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

Ladies and gentlemen, good day, and welcome to the earnings call of IRIS Business Services Limited for the quarter and year ended 31st March 2024. [Operator Instructions] Please note that conference is being recorded. We have Mr. S. Swaminathan, CEO; Mr. K. Balachandran, CFO; Ms. Deepta Rangarajan, Whole Time Director; Mr. P K X Thomas, CTO of the company. I now hand the conference over to Mr. S. Swaminathan. Thank you, and over to you, sir.

Thank you. Just a word of caution before we start. I'm actually at an airport and occasionally I'll go on foot because announcements are being made at the airport. I think we had an extraordinary good year, thanks to the South African contract that we won last year. And from where we were about 6, 7 years ago to come to this year, this stage where we have just crossed INR 100 crores of revenue, I think, is a big deal. And I'm grateful to all of our colleagues for making that happen. And given -- and the fact -- as I said, I think the nature of the performance will keep changing from time to time. This whole year has actually been driven by the first [indiscernible] Collect [ division ] of the company. As you know, the business has 3 parts, Collect, Create and Consume. Collect [ helping with ] the regulators, Create with enterprises and Consume with data analytics part. The Collect business is the one that actually drove performance this year. Though increasingly our focus is on Create, we also tend to take the [indiscernible] mandate data opportunities to other areas, which we will see going forward. But I think the momentum that we have, the [indiscernible] that we have and the cash that we have in the bank, going forward, [indiscernible] bank, all this gives us the confidence that we should be able to mount a reasonable attempt at capturing more market share. How the cash will translate into revenues going forward is something that only time will tell. But I think before I get on to anything of that sort, I will let Balu take [indiscernible] presentation [indiscernible]. I will let Balu take you through the broad numbers before we get to the questions. Over to you, Balu. I think we also have [indiscernible] the call, who is our recent sales hire. He comes with [ ability or ] experience on the SaaS sales front. So he's also available if you want to pose any questions for him. [indiscernible] have Anu, who has been working on taking carbon beyond the mandate. So as [indiscernible], who we can always turn to for questions, very specific questions on specific areas. But we will start with Balu. Balu over to you.

Thank you very much, Swaminathan. I hope all of you can hear me. Good evening, and it's great to see a nice turnout for this conference call. It's also good to meet with all of you after a gap of 6-odd months. So as usual, I'll quickly run through some of the highlights of our financial performance for the year ended March 2024. I hope some of you have seen our investor presentation, which we uploaded on the exchange website a few hours ago. Coming to financial performance for the last quarter, you will see that we have pretty much carried the momentum that we have shown in the previous 9 months, previous quarters, just that we have done a wee bit better this quarter. The top line growth is a tad more compared to the previous quarters, while in the PBT level, we have done a bit better as well. However, we continue to maintain that it is best to look at our company's growth trajectory from a 12-month perspective. For the full year we have grown at about 37%, while the EBITDA increased by 45%. At the same time, the profit before tax nearly doubled. Taking a quick look at the expenses, you will see that costs have nearly kept pace, a little less, with the top line given our need to spend on growing the business, especially on the Create side. So that continues. And as expected, and as Swaminathan mentioned, this year's performance has been boosted by a stellar turnout from the Collect segment, which grew as much as 70%. On the other hand, the Create segment growth was more sedate, though in terms of number of customer additions, I would say it is quite decent as well. So let me just go through a couple of interesting financial indicators. I'm happy to report our -- that our return on net worth, the key ROE, has moved up substantially to 21% from the previous year's 14%. But if I look at the number from a return on average net worth, we do it at the end of the March balance sheet figure, but if you look at from an average point of view, this will be even better. So that is something which is quite [indiscernible], given the fact that we need to use our capital in a very wise manner. The other thing I would like to highlight is that we have done quite reasonably well on our collection [indiscernible]. Collection efficiencies have improved, with the result that receivables as days of sales have reduced to about 80 days, which has also helped our working capital management as well. And before I wind up, I also want to mention that our net operating cash flow for the full year is now close to INR 12 crores and more than doubled from the previous year's numbers, which is again quite gratifying. As I said that that is still a modest number, we need to make sure that we do much better going forward. The balance sheet cash position also has improved, which Swami also mentioned, giving us that extra room in spending so that we can scale our SaaS business in a much more meaningful manner. So that is all from my side at this point of time, and we can perhaps open the session for Q&A. Swami, over to you.

I think before we get to Q&A, [ Geeta ], do you have any opening remarks to make?

[indiscernible] remarks for me.

[ Geeta, ] you are not audible.

[indiscernible]?

Much better but not [indiscernible]. I think you need to speak into the mic -- [indiscernible] the mic you have.

Okay. No specific remarks for me. I'll take anything in the Q&A [indiscernible].

[ Thomas ], do you have any comments you make?

[indiscernible] there is nothing from my side. If there's any questions, I'll [ be glad to ] take it.

Okay. So the moderator for any questions that we will come up.

[Operator Instructions] The first question is from the line of Mitesh Mehta from Investor.

Am I audible?

Yes, you are.

Yes. Congratulations, first of all, for a great set of numbers. My first question is related to marketing plan for Collect business. Like how do we plan to expand the business and geographical reach for this business? Because I feel that is -- that holds a very good potential.

So every segment that we have has significant potential. The [indiscernible] market in the Collect business is very different from [indiscernible] market and the state of other businesses. The Collect business is [indiscernible] RFPs, where regulators issue RFPs on which we bid, and then we thereafter win some and we lose some. So the way we approach this segment is by getting the [ plans ] into action as early as it was possible and telling them that we are potentially a good partner for them to work with if they are looking to implement a regulatory filing platform. And that's what we do. So I hope that answers the question. Balu, you want to [indiscernible]?

Okay. Second question, my second question is regarding, is there any further plans in company to bifurcate the business or split the business into 2, especially to generate more capital for further expansion?

There is always discussions that happen within the company about subdividing the company to various parts, including Collect, Create and Consume. These are discussions that happen at the Board [indiscernible] level. And if and when anything comes to fruition, our shareholders will be the first to know. We always have -- [ actually ] the discussions keep happening all the time. Our Board is a very active Board and we keep up [indiscernible] getting the asked questions about these plans. So as I said, I mean [indiscernible], I think we'll go ahead and do it.

