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

Ladies and gentlemen, good day, and welcome to the IRIS Business Services Limited Q2 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. S. Swaminathan. Thank you, and over to you, sir.

Thank you, Sejal, and happy Diwali to everyone who's joined the call and to those who did not join the call, of course they don't know. So thank you very much for joining. I -- yes, I guess you could say that the last 6 months have been fairly meaningful for the company. I think the numbers are reasonable. We've also been able to attracting some good investors. And so when we were looking at the numbers, I was reminded of a famous statement made by the CEO of Changi Airport when it was opened, and he said, this is the best airport in the world. So what's next? So the next and maintain it, how do you compete with people in other parts of the world and maintain it? So I think the challenge for us is exactly similar. So we have to figure out whether we can maintain it, how we will go forward -- how do we -- what will we do going forward? What we have done over the last 6 months is to lay the foundation for growth for the company going forward. You would have seen from the numbers, and Balu will delve into it in much more detail. You would have seen from the numbers that there's not been very significant growth on the CARBON side, on the retic side. Now what we have done in the last few months is to get the starting in place, get the teams in place. We laid the foundation. Fortunately, the contract that we have from the South African Reserve Bank continues to literally help us grow. And again, Balu will talk about it and give some color to it. The foundation that we have laid is more in terms of getting the people in place, so it'd be the marketing team, the sales team, and the benefits of that are there to see and will be there to see in the months going forward. So we have several of our colleagues on the call who can take individual questions, who can take individual questions on different segments of the business, if such questions arise. But before we get to that, we have already uploaded the presentation to the website of the stock exchange. It's also on our website. We will basically take you through the highlights of the presentation. If you don't have it, you can always please go to the exchange website and download it. But over to you, Balu, to give the color before we get started questions.

Thank you so much, Swaminathan. Good evening, and it's great to once again interact with all of you, and thank you for turning up in good numbers, even though it is the eve of Diwali. I'll squeeze on through some of the highlights of our financial performance for the first half of the current financial year. As Swami mentioned, we've also uploaded an investor presentation on our websites as well as exchange of state a few hours ago. This time around, in our presentation, one change we have made is that we have reclassified our reporting segments so that these are in line with the nomenclature which is used globally. And Swaminathan did mention this intentionally in our annual report, he has left it to the shareholders. But we said we would be doing that going forward. And that's what we have done for the first half of this financial year. Now coming to the performance first, you will see that we continue to grow at a good pace. Overall, for the first 6 months, total income has grown at about 33% compared to the corresponding period. On a quarterly basis, the second quarter's growth over the corresponding quarter is at about 30%, which is a tad lower than that of the first quarter's Y-o-Y growth. But still, on the whole, we grew at 33% for the first half. So this solid top line growth has been the key reason for the corresponding stellar growth in profits. You see that EBITDA has moved up by about 78% for the first 6 months, while the profit after tax has nearly tripled. And I would be the first person to say that high growth rates on a lower base maybe should not be the right set of parameters to an ongoing trend analysis. Having said that, top line growth typically results in more than proportionate growth in profitability numbers for our kind of business where there's expected degree of operating leverage, which we have seen again and again. For example, in the first half, total expenses have grown at about 27%, while the top line grew about 33%. So I should again say that our SaaS businesses need further investments, especially in sales and marketing. And that's an element we need to calibrate as we endeavor to scale this part of the business. So there is a balancing act that we are following, and that you could see going forward as well. So coming to the -- some of the key financial indicators, I'm happy to report that our return on net worth has moved up from 21% to 22% despite an increase in equity capital due to infusion of money through the professional route, which came somewhere in June end. Our balance sheet has obviously strengthened with capital infusion and group collections, et cetera. And as of September 30, we are quite comfortable in terms of cash assets, is about INR 31.5 crores. It has further gone up well into the month as collections improved as well. The Sup Tech business, which is a Supervisory Technology business, erstwhile what we used to term as the Collect business has again turned in a solid performance with top line growth of 48% and that has driven, which Swami also mentioned in his opening remarks, that has driven the top line for the first half. The RegTech segment, which now includes IRIS CARBON and IRIS iDeal, which is an automation reporting software for the [indiscernible] segment business line, together recorded a growth of about 20%. The newly minted Tax Tech segment, which has now gone international with our entry into Malaysia, grew at about 15%. Revenues from Africa now accounts for more than 36% of our top line. The bulk of it coming from our Sup Tech implementation at the South African Reserve Bank. So that's where we are. That's a quick overview. And I think we can discuss more as we delve into questions. Thank you.

