration testing has taken time.

Moderator, I believe my colleague Thomas has joined, but he is there as a participant and not management. Can you please upgrade him so that Thomas can talk?

Sure, sir. Give me a minute.

Can you change? His name is PKX Thomas.

Yes, sir. He's line is unmuted.

Have you unmuted him?

Yes, sir. I have unmuted his line.

Okay, lovely. Thomas, are you there?

Yes, I'm here.

So Thomas, welcome aboard. So, welcome aboard. Can you share with the audience your first impressions as to where we stand as a technology company?

Well, actually, yes, Swami. Actually, like on the technology point of view, actually, like the company is a lot matured actually, like, the maturity level is pretty high. And what I've seen is the level of maturity work, each of the teams, actually, this was their own problems rather than escalating them, which I have seen in many of the companies. Actually, that is a great maturity level to be in and which actually I would like to continue and inculcate move forward. It's that level of maturity or that level of independence with the technology team is not commonly seen. That is one. Second is the kind of technology platforms, which we use, which we actually upgrade and we take it forward, which is actually we use the latest set of tools and the latest set of technology platforms like [indiscernible] or the Java, like it's very stable environ high-end platform or whatever is required, like the level of Python, we use for automating things and like doing things. So, we take the best of the breed to the technology and mix it in the right proportion. So, I would say more appropriate technology platforms everywhere. Pretty good. Thanks.

Thomas, can you please share with us your background because most of the people here don't know your background. I do, Balu does, Deepta does. Like can you please share with us your background your career?

Okay. See, my career, and this is my second innings with actually IRIS. Actually, I was here when IRIS initially started. So, that is how I know all of them and all of them know me. That is one. So having said so, actually like from IRIS, I have moved to the e-commerce world, like we found a tech company called Cleartrip, which is now with Flipkart, the business is with Flipkart. Cleartrip.com, which is actually in your travel space. From the travel space, I moved to Reliance. So, the e-commerce, the initial e-commerce -- the learning of the e-commerce in Reliance actually was done along with my team there and like we started with a few of the high-end brands and grocery, which is actually -- now we are -- I was there in Reliance, there was -- now we have more than 15-odd mono brand high-end websites plus a multi-brand website, et cetera. So, that's actually -- I've been in that e-commerce space. And from that e-commerce space, we've done a lot of automation, including the entire automation of ERP Plus, the website in the Hamleys U.K. and then now back with IRIS to take the technology forward.

So, one thing that appealed to us when we brought Thomas back on board is that he is not just a technology person, he's also strong commercial orientation, which I think would stand the company in good stead going forward. So, he's not only a technology person. He understands business and I think that came through in some of the business that he ran earlier. Balu, you want to talk about Thomas?

Sure. It's wonderful to have Thomas back. He brings in tremendous technology understanding, strength, ability to choose the right technology. Not only that, we feel having him also would inspire our team members to support what they're currently doing and to make sure that we build strength to innovate on what we already have. So, I think it's a combination of bringing solidity to the technology stack that IRIS has and bring in, of course, the commercial angle as well because even actually build products we do it with a commercial focused commercial acumen, which I think Thomas is bringing in ample.

Deepta, you want to give some comments, because considering that you actually wooed him and brought him back.

So [Technical difficulty] maturity and huge experience and commercial bent of mind, but already kind of some of the early things that I think Thomas himself mentioned, the teams work tremendously independently, which is great [Technical difficulty]. The other thing that Thomas is already beginning to bring in a level of synergy, which actually will [Technical difficulty] so ensuring that...

Sorry to interrupt you. Ma'am, your audio is breaking up.

I think one thing that Thomas -- am I clear? Am I audible now?

Yes, please proceed.

Okay. I think one of the things that we're already is seeing, nicely complementing the independent and the [Technical difficulty] of our business units with across synergy across different business units and teams. And I think those are definitely going to kind of yield [Technical difficulty] results. And I think the other the -- that level of, the kind of maturity and processes and those additional things that are required for scale because the businesses that Thomas has been involved with outside of IRIS have all been -- came from small to very, very large. And as we are on the journey, I think that also I think will add hugely, we're already beginning to see early signs. So, very excited. And I think with time all of us will start unfolding. We are already seeing it internally. But as you can't see that, it takes a little time for it to like block them and bloom, think we'll start seeing that more tangibly in the months to come. Thank you.