The next question is from the line of Rohith Potti, who is an individual investor. Congratulations to the entire team. I mean INR 100 crores is a great milestone, and it was definitely hard one. So very happy for all of you guys, and congratulations. My first question is on Collect South Africa. [indiscernible] drove the majority of the growth this year. So what proportion of the contract has been and how much more of the order book is left there is one question. And the pipeline in Collect, I mean what after South Africa is the other question?

Balu, do you want to take that?

Yes, I can do that. While we don't want to give out [ specific ] numbers, I would broadly say that the South African contract, you could say perhaps about 30%, 35% is already done at this point of time, the current contract's [ shape ], of course, can expand it as you go along. So that's one number that you can keep in mind. And outside that, [indiscernible] say that what I've seen in the -- what we have seen in the last few months, the Collect pipeline is looking more and more interesting, more and more inquiries getting floated in the market. We are responding as well. It takes time for the whole process to come to fruition and award gets announced. But I would say that the pipeline is certainly looking interesting. And we don't see much of a problem in terms of -- in terms of not having -- not being able to substitute whatever we accrue on the execution of the South African project. That's what I would say at this point of time.

Basically what Balu is saying is that I will continue to get salaries going forward.

I am just curious now if any tenders, not just up for bid, but any tender results have to be out this year, if you can announce any deal wins like we did in the past with Bhutan and others?

Yes. We are hoping that we would be able to make a few announcements over the course of the next few months. Having said that, we can only do that if [ the group ] paperwork gets completed, and we are confident that this is something where we can meet the requirements, conditions, which are required [ upon us ]. Having said that, I wouldn't be surprised that if you -- before we meet again, there will be some announcements.

I mean, yes, that's what I was looking for. I mean so some tenders are going to be coming on. So that's good to hear, even if you win or not. So the other question is on Create. I mean it was very hard [indiscernible]. Despite no new mandates coming on globally, we still had a 20-odd percent growth, which indicates that we are winning market share with the sales and marketing team that we have right now. So in that context, it will be great to hear more from the management. I mean, you have had a new hire also in [indiscernible] officer, which [indiscernible]. So great to see. So it would be great to hear more on your strategy for winning -- converting more customers to carbon going forward. Because on one hand, we understand the product is sticky, so the conversion is difficult. So how do we intend to do that with the absence of new mandates going forward?

So there was one very interesting development this year, which actually surprised all of us. One of our former partners came back to us because they discovered that their current product does not meet the requirement in [ Europe ] like ours does. I think Geeta or Anu can tell you more about it. Geeta, Anu, one of you can actually take it [ forward ], because you know more about it than I do?

Yes. sure. This is a Anuradha. We've been working closely with partners in Europe. In fact, one of the early partners that we have signed up, of course, initially, they weren't giving us good business. But over the course of years, I think they are trying to go global. They're looking for a partner who is able to overall cover and cater to global customer base [indiscernible] [ perfectly simple ]. It is being positioned as one platform for multiple georeporting, multiple regulatory reporting. And of course, we have mandate, which is upcoming as well. So it is very, very interesting [indiscernible] connecting back to that, but with possible [indiscernible]. However, this is a very early stage, is a very early stage conversation. We need to see how this pans out.

Anu, [indiscernible] Fluence. Can you talk about this?

[indiscernible].

Can you talk about Fluence? Can you talk about Fluence?

Anu, I am not able to hear Swami. Can you talk about what?

Fluence. The recent conversations with Fluence where they found that our product [indiscernible].

Correct. Correct. So Anu, can you talk about Fluence, where they actually came back to us after evaluating other products and said that our product was far better product market fit? I think Anu wanted you to speak about that.

Yes. Geeta, you take it. Geeta, you take it.

Sure. If you can hear me okay. So yes, this is basically in the European market. We had a partner 4, 5 years ago, who actually was [indiscernible] both our product as well as some other third-party products [indiscernible] in the marketplace. This year, this partner came back to us and said that they wanted to work with us far more seriously. They actually said that the other products in the market were not as good, [ slightly ] behind, and they just said that IRIS is doing -- the IRIS CARBON product, I am so sorry, is doing -- was much better, especially given the changing complexity of the mandate, where you're aware things like x blocks needs to be tagged, et cetera, et cetera. And they said that CARBON clearly seems to be a much better product, and we'd like to take this as the new product out. We'd like to position this to our leadership as the new product that we'd like to take out into market. So I think that is the key [indiscernible].

So basically, Rohit, the point I'm trying to make here is the following. Since we operate in multiple geographies, we have had to work with different kinds of mandates. So CARBON has had to deal with multitude of situations. So before new situation occurs, we probably have seen it before in another country. Therefore our preparedness for any changes in mandate, by virtue of being in so many countries, is actually much better than people in single markets, [ who deal ] with one uniform market. So EU is one uniform market. So if you basically are selling CARBON just in EU, I mean that's all that you have. But if you're selling CARBON in EU, in India, in South Africa and several other markets around the world, you'll be thrown different problems for different markets, and therefore we'd be prepared for a new mandate change or a complexity in the mandate much more easily than anyone else. So this conversation we have had with our partner was a huge vindication of our strategy of going to multiple markets. That's all I wanted to [indiscernible].

So it's very interesting to hear. So the revenue from Fluence has started coming? Or is it...

Not yet. No, no, it's still early. It's still early. I think [indiscernible], she [indiscernible] getting married.

Okay. Understood. So could we understand -- I mean, so I believe that you mentioned we hired a new Sales Officer who has focused on the SaaS business in the past. So it would be great if we can hear from him on the strategy for SaaS going forward? Because I understand the competition sells sort of a -- market solution and not just one particular [ piece ]. So to get the customer to shift from 1 to another, 1 company to another, preferably to IRIS, is a more difficult task, is what I understood. So how do we -- in absence of a mandate, how do we win more clients and how do we grow Create is something that will be great here, because I believe from the past you mentioned that pricing is not something we grow on, but we'll rather grow on volumes. So I'll be...