Before I hand over to Tejas for the questions, a couple of things I do want to mention. So the reclassification that Balu talked about is not really a reclassification, but more a recrispening. It's a recrispening of the segments. The only significant change is actually the attribution of the Reg Tech business into what we used to call the -- what we used to call the Create segment into Reg Tech and Tax Tech. That's about the only significant theme in the reclassification. So the story is like is like this, that somebody one day asked me and said, "Why do you want to give names like Collect rate and consume, why can't you give it names that are accepted by industry so that we can go and Google it? So if you go and Google Sup Tech, for example, Supervisor Technology, you actually find a number of companies, so you can initially find out who our global benchmark, global peer groups are, who our global competitors are. Similarly, in the case of Reg Tech, similar in the case of new Tax Tech, the Data Tech business is still in a very, very infant stage. We have high hopes for it, which we'll talk about separately whenever something happens. But the reclassification is more a recrispening, renaming, except for a division, as I mentioned of these two. Two very important news items are sampled upon this afternoon, which I think are significant and we'll shape how we will do things going forward. Google CEO, Sundar Pichai, has actually made a statement yesterday saying that 25% of the Google software is now written using AI. And I think that's very, very significant. Similarly, if you take a look at the other statement in the company of Samsung. Samsung is actually being beaten down by the markets for having missed the AI revolution in a very fundamental way. So I think we are actually beginning to look at how to leverage AI for our own internal work and where all we need to do it. So I mean, we're very, very cognizant of that. But I want to draw your attention to this because as investors I mean, these are little 2 news items which you just want to be mindful of. Having said that, Sejal, over to you for questions that people may want to ask.

[Operator Instructions] The first question is from the line of Ankit Manicha from Adesa Ranchos Family Office.

Yes. Happy Diwali and congratulations for a great set of numbers. So I mean, obviously Collect or now the new name, Sup Tech is probably driving growth and the South Africa contract is driving growth for you over the last couple of quarters. How does the visibility look like with regard to the South Africa contract for the next 2 quarters? And do we anticipate this similar level of 28% to 30% revenue growth that you're seeing on total revenues because of that?

Hello, can you here me?

Yes, sir. I would request you to please repeat your answer because...

I was saying that the base is obviously going up because we started accruing the revenues from the South African contract maybe from late Q2 of previous year onwards. Having said that, I see there is enough work left in the implementation part. So the numbers in terms of overall accruals should not change much, in fact, it could go a little higher as we go along. But the growth from the corresponding quarter to this particular quarter, say, for Q3, Q4 onwards, it might not be that high as it used to be in the past. I would say only so much at this point of time, because the base has gone up.

Okay. And just a continuation of that, I mean, what in Collect comes next after South Africa? Are you seeing some visibility, say, even for next year with regard to some larger orders? Or does next year, when the South Africa thing goes away, does that look slightly bleaker?