Thomas, one question that I keep being asked all the time is that, most of the companies in India are IT services companies, which basically do provide the time and material kind of work, body shopping and so on so forth and also projects [Technical difficulty]. Are we in the round place? Are we -- we are in a niche area. How should a company in a niche area be looked at? Are we -- technology bets that we are making, are they right or wrong? How would be able get to know? So, when it comes to IRIS, what message do you want to convey to people on these questions? Thomas?

Sorry to interrupt, but the line for Mr. Thomas has got disconnected.

Fine. We'll get Thomas back. So, I'm through, Balu is through, Deepta is through. We'll throw the floor open to questions now.

[Operator Instructions] The first question is from the line of Rohit Potti from Marshmallow Capital.

And congratulations on a very good set of numbers and on getting Mr. Thomas on board, he sounds like an excellent addition to the team. My first question is on the rights issue, sir. So, we've talked about attrition being a pain point for us, and I believe that the right issue was to address the funding shortfall that we have to retain employees and to invest in growth in terms of marketing personnel, et cetera. So, what's happening at the right issue end?

I couldn't hear most of what's been said. Sorry.

Am I audible now?

Now, you are. But you faded away on the second half, you said what about the rights issue. You talked about raising money to deal with attrition and then after that I completely lost you. I think as well as attrition of your voice.

No, I just was curious to know the updates on the rights issue because I believe the primary reason for that was to manage attrition and to drive growth.

So, I think the rights issue for us bad joke in some ways because the last call that we had if you remember what I mentioned, is that many shareholders basically say that if the promoters don't subscribe to the rights issue, it's very bad news. I don't have the money. Balu doesn't have the money. Deepta does not have the money. The promoters cannot subscribe to rights issue. We have assiduously built a company which has a certain level of integrity, which I think is second to none. We have built a company where people do not have to worry about us being on the wrong side of the investors. We are here for the shareholders. At the same time, I'm also mindful of the perception it sends on account of things like this. The very same people who initially said it's okay for you to not invest in the rights issue, made a turnaround and said, if you don't invest in the rights issue, then you're sending a very bad signal especially with the lack of thunderous growth in the company and so on and so forth. So I said, I mean that's the way it is, that's way it is. We already have permission from one stock exchange, the other stock exchange we are waiting for it. They're also asking the same question about whether the rights issue, why do promoters are not subscribing, we've given them answers. So technically, we're still waiting for approval, that's the technical answer. The truthful answer is, well, I think if market perception is going to be very negative because the promoters don't subscribe, even after my maintaining ad nauseam over the last 5 years, we have no money to subscribe. I'm finally getting a salary after so many years. I think, and we don't have money stashed anywhere else, I don't know what is to do. But the truthful answer is I think we are -- we're not -- they're in a quandary bordering on saying, well, we will not do it.

And...

But Rohit, they are in quandary. There is a quandary. I'm very careful with what I say. We are still in quandary, I said, bordering on, tilting towards.

I mean -- thank you for the candid answer. And I mean, I've been with you guys for a brief while and I'm very happy with how -- I mean how you conduct yourself and how you communicate with everybody in the [ verdicts ]. It's uncommon to see the candor and transparency that we see at IRIS. My next question is generally on growth, sir. So, if you could speak about -- I mean we've seen decent growth in Create. Collect has been stagnant given what you said about the regulators not opening up. But I remember in the AGM, we -- so first let -- so we spoke in the AGM about 4 tenders probably opening up by December. So, what is the update here? When can we know the -- because Collect, it's been quite a while. And when do you think in high probability we would see something moving here?

Your guess is as good as mine. Yes, we mentioned that there are projects we bid on. There are clarifications going back and forth and so on and so forth. The good news is we've not lost anything. The bad news is we have not won anything. So, I think it's -- I mean, to use an example, [indiscernible]. So, I think -- I don't know whether Chorus can translate that when it comes to a conference call transcript. But the point is we don't know and I certainly do not want to hazard a guess as to when it will happen. Will it happen tomorrow? Highly unlikely. Is the probability it will happen by December? Fairly high. Yes, but we should also know that many of the Christian countries go into limbo and go into vacation mode from, say, in December 15. So, if at all something has to happen, it has to happen before that. Otherwise, it will happen only after about 17th of January. We are optimistic. We're reasonably confident that we have a good value proposition to share with people. I think our proposal has not been rejected as I keep saying. So to that extent, we're happy. When it will happen? I really have no idea, Rohit.

But -- so is it very difficult to give an outer time line? So, can it -- will the outcome, whatever it be, be visible to us in this financial year? Or will it move to the next financial year? Or is that also a little too difficult to say right now?