So before I [ get going ] discuss and introduce [indiscernible] take the question, please?

Sure. So just to -- Vivek, just [indiscernible] hand it over to him, so he can talk a little bit more. If you remember on the last call, we talked about 2 things, one, establishing product/market fit and the second was strengthening [indiscernible] marketing infrastructure. From a product/market fit point of view, CARBON [indiscernible] management perspective, and we have [indiscernible] we have got feedback incorporated with, and you need 2 points. So if you [indiscernible] we have done with the other opportunity [indiscernible] we are doing on the [ application ] management side. So on the product side, [indiscernible] each [indiscernible] [ party ] leave the feedback. We have established further and further [indiscernible] product, if I can put it that way...

Geeta, Can you introduce [indiscernible] in terms of [indiscernible].

Certainly, certainly. And on the sales and marketing side, we've actually hired in from a sales leadership point of view, [indiscernible]. He is on the call with us today. He is having sales and marketing basically drove for IRIS CARBON. And he comes in from a background of SaaS sales. He was earlier with a company called HighRadius, and I think he'll be able to talk to it much more. [indiscernible] has been a part of the ramp-up and [indiscernible] if have it correct [indiscernible] $250 million ARR. But he's been through much of the [ direction ] of HighRadius. And [indiscernible] been with us now for 3 months, and now started setting the [ entire ] sales and marketing [ thesis ] in order for us to be able to take CARBON out at scale in the market. And I think [indiscernible] is on the call, so [indiscernible] would you be able to -- if you can introduce yourself, please?

Thank you so much, Geeta, and hi, Rohit, and hi, everyone. As Geeta mentioned, I'm coming from a background of SaaS sales, selling to the Office of the CFO, and helped through the growth journey of a $10 million to $250 million [ trade ]. So I guess to replicate something similar here at IRIS CARBON, selling to the office of the CFO. In terms of answering your questions, Rohit, very specifically I think our objective is to move towards the non-mandate sales, especially with the disclosure management. So we are not going to be focused necessarily on mandate business. Yes, we will continue to do what we are doing. But the idea is to position ourselves where we show value for the disclosure management product and IRIS CARBON as a whole. That's number one. The second is, I would say there's an awareness that needs to be created. So IRIS CARBON has a great product. But in the North America geography, and to some extent in Europe, there is more awareness that needs to be created. So they're focusing on creating that awareness at the same time directly as well as via our partners so that we are able to generate more interest and visibility within the market. So good product plus awareness, hopefully, should lead to an increase in sales. And I'll pause on that. Does that answer your question, Rohit?

No. Yes, that was very helpful. But a little more detail would help in the context. And my understanding is the product, at least IRIS CARBON sales had, let's say, $5,000 to $10,000 per year. And in that context, my understanding is that -- so at least, because we're selling to the office of the CFO, right, we just want to get the work done and a saving of, let's say, $1,000, $2,000, won't cut it because we -- I mean, to relearn the whole thing for the whole office, it becomes a little painful for $1,000, $2,000 an entire year saving. So in that context, how do we go about converting? I mean if it was a tech adoption or a sale, something like that, it might have been different or if the saving was an order of magnitude higher, then it would have been different. But in this context, is it not difficult to convert people from the office of the CFO who might not necessarily be very tech-savvy to switch from one product to the other. In that context, how do we grow, is where I'm coming from.

Yes. That's a great question, Rohit. I think the way we have traditionally sold -- I think we have pivot a little bit of late, where we are trying to understand the overall value, like you rightly called out. What we have observed is the value is a lot higher that we are delivering or saving to our potential clients. And as we quantify the value to them, we are able to position it better internally. To add to that, I would also say that price or cost is one of the factors that customers or their [ proxies ] are looking for change. What we are trying to identify is the other factors which is causing that pain. So what we are -- as and when we understand the reason. So in terms -- I'll give you a small example. One of our competitors, a big one, is not using Microsoft Word, Excel, et cetera, as their baseline product to work off the decision management solution. We are positioning ourselves as you can continue to work using your traditional tools like Microsoft Word and Excel and not having to move out of them. That gives them a lot more comfort. So there are different things that we are doing, in short, understanding their pain points and then positioning ourselves accordingly to the situation. May or may not lead to the dollar delta [indiscernible], some of them are not looking at, like you said, the dollar value [ change ]. But some of them, a lot of them are looking at ROI or cost savings, and we're trying to quantify that as much as possible, which can add up to a significant in number.

Yes. That is definitely helpful. I mean you're talking about either giving convenience, which -- or the time value as well, which will be -- this will be very helpful for sure. And so just one last question. So in terms of if the strategy is working out or not, the best indicator for us to track, let's say, over the next 2, 3 years would be the Create ARR number, would that be right in thinking, to see if the strategy is working going forward?

Absolutely. I would call it a lagging indicator, an output that you'd like to measure. A leading indicator for me would be growth in pipeline as you move along. So we measure both than leading or important metric as well as the lagging, and we'll get to know whether strategies are working or not. And we make changes as and when needed.

Understood. Fair enough. I don't think we will be privy to the leading indicator for [indiscernible] purpose perhaps. So I'll look forward to seeing the lagging indicators more quite heavily going forward. Thank you so much for your answers, the management. And second, congratulations to everybody for the INR 100 crores [indiscernible].

The next question is from the line of [indiscernible], who's an individual investor.

I'm audible, right?

So you're audible, but you're sounding off. So if you're using the speaker phone, maybe request you use the handset more, please.

Firstly, congratulations on a fantastic set of numbers. I think everyone did highlight that, right? I had a couple of questions, right? One is on the product ID, right? Which then the [ automators ] are regularly reporting, right? I just wanted to understand the sort of revenue model here, right? Do we like involve our clients' implementation plus cable usage-type of model? And why I'm asking this is like we all know the reporting requirements for banks, financial institutions, are growing and will continue to grow exponentially. So I was just trying to link if that is of linear relationship here.

Balu, I've got to turn over the call for a few minutes in a while. [indiscernible] you the first question and let you [indiscernible].