Everything that goes away usually is followed by something that comes in, and there are still about 120, 130 countries, about 1,500 regulators across the world. who need to adopt standard wage reporting. So I think there's a huge opportunity still there. Africa is still a virgin territory. And if you take a look at our number growth in the last -- so obviously South Africa has been the biggest growth driver in the last half year. And this is also why Africa becomes an important source of revenue for us. We've also been doing extremely well in Nigeria where several banks have actually come to us for solutions. We're also doing some reasonably good work in Mauritius with demand reporting. So there's a lot of possibilities on the Collect side because we also see a lot of regulators coming up with tenders. We win some, we lose some, these things are bound to happen. But there is certainly an acceleration and also a greater appreciation on the part of multi-lateral agencies. But this whole Sup Tech segment is like an elephant that starts moving very slowly. And it takes -- the gestation time is huge. I mean you don't -- so from tender to award can be as much as 18 to 24 months. And even then, some decisions don't get taken. I can give you enough examples of regulators who may have called a tender 2 years ago, but are yet to make a decision. And one of the biggest fears that we have is if the multiple tenders that we have bid on, if they all come together at the same time, then we are in deep trouble. If you see what we won in the last year or so, PLC, the pension fund authority thing is a huge victory for us, and there is one more also, Balu?

[indiscernible].

And the GRI, and the GRI thing in the context of the ESG reporting thing. So these are 2 big things we won in the last half or 6 months or so. And the other thing to keep in mind is, for us, the important thing is not whether even 10, 20 contract is whether we have enough to happening because we really have so much of a capacity in terms of delivery. So if we won 2, 3, every year or 3 or 4 every year, we're quite happy in terms of going forward. 3 or 4 will be a stretch, 2, 3 is a reasonable number. But we're also looking at alternate business models where we move from a fixed price model to a SaaS model to -- these are all things in discussions with various regulators. And in a way, it's good that many regulators don't have money, so they will need to look at our pay-per-use model. So we're also trying to pivot to a new model so that it increases not a onetime revenue, but actually a revenue stream over a 10-year period. So the pivoting of the model is also something which we're working on. So when you see what -- when you look at smaller countries, you will actually see many of them looking at solutions like that. Balu wants to add something?

I just want to add that I would be greatly surprised if revenues from the South African business diminish over the next 1 year. I would just leave it at that.

Understood. Just an extension, the 2 new contracts that you talk about, are those already reflecting in your revenue stream in the last couple of quarters? Or are they expected to comment later?

To a small extent, I would say.

Right. And my second question is something that -- I mean, we came across a study violation, which was reported. So I just wondered if you could just add some color on to that, the yes, that...

That's a good question. January last year, Balu basically made an announcement that he will sell 2 lakh shares within a certain period of time. Now it's -- I don't know of many companies which announce plans, many promoters who basically announce these things in advance in the manner in which Balu announced it. And since then, we've been in through ASM, BSM, VSM, all kinds of SMs, which basically have curtained liquidity in the market and affected the ability to sell in the market. And as a consequence, he could not sell the full 2 lakh shares that he committed to sell but could sell only about 95,000, 98,000 or 99,000 in the course of the year. As a consequence, that's seen as a violation, and therefore, it's part of the LO, it's part of the insider trading rules. And since he could not sell the full amount, he had to basically send a letter to SEBI, saying that I could not sell it for these reasons, and the company, therefore, had to issue him a letter saying, bad boy, why do not sell? Why could you not sell.

Okay. Yes. That's helpful. And good luck for the upcoming quarters.

So it's not really a violation. It's not -- we've not violated any inside trading rules, it is the manner in which that has been portrayed. It's just his inability to sell because of lack of liquidity in the market.

I would just say the SEBI rule allows incomplete trading plan. The details will be submitted to the Audit Committee for the committee to act on it. Audit committee has sent a letter on that.

So some -- so basically, the rules basically say that as long as the company condones it, we are okay with it. But this is not a deliberate act or whatever. It's beyond the fact that we could not sell it.

The next question is from the line of Mitesh Mehta from Long term Investor Group.

Am i audible?

Yes, very clear.