So, now when I say of the iFile project, the Collect project is such that we initially sell the product to the customer. So, we sell iFile to the customer and book the revenues based on the accounting standards, accounting norm. So, to the extent that we're able to sell iFile to the customers, we will book those revenues if we make a sale. If you don't make a sale, well, we don't know. And to answer your question about time frame, so there are countries which work in January-December budget cycle, government, I'm saying because all regulators are all government bodies as you know. There are governments end with [indiscernible] April-March cycle, and there are governments July-June cycle. So, there are -- I don't know the specific cycles for the 4 projects where we are bidding right now. I don't know the answer to this question. But having said that, typically, we found there are more people who work December-January -- January-December cycle than the other cycles. So, that impact will have on decision making. So, typically, if the pilot gets flown over to the next year, carried over to the next year and so on and so forth. So, do we have an answer? No, we don't have an answer. Do we have some guesses that it might happen? [Technical difficulty] But as I said, I'm not -- those guesses on open forum or even a private forum. We shared internally within company. We keep chasing people. I mean there are people who are constantly calling those -- so we recently hired a very senior colleague called Rajesh Srinivasan who basically has been hired to chase up these potential iFile implementations. Balu, you want to talk about Srinivasan for a second before I get on further with this. What is Rajesh's role?

Yes. Rajesh, primarily is looking at business development in the Collect segment. He brings in a lot of experience in selling BFSI solutions, especially the Basel III kind of software solutions to Middle East, Africa and India. So, he was with [indiscernible] before, then after that he was with a firm, which specialized in this kind of software. He does have the right connects and we feel right now the way this woken up, they are looking at how to look at the next round of tech refresh in their platforms. And he is just getting oriented and he's already started talking to a few potential clients as well.

Also, one more thing Rohit, I must tell you is the next XBRL Asia Conference is being held in Bombay. About 20 countries from around the world are participating. SEBI is participating, RBI is participating. Certain agencies of the government are participating. And I think that will shine significant amount of light on XBRL implementation in India. And I think that can augur well for us. Again, Balu will talk about the XBRL Asia Conference. Balu also serves on the Board of XBRL India. So, maybe Balu you can talk about the impact XART will actually have in India.

See, XART is a -- it's a program which has been running for the last 5, 6 years, of course, because of COVID it has been at hiatus. But this is where across Asia, the greatest come and share their experience in working with the information standard and look at how to take it forward and what all can be done going forward. So here, this time the Institute of Chartered Accountants is hosting it. And it's a prelude the World Congress of Accountants, which is again hosted by ICAI on just -- just after the close of XART. So, we see many Asian countries participating. Some of them are our clients as well, they're also coming. We also are presenting some of our experience solutions, et cetera. So, it's a 2-day conference. We see that again giving some impetus to regulator talk in terms of what to do next and we want to be there in that audience. So, we want to be talking with them and we are there.

Rohit, I'm sorry if you didn't get the answer that you were looking for, but that's the best we can do. And one point, Rohit, which might interest you is at the XART Conference, SEBI is presenting data on ESG filings from about 200 companies. So, SEBI is actually ratcheting it up understanding, ratcheting it up XBRL implementation in India [indiscernible]. So, you'll actually see some major stuff happening from there going forward.

Could you speak about the Create segment because I think for the last many calls, we were very excited about the growth in the segment driven by ESMA and U.S. for filings? So, what will drive growth here in the next couple of years?

Our customers on ESMA in the last 1 year, which I think is quite satisfactory. We also had about 100-something customers in South Africa for the CIPC filings. So, I think the next mandate has not come yet. Maybe Deepta, you can take the question on Create?

Are you able to hear me?

We can. Speak into the mic. If you keep moving back and forth, we don't.

Okay. Am I audible now?

Yes, you are. And then you fade away because you move back, please.

Okay. So yes, good question, Rohit. So, I think like we mentioned on one of the calls some time back. Normally, when there are mandates we get like a tailwind of growth. And so when we don't have mandates or in the Phase I mandates are still not rolled out or announced, then we are in the replacement market, right? So, we have already seen, for example, some early movement in the replacement market space in the case of FERC. So, what we're kind of doing is going after existing customers and who already are using other solutions perhaps not as efficient, perhaps more pricey and then looking to see whether we can switch them over to us. So, that is kind of the strategy. You may also remember that we talked about our disclosure management solution the last time around, and that is mandate nonspecific. I mean it is not linked with any mandate as yet. And we had kind of talked about rolling out the disclosure management solution. So, now we have a couple of early customers. And as we already mentioned and as you know, what typically happens is when we roll something completely new out, there is a curve, sort of early customers take it, adopt it, we get rapid feedback. [Technical difficulty] agile, build and rollout basically. So, we already have a pipe building in that kind of area. Now when that starts in new markets where we have gone with CARBON, it almost takes a year to stabilize once we roll [Technical difficulty]. But once that starts, we think there's an opportunity in spaces not necessarily related to that sudden tailwind of mandates. So, I mean there are both. There is a replacement market that is waiting for new mandates that are [Technical difficulty].