I can take the question. Thank you for asking this. Ideally, it is a very important industry product in various portfolio. So we do work with more than one model, one model for invoicing. One, of course, when we started out with iDeal, which is primarily in the [ vehicle ] sales sector and which typically handles large volumes of data and pushed the data for doing it [ the violations ] automatically to the regulators, the regulators' collection platform. So we initially started out with the licensing and AMC model, and that continues. [Technical Difficulty] Hello?

Yes.

And I hope you can hear me. I was saying that we initially started with the licensing and AMC model, which also [indiscernible] at this point in time, and we continue to [indiscernible] for customers. But we have also have an offer, a subscription model where people pay a subscription or an annual basis. And we have this, I would say maybe 30% or 40% of clients are using the subscription model, [ the model has ] worked. And we do have it on at this point of time, especially in India and [ Mauritius ], where we are in operation. In South Africa, we have also started to offer this product on the [ cloud ] [indiscernible]. So this is a product where we feel there is a lot of competition. Of course, the market is very competitive in Europe, especially where XBRL mandates came in quite some time back. But in other countries, it is just opening up. That's what I would say.

Great. I had a follow-up question on the Consume business, right? Now with all this data that is being reported to the regulators and the sort of standardization sort of coming in, right, again, the expectation would be that regulators start looking at all these data for analytics and even for the policy implementations, right, now or maybe in the future. Given regulators are a sort of very niche client category that we have, are we seeing that sort of discussions that they are looking at help on understanding and making sense out of all the data analytics and all of that? Or is it too early for that?

We already have products in the Consume category. For example, if you see our flagship product for the banking system for RBI, something very close to this would be [indiscernible] analyzing the findings made by banks to the RBI. And we help RBI make sense when we [indiscernible] this. So with every customer, depending on the scope of the implementation of the [indiscernible] platform, there's also other platforms where we see the revenue. In the case of Consume, a lot of it comes actually from implementation of solutions, [indiscernible] helping on those clients in [ Dubai ], we've done something on similar lines in [ Oman ]. So it's increasingly [indiscernible] to that, increasingly customers are, they use it on how to use the data better, and also looking at how to use the data along with other data. So Balu, you want to mention something about the Dubai opportunity that we -- the Dubai [indiscernible] that we did?

So we [indiscernible] more for our customer, which is Abu Dhabi Stock Exchange. The [ content mall ] is a product in which whatever data they collect from companies, essentially financial data, can be further repackaged into data [ APAs ], and the Consume, right, [indiscernible] customers, is one of the -- among the offerings that we have in the Consume space. I will say that we also do normal analytics. We have done that for certain banks as well. So it is many times bundled along with the overall Suptech offering, which includes collection and analytics.

And is the state as competitive as other the businesses? I mean -- like I mentioned, you have a niche client [indiscernible] segment here, is the segment as competitive or we have an advantage there?

I think some regulators see this as a completely different thing altogether. Some regulators see it in combination with the platform that we [ develop ] for them. So I think there's no uniform answer. There is competition but then there is no competition. So it's up to us. So we do try to talk [indiscernible] to our customers [indiscernible] and we see who we really can do business with this. Sometimes they buy something they don't like. I think more often than not, until now, they're not [indiscernible]. But I think increasingly, we see a trend where people are saying data [indiscernible] is not collectors, we have already collected so much data, what can I do with it, and what other data streams can I have talking to it? So I don't think there's a very clearcut answer as to how competitive it is. But our strengths, by virtue of what we have, how well known, and therefore we're able to get customers with demand. We're not really focused on the [indiscernible] except the focus that we do on this one is at the time of the tender itself, where we try to tell them what all they can do with it. So it's something done as a separate entity. [indiscernible] Dubai, for example, we implemented the platform several years ago. It's only now that we have talked about -- started talking about how to leverage the data. So I think to each his own. So it's competitive, but not competitive, but we are in a good a spot, we are in a good space.

The next question is from the line of [indiscernible].

Like on how to grow our business in the Consume segment, considering it is our highest margin segment, so can we like see [indiscernible].

Mr. [indiscernible], your line was not audible at the start. So could you please repeat your question?

Am I audible now?

Yes, sir.

Yes. Could you shed some light on how to grow the Consume segment considering it is our highest margin segment. So can we see the significant growth in the top line also going forward in this segment?

Swami, will you take this question?

The line for Mr. Swami has been dropped. I'm connecting him back. [Technical Difficulty]

Okay. So maybe you can come back to [indiscernible]?

I'm back.

Can you repeat your question?

Yes. So could you share some light on the Consume segment, it is like the highest margin segment. So going forward, could we see some growth in the top line also in the next 4 to 5 years in this segment?

I think the Consume segment is something that people may invest in now that -- if you don't have money, you have to choose where to invest. The industry in Collect and Create, now that we are slightly better off, we will invest increasingly in the Consume segment. And we should have significant possibilities there. How fast will it grow, what all it will grow? Sure, the Consume segment has other possibilities. We can always offer collected data for free [ anytime ] for customers buying CARBON. We can offer data for free for people buying our [ GST vehicles ]. So Consume segment can also be a marketing tool to acquire customers, Consume segment can also be ready to [indiscernible] business for customers for us. So how do you [ measure the ] function of many of these factors? The reason we have not shut down the Consume segment, obviously, is because it's been very valuable in terms of helping us acquire customers by using the data from the consumer segment as a marketing tool. But you're absolutely right. If we invest in it, we would be able to grow it much bigger, and that's certainly one objective [indiscernible].

[indiscernible] mainly the ID space, are these -- is the revenue coming from that software or like application, or it is just for the marketing?

[ Peridot ] is completely free. Peridot is completely free. There are no revenues from Peridot. But having said that, because data [ there is free ], we are able to offer data [ APAs ] to customers, we gave APAs to [indiscernible], for example, and there are [indiscernible] lenders.

[indiscernible] So the Peridot app is completely free, but it actually gives visibility to end users of all the potential of data that it [ sends ]. So we've been using the data [indiscernible] APAs and providing to intermediary [indiscernible] platforms as well as some of the lenders to use both consent and nonconsent-based data for the industry [indiscernible] for monitoring purposes.