First off, on congratulations for a good set of numbers. And I have a few questions that is regarding to Tax Tech, the GST module launched in Malaysia as well as other cases. So basically, I want to understand how is the revenue model for this Tax Tech business? And when can we expect breakeven in that segment?

So when you look at the numbers there, it's because of the overheads that the company, the Tax Tech business does not -- has not -- does not show profits at this point in time. But to answer the revenue model question, let's have Gautam over to you. Gautam, can you take the question, please?

Sure. Sorry, good evening. So the Tax Tech revenue model is purely a tax-based revenue model. So in India, we offer a platform for GST, e-invoicing and EV bill compliance. Along with it, there are additional modules around accounts payable automation and litigation management. So it's completely dependent on the volume of transactions that the company conducts and the number of GSTNs and the number of PANs that they have. So it's a recurring subscription model. And there's a onetime onboarding fees that every company pays when they come on to the platform. A similar model is adopted in Malaysia also, which went live first of August, with the first phase of e-invoicing for all companies over MYR 100 million, where they subscribe to various e-invoice impacts depending on the number of sales and purchases that they have to make in a year.

Okay. And the second question related to it, are we planning to expand in other geographies for this GST modular Tax Tech? Any commitment on that field?

Yes. So Malaysia was our first international foray and now we are looking at 2 more geographies, Singapore, which has announced e-invoicing in the third -- or the fourth quarter of 2025. And UAE, which would be second half of 2026. So these are 2 countries which have announced their e-invoicing mandate and IRIS would be offering the platform in these countries. We are actively looking at -- our primary focus right now is the GCC and the APAC market, where we feel that e-invoicing and e-reporting is going to come up in a big way in the coming years.

The next question is from the line of Rohit, who is an Individual Investor.

I just want to begin by congratulating everybody. I mean I was just looking and 4 years back the market cap was around INR 30 crores, INR 35 crores and if I analyze the half year profit, it's about INR 16 crores, INR 17 crores today. So from that time when it was a dislocation, of course, but from that time to reach here is fantastic work, so congratulations to everybody. So my first question is on the Reg Tech business. So you mentioned that with the new sales side we intend to convert -- so the growth is driven by new [indiscernible] with the new sales head, we intend to convert other clients to our clients. Now my question then becomes, what prevents others from doing that to us as well? So the beauty of the SaaS model is understood to be the fact that it's very sticky. So can stickiness be low if in this space is 1 question I have?

First of all, Rohit, congratulations on your second baby, and we keep track of Rohit because Rohit keeps us on our toes and he is the most prolific questioner of the company. So all the entire management spends 2 whole days. The reason we have 2 days between the results and today, it's because we're always trying to figure out what questions Rohit will ask. Rohit, it was a complement there for you.

Thank you, sir. I mean, thank you, thank you, that's very nice of you to say, thank you.

So I think you said sickness. I don't know. I don't think we have enough data to know whether they are sticky or not sticky. See, the thing is if you look at the market directly in each country, there are basically 2 extreme set of -- 2 sets of providers of solutions. One in a class of their own in America, for example, the company called Workiva, which is operating at the higher end. And we believe that their vulnerable points, if want to look at it that way, is possibly price and nothing else. Maybe to some extent, some features here and there. Then there's the lower end of the market, which is completely price sensitive, where there are hundreds of several dozen or a few dozen amount of providers where the only thing that really matters is price. So when you start adding price and quality, which is what we're trying to do, then the situation changes. Also, when it comes to stickiness. In the regulatory space, people entering into a contract generally not longer than 3 to 5 years. So at the end of that period, they do -- they are open to looking at what others have to offer. It doesn't mean they switch. We've had some success with some people switching. We have also lost large customers in the course of doing this. So is there stickiness? Yes. Is there no stickiness? Yes, the answer to both is yes. It is like a very confusing answer, I realize that. But we don't have enough data to say one thing in a very determinant fashion as to what level of stickiness exists. Currently, most of our customers have stayed with us. The only customers we've lost is because we have been working through 1 of the accounting funds to acquire customers in the U.K. And if you take a look at our customers in the U.K., the customers for our CARBON product, we have lost customers in the U.K. because our customer who actually brought in all these filers has gradually started taking the work within their own company, and that's how we lost customers in the U.K. So when there's not been the lack of growth in the number of customers for CARBON for U.K. market filings happen because of this. So the lack of stickiness there is because 1 customer decided that they're going to take most of the work in-house. I hope I've answered the question to the best of my ability. But Deepta, do you want to add this about stickiness?