I'm sorry to interrupt, ma'am, your voice is breaking up.

I'm sorry, I haven't moved. I haven't moved an inch actually. So, okay. I'm not sure how much...

Right now it's better.

Okay. So, I said there are basically 3 things, therefore, there is, when we don't have new mandates or when we don't get the tailwind of mandate, there is a replacement market that we go after. The second is the adjacencies like the disclosure management, which we have launched. But like I said, normally, these things take a while as we have seen from chasing after new opportunities, it almost takes us a year to stabilize and offer it, but the early customers really give us a lot of ramp-up. And in markets -- in markets like the disclosure management, we already have a larger pipe. But once we nail it, then we can kind of start looking to ramp up irrespective of mandates. So -- and that's what we would look at. And of course, I think we also mentioned the newer mandates that are on the horizon like ESG, like AXA, like FERC for Phase II as and when they announced. So, those are the kinds of things that would give us the growth going forward. I'm not sure if I was audible.

Yes, you were audible. I mean it was clear. I was curious, so on the answer that you -- follow up to the answer that you gave, 2, 3 questions. So #1, so like you are trying to bring customers in the replacement market I'm guessing that the competition will be trying to win customers from our customer base. So, are we seeing any attrition there? How are we positioned there? #1. Second, there was -- I mean you mentioned the disclosure management platform and we have initial customers, et cetera. So, what is the pricing there? And what can be the potential market size? And what is the go-to-market strategy there? That's the second question that I had. And similarly, on the Litigation Management System as part of the GST segment as well. So, what is the pricing there? And how is the traction? And what is the go-to-market strategy? That would be great to know.

Pricing in DM, we will not talk about for obvious reasons. As far as the question about attrition and taking our customers, if you look at the last 6 months or so, we've not lost a single customer in Europe, we manage 44 customers. So, that probably answers the question that you asked. It doesn't mean that we have sleepless -- we don't have sleepless nights about losing customers. The -- on the Litigation Management Side, if Gautam wants to share any pricing information, he's welcome to. But with disclosure management, we don't share because of international implications. Litigation Management is the only company in the country right now offering solutions like this from what I know. So, Gautam, you want to take the question?

Yes. So, we have actually a differential pricing model. So, the pricing for banks is the highest because of the need and we see that their ability to pay for this kind of solution is also there, followed by the BFSI, basically, the insurance companies. And we are finding -- and the pricing for the corporates is the lowest tier. And within the corporates, the pricing is dependent on the number of GSTINs and average number of cases that they have actually received in the last 2 years and going forward, what at going to be. So, that's there. In terms of traction and go-to-market, our first initial approach in the last 3 months has been doing a direct reach out to all our customers and all our direct clients as well as our prospects. We have -- this product has been built along with a partner, a firm called DAA. So, they are the actual domain experts. So, they are the ones who have been actually giving the inputs for the solution. So, DAA customers and IRIS customers have been reached out to and all the prospects. Now that we have kind of started talking about it, there is news in the market. We are also looking at going to the market through various other partner firms, other CA firms outside of Big 4 who have their own set of customers. One interesting possibility in fact, we've got an inquiry from couple...hello?

I lost the last bit. Gautam, you talked about an interesting customer, something...

Interesting proposition from partners who are actually looking at -- who have asked if we can white-label the solution with their branding and with their logo which they want to offer it as a platform because litigation, these CA firms offer advisory services and litigation services on a case-to-case basis. So, for them, it gives an opportunity to actually also sell a platform, which they have access to with a model that they do managed services on top of the platform or the client actually uses the platform directly. So for them, they would like to position it as a tech platform along with litigation services. So, that's the second go-to-market, which now we have started talking to a couple of these CA firms.

Gautam, competitors for the product. Gautam?

Sorry.

Any competitors for the product, Gautam?