Yes, helpful. And I have one regarding the [ ESG ] mandate. So are there any like update on that ESG mandate?

[indiscernible] The ESG mandate, there's a question on ESG mandate and how is it shaping up?

Okay. So [indiscernible], they will continue, in a phased manner, will start reporting. The sustainability report is contributing for next year. And [indiscernible], but there are still projects in the U.S. states [indiscernible], for example, like California [indiscernible] and other states. So we expect that the ESG mandates in the U.S. [indiscernible] market, where we will start building out our solution and making it available [indiscernible].

Just to clarify one thing, currently, there is no revenue coming out from the ESG report, right?

[indiscernible]

[Technical Difficulty] I do want to apologize for constantly getting bounced our call in a [indiscernible] for some reason, the call keeps dropping. So my deepest apologies, everybody [indiscernible] bounce the call so often.

So the next question is from the line of [indiscernible] from [ Sapphire Capital ].

Sir, many congratulations for a good set of numbers. Just first, I just wanted to understand what's our annual R&D...

Can you speak louder? [Technical Difficulty]

Yes. So I was just trying to understand, in terms of your R&D spend, I mean, how -- what is the annual spend that we need to do and how much we capitalize and what would be the capitalized amount in our books as of now?

So we said about business is that R&D is a continuous spend. And if you take a look at CARBON, there's always constant improvements happening. There are constant [indiscernible] happening, and there is constant R&D happening in terms of what the next [ generation ] contains. [ Deepta ], do you want to take the question on how we approach R&D as a [indiscernible] CARBON?

Sure. I'm not sure if my voice is clear. And if it is not, I'll just please request either [indiscernible] could take it. [indiscernible] continuous product enhancement, both for newer modules, such as [indiscernible] management modules [indiscernible], et cetera, as well as for enhancing some functionalities, so for example, [indiscernible] Gen AI into the product or bringing in more analytics capability into the product. But all of these [indiscernible] continuous R&D investment in both keeping the product current and also taking it ahead of competition.

Yes. So I was just trying to understand what is -- in rupees crores -- what is the spend that we did in last year, FY '24?

[indiscernible]. So we do have capitalization stream which will be less than the money we spend in R&D because the conditions have to be met before we capitalize. So the capitalization would be about, I would say, about [ INR 2.3 crores to INR 2.4 crores ] for this year. But we do spend the money more than that because some of these activities are not fit in for capitalization.

And how much was the money spent in FY '24 in R&D?

FY '24 R&D on the whole, I wouldn't like to give a number, but I would say capitalization would be about INR 2.3 crores to INR 2.4 crores.

Okay. And what will be total amount hitting your balance sheet, the capitalized amount?

The intangible assets, which includes the capitalization we have in process, would be about INR 4 crores.

Fair enough. I got it. And my second question is on your sustainability. I mean this quarter, we saw a good jump in quarter-on-quarter revenue and which also led to better leverage for our company and delivered higher EBITDA margin. So how sustainable is this kind of EBITDA margin and what sort of growth are we are looking at for FY '25?

Yes, we don't give any forward-looking statements, but [indiscernible]

Come again, you were not audible, sir.

That's because I'm at the airport. Before I get to the question which you asked, I want to add one more thing here. [indiscernible] there are different people in the company [indiscernible]. For a company like us, don't look at R&D spend as something we have in isolation. R&D spend for a company like us is largely salaries. R&D spend in many other companies, they have a separate division, they have a separate R&D lab. That's not really how it works here. So we currently have, for example, a gentleman working on one product who is [indiscernible] for different products. Now we [ need to do ] something in CARBON, we need something in GST, we need something elsewhere, but we're not holding our breath in terms of what could actually happen. So please don't look at R&D as a complete and separate division that we actually have maintained with a bunch of separate people. R&D is a continuous process for every product, so -- which is why estimating R&D expenditure is [indiscernible] discussed. Now to come back to your question about looking forward for FY '25, we don't make any forward-looking statements at all, so I cannot answer the question about FY '25. Nothing more, nothing [indiscernible].

Okay, fair enough. But are we seeing enough -- I mean the northward direction on a going-forward basis, I mean, without giving any kind of objective number, subjectively, if you can define something, that would be helpful.

I don't make any going forward statements of any kind under any circumstances. I can only tell you that we can only look back and basically say what have we done. As a company, we are constantly striving to get the maximum bang for the buck. We are constantly striving to invest [ in a way ] that gives us the best possible returns. And we are constantly trying to allocate capital depending on where we see the best returns are. Now what will we do going forward? Well, I think every quarter when we come up with something, we [ let you see it ]. We don't make any forward-looking statements as a matter of policy in the company.

Fair enough. That's fair. And just one last thing. In terms of tax rate, what is the tax rate we are looking at? Revenue tax rate?

Yes, we are 25%, 26% marginal tax rate, but we do have some max credit available because we were incurring losses earlier and we were paying taxes on the booked profits. And we have recognized the deferred tax on the max credits this year. So effective tax rate would be around 10% to 12%.

And this will continue, this effective [indiscernible], or it will normalize to 25%, 26%?

Yes, a little bit, for this year, I expect to continue.

The next question is from the line of [indiscernible].

Yes. So our biggest competitor in the U.S., they fund around [ $150 billion ] annually on research and development. And still we have been able to compete quite well. So what has helped us to compete with them in the last few years? And in general, how do you see the competitive intensity going forward in different [ regions ]?