Sure. Congratulations, Rohit. Just to add to what Swami said, so there are many factors, right, around stickiness. So 1 is, of course, the customer satisfaction, how satisfied they are with your solution, I think your question is if we can steal others' customers, can they not steal ours, right? And the dimension of acquiring the customer, I mean, although the aspect of acquiring a customer and retaining the customer, it has many dimensions. So what you are selling to them. So for example, when we talk about XBRL, that's one module, let's call it like that. When we talk about disclosure management, we are potentially going deeper into the organization or in ESG model we're going in deeper. There are also aspects about kind of the tenure of the term of the contracts that we enter into with the customers as to our competitors, right? So there are different dimensions to stickiness. Can someone please customers at any point in time, including other? Yes, of course. I think, therefore, the idea is or what we aim to do and try to do is try to make sure that we are constantly kind of innovating and doing a trial, right, whether it is kind of on product, whether it is on what I call it, customer wow, for our customers excellence, whether it is on right pricing, whether it is on added modules and added functionality. As I'm sure, Rohit, others might be kind of doing as well, we've just been successful. We hope to be able to replicate or see that in the newer offerings that we're rolling out in the marketplace.

Deepta, thank you. By the way, Rohit, Anu just come back from Europe, where she's making many customers and tried to question with some of them to switch. Anu, do you want to share your experience and anecdotal experience. You don't need to mention any of the clients. But generally, when you speak to customers, asking them to switch, what would you say?

There are different reasons why companies, until they see definitely the product is -- when it comes to the CARBON product, there's a lot of automation, which is there. And also there is -- the ease of use is also very, very high. So that's way companies are willing to consider looking for alternative options. That's number one. Secondly, we are also trying to overall see how even our existing customer base, right? Who don't have products for financial reporting, et cetera, the disclosure management, definitely, we are seeing as a very good entry into an existing customer base that way we are able to solve a real problem. So in some opportunities, we are replacing another vendor with that, but there is also an opportunity with the disclosure management where more companies even the large ones do not have solution/technology, we're doing a very magic that's where some of the new modules like disclosure management, we are able to kind of get a decent entry and acceptance of it.

In fact, Rohit, when Anu came back from Europe and Servo came back from Europe, I had some interesting things that I had to unlearn, had to unlearn many things and relearn many things. And one of the things that's actually happened is Servo has managed to change the way we sell a more consultative approach, and that's leading to increased realization from customers. Servo, you want to talk about that?

Yes. Hi, everyone. So I think as Swami mentioned what we've been doing slowly and steadily is it in understanding the real pain points that customers are trying to solve for. So when they're buying the software, they're not buying it because they like the product, but they're buying it because they're solving a problem that's either related to their top line or bottom line, right? So either helping them make more money or helping them save money. So they're trying to understand what problem they're trying to solve for? How are they doing that currently? If we solve it for them, what is the value add we are giving them? And on the basis of that value add, what is it that we can charge them? So what this has led to is increased pricing across the board, eventually meaning more money for us and also stickiness because it's a concentrated approach. We really feel that we understand what we're seeing and we're solving for the problem. That also includes giving that feedback to the product team. So we're very agile. We're getting the feedback to the product team, and they're very rapidly building the product based on what's happening on ground. So all that collectively is helping us gain momentum in the sales cycle and increase our deal pace at the same time.