Yes. So, there is. So, EY has a product, but it's more of a generic product. EY -- the Big 4 have built something over the last couple of years. But the feedback that we have been getting so far is that because we've built this product completely keeping in mind the GST regulation and the GST flow, it's -- the other products don't come as close to this. So, we've gone far more deeper into it. On the other hand, the other Big 4 offer a more generic GST litigation product along with it the direct tax litigation also. So, companies are interested in taking a solution which can actually take care of both direct and indirect tax. So obviously, for us, we would actually look at having the direct tax model also built sometime soon.

So, Rohit, to add to what Gautam just said, a little while ago is that typically when the Big 4 build their own products, they're able to go after the big enterprises and they don't actually [indiscernible], that's one part. Secondly, the small chartered accountant play an important role, the CA firms, they play an important role. The law firms play an important role, they will not necessarily go after the Big 4 products from what we've seen in the past. Therefore, there is a large market outside the big enterprise market, that's still waiting to be served. It does not mean that you don't compete with Big 4. We will compete with the Big 4 and we will also offer a large enterprise market. So, just to say that there is a large market out there, which is still untapped.

[Operator Instructions] The next question is from the line of Vikas Kasturi from Focus Capital.

Sir, about 1 year ago when we were discussing the Q2 call of FY '22, I had actually suggested that you go for a rights issue. And then subsequent to that, I had also e-mailed you giving some reasons for that. And I only wish we could have brought in a strategic investor or something like that, 1 year ago, when our prices were double of what it is now. I mean, you could have raised a lot more money by diluting the same amount of equity. So, I think we missed that opportunity, sir. But that's just an observation. My question to you is -- so you now have so many products, right, in the Collect, Create and Consume segment. So, which product would you say is your Trojan horse, which will sort of get you an entry into the client organization? And after which you can then position your other products? Would it be the IRIS CARBON?

Excellent question, Vikas. And as I said, no point crying over spilt milk or lost opportunities. I remember that you mentioned this, so thank you very much. I think shareholders like you who are constantly thinking of the well side of the company, I think add a huge amount of value to the company, for which I owe you a deep debt of gratitude. So, thank you very much. We lost the opportunity. But as you said -- somebody said in the market, you can buy at the lowest point and sell at the highest point. It doesn't really work like that, as you know. But as I said, we continue to pursue. If we had -- I'm not sure so much about the strategic partner, at least not in India. There could be overseas. I don't have an answer. There are discussions that keep happening from time to time, but nothing necessarily comes to fruition because ours is a very complicated business to understand. As far as the next point, you mentioned about Trojan horse. I think every one of the products has got its own dynamics and needs of different segments of the market. So, I think today for example, we recently we launched a product, which allows you to download an XBRL document into Excel sheet. It may seem like a very small product of no consequence. But actually, you'll be surprised how many people have started using it. So, getting into people's minds is literally what some of these projects do -- products do. So, I don't know how, for example, Peridot, our application, which is used to verify counterparty compliance for GST would be such a hot -- is a hot product. So, Gautam, you want talk about Peridot for us. So, Gautam is the brain behind Peridot and Peridot is a huge Trojan horse for us in terms of capturing mindshare in the GST space and all compliments to Gautam to it. Gautam?

Yes. So actually, when we had launched Peridot, we had no idea that what shape it will take. So, we've actually let the users actually dictate and it's completely grown organically a word of mouth. We've kept it very simple. It just allows you to scan or check any GST number or any company by a voice or by just by typing in the name. It tells you the overall status, the compliance status of it. And as the users have grown, we've added more features. Now, we've added features like you give consent and you get access to your own GST data, your reports and dashboards and stuff like that. At any point of time, there are more than 400,000 active install base, and we have more than 200,000 monthly active user base. So, we actually look at the install base rather than looking at the downloads. And these users, about 50% of the users are small merchants, SMEs, traders, small businessmen who actually want to check the genuineness of the counterparties or the people or the vendors from whom they are actually dealing with because it actually helps them manage that into tax credit. There are a lot of government officials who actually use Peridot and swear with Peridot because it helps them track and manage the SSEs in a very seamless and very easy manner. There a lot of chartered accountants who use it for their customers. There are a lot of company employees, people working in the procurement department, people working in accounts department who actually use...