I think it's a great question. As I mentioned to you, [indiscernible] I mean I think it's a complete -- we don't really account for R&D separately to the [indiscernible] of R&D. It is a continuous improvement process actually happens, unless on like [indiscernible]. And so I think there are differences accounting how big [indiscernible] of R&D, that's what we know. Secondly, the reason why we are [ competitively ] ahead is because we have a motivated team. I don't know which car company, I think Avis or Hertz, used to say that "We try harder." So when you have a motivated team working on multiple countries, [ pulling ] ideas from multiple countries, and doing it all together into one platform, we've actually seen constant improvement on the product and constant R&D happening. As I said, we do what's appropriate. So what applies to South Africa is different than what applies to India. What applies to India is different than what applies to Singapore. So the fact that we are in so many countries automatically changes the way we approach product development, changes the way we do product deployment. And today, for example, in [ 3 ] products that we have, both in the CARBON, [indiscernible] or iDeal, are products that allow us the comfort of going global. Even if you look at GST, [indiscernible] that we have in India, while the product [indiscernible] delivered from Malaysia, we have now taken the product to Malaysia and we're getting some decent traction there. So I think R&D is something that's happened in the marketplace. It's not something that happens in a lab. If you're constantly close to your customers, if you have your ear to your customers, then the customers can do what is required, what the new things are. So for example, an example is the [indiscernible]. Is it -- does it require a huge amount of brains to know that the whole world works in [indiscernible] in Microsoft [indiscernible], that can be a differentiating factor in case of [indiscernible]. It doesn't require a genius to do that, because the whole world works in Microsoft. But what keeps us being a dominant here in the [ picture ] has been [indiscernible] work with Microsoft [indiscernible] they had their own [ flavor ] for. Actually, they've done it, but the [indiscernible] to a workplace environment, absolutely. So -- but I think the fact that we work close to our customers and we're constantly talking to customers, gives us the comfort to stay ahead of the curve. And I don't know how many people have actually seen this, just like Gartner [indiscernible] services is the company for [ G2 ] [indiscernible]. And on G2 rankings, we continuously scored ahead of [indiscernible]. [indiscernible], you want to talk about the G2 rankings for a second?

Sure. I hope I'm audible.

Yes, you are. Focus only on G2.

So G2 is an online rating platform where a company, customers can give review. And G2 also publishes from time to time, like, a -- [ grades ] around satisfaction and the performance of various products. So [indiscernible] CARBON has been ranking higher customer satisfaction, and that has been consistently there. So as an organization, as [indiscernible] said, we are a very listening organization. We speak to customers very regularly. We get feedback from customers. That's how we are able to keep our products always up to date. And also we gear up for all future requirements. So this is one of the key reasons how we are able to maintain a consistent ranking in terms of high customer satisfaction on the [indiscernible] grades. And of course, comparing to some of the key competitors that we see on some parameters from a product perspective, we are in fact ranking higher than some of the bigger competition which exist in the market. So that is very, very promising and nice to see as [indiscernible].

[indiscernible] request every one of you who wants to know more about this thing to actually visit G2 and look at IRIS comparisons with other products. It will be a revelation, I promise you.

Sure, sure. And how much was the recurring revenues for the entire year, if you could just give that number?

Recurring revenue for the whole of the year FY '24 will be around INR 62 crores to INR 62.5 crores.

[ INR 62 crores ], okay. And the same figure for FY '23 was what, sir?

There have been about [ INR 57 crores ], roughly.

The next question is from the line of [ Sharan Ajmera ] from retail investor.

Hello. Am I audible?

Yes, you are.

Sir, congratulations on quite a great set of numbers. I had a couple of questions. So in terms -- this is specific to IRIS CARBON. So how do we place ourselves against bigger companies like, for example, [indiscernible] America and technology in Europe. Like what specific sort of target market that we are targeting, like what kind of companies are you targeting? For example, some of these competitors have been able to onboard like some of these multibillion-dollar organizations. So are we targeting those? Or are we targeting like somewhat smaller organizations? How does our target market basically differ from theirs basically?

Yes. I'll take that question. So I think historically, [indiscernible], but even some of the other competitors that you mentioned have been focused mainly on the enterprise market. So over $1 billion in revenue kind of clientele. Our target historically has been the mid-market and SMB segment, so anything under $1 billion, where we have been targeting. Now having said that, we do have quite a few customers who are also enterprise customers over [ $1 billion ] In revenue. So we've never differentiated necessarily on the basis of what the revenue size of our customers or prospects are. Moving forward, I think we will also start focusing. We were preparing the product for the enterprise customer, especially from a disclosure management point of view. Moving forward, we will continue our focus on the major SMB segment and also start entering more and more proactively into the enterprise segment, both in North America as well as Europe.

Basically [indiscernible] basically, USP, if you would say are more compared to this organization? For example, I believe their enterprise is their selling point, right? They can cover like [indiscernible] department, aside from just the CEO -- CFO department, I'm sorry. So what is our selling point [indiscernible], let's say, we are good. One is our price, I'm assuming. I've seen the G2 reviews, that [indiscernible]. So if you could answer that. .

I think differentiators, size is one factor, like you rightly called out. But I don't think we are differentiating this alone on the basis of size. I think we have a fantastic product. We need to create more awareness and differentiate based on what value we are adding to our prospects for our customer base. We need to do a more effective job over there in an ROI-based [indiscernible], quantifying that value for them. There might have been more features, functionality in some of our competitors' products, but that does not mean that is what the client needs or it's really solving the pain point or problem for them. We are focused on solving the problem end to end for our clients. And I think our service -- customers service -- after sales service has been phenomenal. So that's been a big differentiator. So a lot of word of mouth, and reference is what we also focus on.

[indiscernible]

I think [indiscernible]. I think our pricing is [ one ] thing, it's not all of it. I think we have a superb customer [indiscernible] the quality of service and the integrated services we offer. And of course the product functionality will [indiscernible], which I think [indiscernible] said [indiscernible]. I think all of that makes for a [ competitive ] package. So I think like [indiscernible], now it's just about making sure that we increase the awareness and just the cadence of getting in front of the right audience in the market. So the combination of what is going into the [indiscernible].

What would you say our total addressable market is for IRIS CARBON in terms of global, if you could have -- if you would have a number for me?

[indiscernible]

Okay. I would say the addressable market for IRIS Carbon is roughly in the range of $10 billion to $15 billion. So we are probably scratching the surface right now. [indiscernible] estimates to be a little higher. But I think from our point of view, we think it should be somewhere around this range.

$10 billion to $15 billion. Basically, we are banking on the fact that we will keep adding more and more functionalities to our product because that's how this number will grow so high, right?