Gautam, I'm going to interrupt. We're getting off track here. So, when you talk about Trojan horse, I did not -- we did not realize and he has launch Peridot as to what all it can actually do. So today, Peridot is the reason why many companies come to us basically take data from us for promoting digital lending. So, for every business segment, every product in a certain way is a Trojan horse, which has potentially huge multiplier effects for us. But we have capitalized most of them as of now. Peridot is capitalized on, but not monetized it to the extent that he possible should going forward. I mean just think about it this way. If you have 2 lakh, if you have 4 lakh installed base today and say 2 lakh, very, very active users and 90,000 people are using it literally on a monthly basis, these 90,000 MSMEs who are right to borrow. So, just do some simple calculation in terms of what will happen if they start borrowing and if you come up with a model that we're able to leverage that. So, the possibility is simply are endless when you start applying your mind to it.

Yes, sir, I agree. There are a lot of possibilities in your line of business, and I really wish that because every time we start a discussion, it always ends with the company, we just -- equally, we had more resources and -- so yes, sir, I'll go on to my next question. Could you just tell us your client retention numbers in percentage terms? I know you said that it's a very, very high -- very, very sticky kind of business, but would it be in the high-90s?

It's much higher, but the point is, in the case of Create, for example, we lost 1 client who took away a significant number of customers because we went through them. We learned the lesson of therefore, not of trying to ensure that we don't have customer concentration. But generally speaking, I don't think we've lost too many customers. In the case of iFile, which is the Collect space, I think just 1 or 2 people after the 5-year contract was over, decided not to renew it. That was long ago. I think Thailand was one of them. I don't remember who else is there. In the case of Create I think on CARBON, I think it's still very early days, and I think it's too early to lose customers. I think it's something we should see over the next 2, 3-year period. And because of NCA filings, again, as I said, basically use of CARBON, did not lose too many customers. In the case of GST, we have gained more than we have lost. And one of the reasons why we lost some customers in GST is because of absolutely product repricing happened in the market, rock bottom pricing. But I think these awards like Best Tax Tech award help us in terms of conveying a message to the market that we are a very serious player. So generally, when you said 90%, I think that's not a very -- that's on the lower side. I think our target is much higher than that. Except for the 1 aberration of 1 customer in the U.K. who would pass on a significant number of customers to us and is no longer with us and [Technical difficulty] and therefore, we've lost some customers there.

And I have 1 last question. Sir, earlier, I noticed about a year ago, there were a lot of online demos that Ms. Anuradha would do. I would attend those. But have those demos not been happening of late, sir?

[Technical difficulty] Happening. I think somebody needs to put you on list, I think there are demos that happen almost every other day. And just to give you a sense as to how active we are in terms of demos, it's not only the Indian market, but also the overseas market. So, maybe Anu, on the call, please send him invitations to demo that maybe of relevance to him. So, that he will know what's happening. Anu, are you on the call?

Yes, I'm here.

Please ensure that people know that you're inviting people unless, even if they're competitors, doesn't matter, just invite them.

Yes, definitely. I think one of the reasons why you don't see any of those online ones as much often as you do is because now post-COVID, everything has opened up. So, like conferences are happening physically instead of virtually. So, that would be possibly one of the reasons, external ones. But internal ones, yes, we organize more webinars and seminars on various topics.

Anu, since I'm also a shareholder, I'll ask you the question. I think it's not -- is it smart to basically to say, since things have opened up, let's go to Paris and do a demo, instead of doing online demos, so much cheaper. As a shareholder, I'm actually worried if that's the pose we take? I hope that's not what you meant.

No, no. So, we get invited to speak various seminars as well. But we're also kind of going to start doing our own seminars. And going forward, we are also being invited by, for example, I think we are expecting 1 webinar in December from Italy, that's going to be an online one. So, I'm sure on our social media, you can see updated for more webinars and seminars coming up.

Thank you and wish you all the best, sir.

Thank you very, very much. And I think shareholders like you keep us accountable and also give suggestions because we're extremely valuable. We can't always act on every suggestion as you can imagine, but we pay heed to every suggestion. We evaluate it some variable to act on, some we're not able to act on. So, please bear with us, if not everything gets acted upon.

The next question is from the line of Rohit Potti from Marshmallow Capital.

I just wanted to hear from Balu sir, on -- and given how we do not have as concrete scenario for growth that we had in the last 1, 1.5 years from Europe and U.S. So, I was just curious on our cash flows and our intent for growth. So, with us being on borderline on rights issue and us hiring senior resources. So, how are we played on cash flows? And how do we think we are geared for growth there?

So Rohit, I know you don't want me to answer the question, but you want Balu to answer the question and rightly so, because Balu is much smarter than I am, and also there is some [Foreign Language] bonding going on perhaps, who knows. But the point is let me take the question slightly differently. It's not that we don't have a strategy. For example, the U.S. government reporting is opening in a very big way. And I think we have a very conscious strategy for U.S. government reporting. In fact, my colleague, Anand, who heads the U.S. operations is actually coming down to Bombay, I think next -- this week where he will actually be spending time talking about how to visit this whole government reporting thing. So, there are specific initiatives we're actually looking at or the ESG initiative in Europe, which kicks off next year. So, it's not like we don't have a strategy. It's not like there's not much happening. There's a lot that's happening, and some of these things can actually happen without too much of capital as we muddle along. But having capital always helps. But I think this is a question on cash flow and all that stuff. So, let me also add one more thing here. A lot of people talk about Infosys as a great company. What really made Infosys a phenomenal company is the day Narayana Murthy basically said, I will not do the GE work anymore. He actually walked away from the GE project. So, that led to some serious problems as far as finances are concerned. I think in our company, the fact that we've hired somebody at this kind of price tells you that we are brave and that we have a very strong confidence, very strong confidence in our future. And I'm also -- and the fact that I'm starting to get salary. So, my point is that we -- for us, this could be the ah-ah moment that takes the company to the next level of growth. Balu, over to you.

Well, yes, you put it very succinctly. But from an emerge perspective, Rohit, I want to mention that we are operating cash flow positive. We continue to be doing that. And I don't see too much of a problem in managing our cash flows. Having said that, we don't have the luxury to spend too much at this point of time. I think even that situation could recede if you are able to start getting some traction in the Collect business. So of course, if you have capital and if you have the next array of planning assets and marketing spend in a much more aggressive way, you could grow at a higher rate, much higher rate than what we currently aspire to. But even at this point of time, it is not that we are not looking at decent growth. We are, and we can continue to grow at this rate as well. And there could be some ballast coming into our ship if you're able to get some Collect customers as well.

Balu, I'm worried. Rohit just said, we are all at seas. And you have ship example, so what will Rohit say next. But that part, Rohit, let me keep that aside, the point is that we are not fully utilizing our ICICI Bank limit. That's also a source of great comfort. So actually, there's enough headroom available. And please also know that what is luxury for IRIS is usually necessarily for many other companies. So, we are frugal, and I think that really helps us grow the way we have grown, and I think it will keep us growing. We are -- as we said, we are still throwing up cash. And please also note that given the way we are structured as a products company, I think every -- even 2%, 3%, 4% growth in revenues will actually throw up a disproportionately higher amount of cash. So, I'm not terribly, terribly concerned about that. But as I said, your point is well taken, but there is a strategy. There is a strategy, there are growth opportunities, and there are mandates that we're latching on to, like the U.S. government one. Anu, since you're there, can you just share with us something about the U.S. government opportunity? Anuradha?

Can you hear me?

Go on. Tell about the U.S. government opportunity, state government.

The U.S. state governments, they are requiring the local agencies, what they call a state agencies to start reporting in XBRL. We are seeing some early momentum around this. For example, states like Florida, Michigan, et cetera. So, some early traction we are able to kind of see. So, I'm sure each of these states will kind of pass laws, release taxonomies, et cetera. And I mean, of course, it's too early to share any numbers, but we're definitely seeing newer opportunities in the U.S. beyond the SEC mandate and the energy mandate.

So, this is helpful. And Swami sir, I asked Balu sir, because it was a financial related question and I thought I'll address it to him and no other reason. And my last question is on and for Mr. Thomas. So, I mean it's interesting that he was in IRIS early on, but later on, it seems like he spent a lot of time in B2C businesses. So, I thought it would be great to hear from him. He did explain his views on the tech maturity that the company enjoys. But what from his vantage point does he see on the commercial side? Are we making products which are beautiful, but we are not able to sell for some reason or what would he see -- what would he want to improve in the commercial side or maybe in the next 2 years? And what should we as shareholders look out for on that front?

Rohit, the only thing I will not plead guilty to is that our products are beautiful. I think our UI has a problem. And I don't think our products are beautiful at all. I think we focus on functionality. So, please don't accuse us of having beautiful products or beautiful looking products. Thomas, over to you.

Yes. Actually, hope I can -- you can hear me?

Yes, Thomas.