Not really. Not really. See, the point is that also [indiscernible] CARBON. It's used for different kinds of reporting in different parts of the world. And what [indiscernible] said earlier, moving away from the mandate. So whether you add features or not, there is already a full product which can be sold to people. We're able to wean away customers from our competitors at this point in time [indiscernible]. So revenues will grow -- for revenues to grow, you don't necessarily need to add more and more features. Sure, we will keep adding on new features, but the sales does not depend only on adding new features. We already have a viable product that is currently accepted in the market.

And this is regarding Collect. So based on our November '23 conference call, we have expanded a lot in Africa. I can see that from your presentation as well. So what do -- how do you see the current RFP pipeline for Collect for the coming year?

See, RFP pipeline I can't -- I don't know much about because one fine day, a regulator will stop [indiscernible] RFP and something actually happens. But what I can say is increasingly RFPs have been issued. And just because RFPs are being issued doesn't mean we will win them. We don't win every single one of them. As I said, regulators are waking up to the need to move those platforms and increasingly it's happening. So as I said, I might prefer to have that I guess in terms of coming RFPs to be issued this year, I have no idea. Do I have [indiscernible] in terms of what the value of RFPs should be? I don't have any idea at this point in time. What I do know is that more and more regulators are [ waking up ]. And even surprisingly, regulators we did not expect are waking up and started talking to people and saying, "Can I start looking at this?" And so some -- there are no numbers I can offer you, if that's what you're looking for.

Okay. So a follow-up to this, what is our win rate in terms of RFP and of which market specifically we are focusing on for Collect?

So if you take a look at the win rate, again, that's going to be a number that's difficult to come up with. I'll tell you why. Before COVID, we are winning 55% of the bids that we were putting out. After COVID, it's only now that things are picking up. We still have a very small number to go by. So if you have 2 people in the room and one person leaves, it will look like 50% of the people have actually left, which, as you know, that you had them there. It's really hazardous to apply [indiscernible] when the number of -- the numbers we see is very, very small, and that's where we are. Maybe in about a year or 2 years' time. So when I give numbers [indiscernible], 55% was pre-COVID. That was over a 10-year period. But there -- and right now, post-COVID, there are very few that have actually happened. Therefore, it's difficult to come up with a number of percentage of wins. As I said, 5 years from now, our new percentage of wins will be a meaningful number. Today, the percentage does not make any sense for anybody at this point in time. And which markets are we currently? There are 70 countries in the world that have adopted XBRL for electronic filing [ thereabout ], and which means that there are 120 countries that have not done that. Every one of those countries [ operation market ]. I would not expect, for example, that Bhutan would be an adopter as they are at this point in time. And it's surprising the kind of country that is actually getting into it. I see some traction in Africa. I see some traction here as well. So this is why you see us spending more and more time in Africa, but nothing significant to report at this point in time. For example, we got some like Nigerian clients for bank reporting, even though Nigerian central bank is still not ready with the finance [indiscernible] credit reporting platform. So each country is moving at its own pace, but we are reasonably confident that of the 52 countries in Africa, 54 countries in Africa, we expect something to happen going forward, now that South Africa and Mauritius have examples to show. So Africa is certainly an area where we are concentrating. Also, you may have seen that the [indiscernible] of India, the controller of the [ country ], has issued a report about 2 years ago talking about data standards and how governments in India, state governments and government departments, should follow their standards. We see that as a possible -- as possibly creating opportunities for us going forward. We don't know where the opportunity will come. We are trying, we're knocking on doors. We're talking to people and basically sensitizing them to the CAG report as well. So where will the growth come from? I'm not being difficult, I just don't know. I know which doors I'm knocking on, but if I keep talking about these doors I'm knocking on, the next step is why we're not doing -- what -- who won, who did not win. These are -- it's a concept that needs [ to be sold ]. Structured reporting is a completely new concept. And we are fighting this previous-based reporting and document-based [indiscernible] reporting. So we are optimistic, we are confident, but the focus, as I said, is on underserved areas like Africa and many of the regulators in the country in India.

Another question for -- just a small follow-up question to this is, from Collect, we receive primarily the project-based revenue, do we envisage this revenue to convert into annual recurring revenue in the future?

It's not only project-based revenue. There's also product-based revenue. There's also licensing revenue, because [ i-file ] is sold along the Collect platform. Are we trying to move it to an annuity-based model BSBR? But are people willing to do that? The answer is no, so far, except for Mauritius. So the Mauritius model gives us hope that regulators across the work will start looking at this. So we are optimistic it will happen, but I think it's a fantastic question. We are trying to move it to an annuity-based model going forward.

Okay, sir. Just a small question, that's all I have. So we had a little -- a few months back, we had gotten the approval for raising our equity capital. So do we have any plans to raise funds in the coming year?

So if -- I'm very happy to send you a proposal for INR 25 crores. If you want to give it to me, I'm very happy to take it from you. As a company, we certainly -- while we have [ INR 16 crores ] in the bank, we certainly want to add to the war chest to be able to mount a meaningful assault on the markets that we want to get into. We did not raise money earlier because of the way -- people see -- I don't think many people still today have an understanding of our business like we do. I mean, the people on the call have a good understanding of our business, but the majority, I think, they don't. And I think until such time as that happens, raising capital is difficult. We raised the [ office ] capital also because we, at that time, we were also looking at [indiscernible]. We also did it because we wanted to be prepared in case suddenly some offer came to us from [ investors ] the money. I'm not saying we are actively in the marketplaces for money, but I'm also not saying that we are not [indiscernible] actively in the market [indiscernible] money. We need resources to grow to the next level. With the INR 16 crores in the bank, I think the [ inpatient ] changes, we have enough to kickstart our activities. Is it enough? I don't think so. How much more do we need? Do you have some idea? So the answer is yes and no, complicated answer. You will think I'm being difficult. I'm not being difficult. I'm just being [indiscernible].

Okay. Sir, are we looking at debt instead of equity? Or is there...

No, no, no. Absolutely no. We will not look at debt, we're not interested in debt. There have been people who come to us because the debt. We will not [indiscernible].

The next question is from the line of [ Mitesh Meza ] from investor.

I have a few questions. One is a promoter stake is reducing. That is just a factor of [ results ] or from a promoter is actively reducing the stake?

I think just take a look at the filings. You will not find promoters activity as [indiscernible] the [indiscernible] holding. Please look at the filings, you will have the answer.

Okay. My second question is, like, we have some INR 16-odd crores cash balance, and we have some INR 6 crores -- INR 5 crores to INR 6 crores short-term borrowing. Is there any specific reasons why borrowings are kept, or like company's increasing war chest for some inorganic opportunities?

There is no inorganic opportunities any kind that we are considering at this point in time. Under the provisions of the banks, we [indiscernible] that the [indiscernible], we are required to utilize something, otherwise we end up paying a hefty [ commitment ] fee. So some utilization actually happens on the lines that we have from ICSMI.

Okay. And my last question is pertaining to client mining. Like we do we have an active team, because we have a list of market clients. So are -- we have a specific team working on client mining?

I think everybody in sales is looking to cross-sell. So we have a number of [ MCA ] customers who are [ BC ] customers, a number of BC customers also are [ MCA ] customers. And logically, when we have a new offering, we first go to our existing customers. So is that a separate team for it? No, there's no separate team for it, but cross-selling is an extremely important thing, and even in the context of Europe, as [indiscernible] will tell you. [indiscernible], do you want to take this question and ask you how we are trying to get deep into clients, especially with the non-mandate [indiscernible]. [indiscernible] could you answer the question?

No, I think it's good. But if you want, I can elaborate a little.

Please elaborate. Please, please, please.

Sure. So I think the idea is to get into -- so we have an existing customer base across the board to whom we can not just upsell, which it basically means more of the same product, but we can also cross-sell. So we've got multiple products across the board that we can sell to them. What we can also do is -- there are -- these are large corporates, which are globally present and have multiple subsidiary or child organization, if you want to think of it that way. The objective there is to bring in not just a product but multiple products across the board. So that's one of the strategies we are looking at to make footprint within our existing customer base.

Okay.

Does that answer the question?

Yes. And can I request like if management thinks like we develop a special team for client mining because the kind of multi-client company has, like we see a lot of potential in like increasing per client billing.

So when you say client mining, I'm not sure if I understood that. Can you elaborate?

Cross-selling, cross-selling products as well as servicing -- services.

I think it's a good question. We will certainly see what we [indiscernible]. I think it's a great [indiscernible].

The next question is from the line of [indiscernible] from [ Robo Capital ].

Congratulations on a great set of numbers. I wanted to know if our Q4 margin of 21% is sustainable on an annual basis?

[indiscernible]

Traditionally, you have seen that our Q4 margin is a little more than the [indiscernible]. Having said that, I think it depends on the overall volume growth. The volume growth is robust, I don't see any reason why the margins should be less than or [ higher ] margins. Quarterly margin is not [indiscernible], but there are certain quarters where there is higher volumes happening in certain parts of the business. But overall, our margins are very closely linked to the overall volumes, overall growth in the top.

Okay. So basically, you have...

I just want to mention, one is the EBITDA margin. At the PBT level, we do have some overheads, but overheads are growing at a much lower rate compared to the overall revenues. So that also is something which looks quite promising. So at PBT level, you would see that the PBT doubled, while EBITDA went up by [ 45% ]. So that leverage still exists for some more time.

Okay. Got it. And on the employee cost, how much increase do we expect generally year-on-year?

How much do we expect?

Yes. I mean due to [ retainment ] or hiring, how much increase do we expect year-on-year?

Okay. So it is hard to put a number, because there's different requirements. For example, in the SaaS business, we definitely want to increase our [ sales and ] marketing percentage and make sure that we have covered our market well in terms of both inside sales and some feet on the street. Having said that, we have grown our expenses and [indiscernible] expenses [indiscernible] 28% to 30% over the last couple of years, which I think is a fairly high number -- high percentage, okay? So in a business-as-usual case, I don't see the growth in employee costs going up above these levels.

As there are no further questions, I would now like to hand the conference over to Mr. Swaminathan for closing comments.

Thank you. Thank you, everyone, for participating. I'm sorry we went a little bit overtime. I hope all your questions were answered. Thank you all for your support. And I just want you to know that our pride in the company is driven by the financial performance of the company and not the stock performance of the company. However, we are mindful of the [indiscernible] business, and therefore we are mindful of our obligation to do the best that we can to ensure that our financial performance gets -- improves going forward -- improves quarter-on-quarter. But it's not a company that you should look at quarter-on-quarter. It [indiscernible] look at it in the context of the year, because quarter-on-quarter is really where we see numbers literally. So I'm grateful to you for participating in this conference call, and previously [indiscernible] sent me question sometime ago asking why we're not paying dividend. We're not paying dividends because we need to raise capital, we need to conserve resources. We need to conserve resources, and dividend payment is not the most optimal way to [indiscernible]. I think the day we have enough cash [indiscernible] a buyback as opposed to paying dividends. We don't have enough cash right now to do things like that. That's the [ course ] we're actually going to take. So if you are looking at a company that pays you dividends quarter-on-quarter, we are not the company for you. [indiscernible] now year-on-year [indiscernible] the company for you, because that's not the course we are actually going to take. And as far as we are concerned, the money that we have right now needs to be conserved for accelerating our growth for our [indiscernible] CARBON products and other products as well. So I want you to understand that. Keep your questions coming. We may not answer [indiscernible] from time to time [indiscernible] it will be a [ 5-week period ]. So some people keep reminding us of the questions. But be aware of the [indiscernible] really want to do questions and we'll answer it [indiscernible]. So once again thank you. I want to thank all my colleagues. We do have -- so my colleagues in this company [indiscernible] 20 years in the business this year. So we're actually going to be celebrating with all of our colleagues this [ Saturday ]. When we will talk about -- we talk about growth going forward [indiscernible]. We're also calling our auditors, [indiscernible], internal auditors, our suppliers, our vendors, all of our partners keeping the company in stock. But all of this can happen only with the support of shareholders. So to each one of you, I'm deeply grateful. [indiscernible]. So please, thank you. Keep it coming, and we will continue to do the best we can to ensure that there are no [indiscernible]. Thank you. Bye-bye.

Thank you, members of the management. On behalf of IRIS Business Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.

Thank you.