So, as actually, one of the key things we need to actually invest some money exercise on the user experience of the products. We need to go to next level. The current level may not be that great in the near future markets. So, we need to actually improve upon that. So, one is -- that is actually one of the focal points. The second one being actually like slightly turned the current development process to where more of product-driven process where when we actually add functionalities, et cetera, each of the functionalities is actually debated upon the commercial success of it. Or like why should we have a functionality. Even a simple smaller functionality to a complex functionality, just give a little thought about the commercial angle to it and a usability angle to it. It's not only we already commercial. Sometimes the feature could be becoming much better user-friendly than much better -- easy to actually navigate or use the product, which could actually have a value much higher than the commercial value also. So, have a product-driven approach. That is actually the next level of maturity of the technology team. Takes you to that kind of implementation. We already started driving on the same and -- on both the sides, on the user experience as well as on making it to a more product-driven organization. Organization need to be more potential.

Sorry, my last question to you, sir, is and for this call is just curious to know, I mean, from your angle among the opportunities that might have possibly been available to you, how come you chose IRIS? I mean, is it to pivot from a B2C to B2B business? And I mean Reliance is a very large organization with a lot of entities, so movement within would have been possible. And IRIS is a smaller B2B organization. So, I was curious to hear and at least have been among my colleagues that and friends that as people become senior in organization, they try and move to more mature organizations, but you come back to effectively a start-up, I would think. So, just curious to know your thought process behind this decision.

See, it could have -- I'm saying, I could have -- because of, like that is what I feel. It could have some impact on what my personality could be, okay? The reason being like, I love being in the start-up organization. If you look at the one at Reliance, what I've done with Reliance is not what was existing there in Reliance. Actually, what I did was actually introducing e-commerce and learning the entire organization into the e-commerce way of doing things. Okay? Like -- so that has a different level of commercializing in the sense that, for example, a product could be sold in different parts of India at different times. It is perfectly fine. But when it comes to e-commerce, it is not fine. Okay? So, those kind of commercial difference actually happens. And that is actually driven into the organization. Same day when I was actually talking to Swami and the team, with Balu, et cetera, I realize that there is a lot which actually like I can do and implement there and adding to my nature of being in a start-up organization. I know IRIS is a much better organization. But the scope of actually the changes that I spoke of things, which we can execute there and actually, that was pretty interest. So, maybe I don't like a cushy job. I would like a little -- little in the hands, et cetera on my personality.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments.

I think Deepta, why don't you have the last word, this one today. Deepta? Okay. We can't find Deepta, it's okay. So, I think it's a bit of a hyperbole to basically say that you know what, everything is wonderful going forward. I think we still continue to be at the mercy and what the decision-making time frame that regulators actually take. I think we still need to get ourselves funded properly. And I think the fact -- I think if you want to look at signals as far as the company is concerned, whether it's the hiring of Thomas or whether it's the change in the composition, when we were a completely iFile-driven company, you would see the lumpy revenues in the second half. You'll see revenues in the second half and not the first half. If you see this time, Q1 was good, Q2 was not so good. Let's see what Q3 holds, I have no idea. I think we're trying to even out things over time. I think the company is in transition. I think the fact that getting recognized with these awards, I think is a huge thing. And I think what we are now trying to do is to ensure that we have stability of revenues and predictability of revenues from an investor and analyst point of view. It's not going to be easy, but we're going to try. And also, we are plugging away by fixing all the gaps in the hiring. I think Thomas' efforts in bringing in good people, when you get somebody like Thomas, what happens is he raises everybody. He raises everybody's level quite literally. And I think that's what's happening as far as the company is concerned. You can see some extraordinary thinking happening. And just to give you 1 small story, this will appeal to you. In the earlier company that we had, when Thomas was there, we had a guy who blew up INR 7.5 lakh 1 night on data downloads. Those days, data downloads are very expensive. We did not sack him, but we were amazed that the guy would actually do it. Of course, he got rebuked, he got a slap and all that stuff. But the fact that people who are willing to do that to pursue their own knowledge was a great positive sign. I mean it also taught us a lesson about checks and balances and all that stuff, but that's the kind of stuff that we want to encourage. We want people to innovate. We want people to discover new things. We want people to keep adding value to the company. And today, for example, the improvement in the products is led by people down the line, not by me, not by Balu, not by Deepta. I think very often, we don't know all that's going on. We know some -- most of what's going on. And of course, Balu knows everything that's going on from a financial point of view. But I think we are quite happy with the way things are going. And I hope that with your support, I think even better days will be ahead for us. Thank you very, very much on that note. Bye now.

Thank you, members of the management team. Ladies and gentlemen, on behalf of IRIS Business Services Limited, that concludes this conference call. We thank you for joining us and you may now disconnect your lines. Thank you.