And Servo, if I'm not wrong, because of improved marketing, we're also -- the funnel has also become much bigger, isn't it?

Correct. So we've increased -- so we've had infinite focus on increasing the top of the funnel from a marketing perspective, so we build structures and playbooks around it. So the marketing team is starting to fire like an engine where we are increasing week-on-week, month-on-month increase in the volume coming in terms of lease. Some of it, I will also say is the tailwinds from this ESG mandate being rolled out. And as we get closer to the time lines for submission next year, there is traction over there, but a lot of it is the focus on numbers-driven approach from the marketing perspective, leading into the sales funnel and then leading into the customer success and implementation funnel. So the marketing team definitely is playing a big role there.

And I think we're grateful that the stickiness here is not to be compared with the level of stickiness offered by Fevicol, so it's okay. So we are betting on the possibility that people will get undue from their existing web providers and move to us, for which there's a lot more ground to cover. We have a lot more work to do, but we have laid the groundwork to get there. And we're very really happy. So there's one market, Rohit, where we actually won a customer who was earlier worth about 1/4 what he's now willing to pay for the larger DM solution that we actually have. So by with realization going up like this, I think it augurs well for us.

I mean that's a very, very comprehensive answer, and thank you to the whole team for that. A few things to pick on that answer, follow-up questions. One, I mean we've been very excited about disclosure management. So if you could give more details on how that is shaping up in terms of seeding and realization as compared to the traditional CARBON solutions we have? That's the first question on that. Second, Servo's answer on pricing increase was very interesting. But where are we seeing this pricing is interesting because I assume the contract was signed for a year and you can't increase pricing. So a little more detail on how the pricing -- so where is the pricing increase happening and a broad understanding of the quantum of increase would be helpful. And the third question is, I mean, it's very clear from balance sheet that IRIS is becoming profitable and then in capitalistic world profitability attracts competition. So given this -- do you see increasing competition in your core regions in either Sup Tech or Reg Tech in terms of not just new players coming in, but what you are doing are others doing? In the sense if somebody providing some sort of accounting software, are they trying to enter into this space? And are you seeing increased competitive intensity in the core regions is my third question?

So in terms of DM, Anu, you want to take the question?

[indiscernible] disclosure management, I think definitely last year was what we call testing the water. And overall, with more reporting coming up like ESG, et cetera. In fact, whenever there is an increased regulation, which is kind of coming up, clearly, with it is in countries like Europe definitely the need for solutions like disclosure management is only going to increase. And a large base of companies we need to report on, for example, 2026, that's going to be on the biggest base in terms of ESG reporting. So I think this year and the early next year is going to be very crucial. You can see a very good momentum of requests coming in from existing customers. And as Servo mentioned, there is also more inquiries coming in from external sources as well.

And, Rohit, to answer the question on pricing, it's not necessarily at the end of a contract cycle. When you add additional features to the product, you see this product can do this much more and this much more, then automatically, it gives you justification to add on an additional pricing reason -- additional reason for increasing the price. You don't look at increasing the price, you basically say that when you're paying me so much for this, now I'm going to throw in this much more, and therefore, for that, you pay me much more -- you pay me a little bit more. And that's really how the whole thing is happening. Servo, you want to look at -- do you want to answer the question on pricing?

Yes, sure. So I think, Rohit, pricing, the way we see it is the function of what value we are able to deliver to the customer, whether it's an existing customer or it's a new prospect we are talking to. For customers that we are already in existing contracts with, for the same service that we're doing, definitely, we cannot change anything because we're contractually bound. However, when we do go back for renewals, there may be some marginal increase in pricing for the same set of services. But like Swami mentioned, we are tied to position an additional up-sell or cross-sell with the same set of customers, for which we are doing a value-based pricing. As far as prospects are concerned, from day 1, we are doing a very deep discovery, a very consultative approach. So think about it like someone going to a doctor and doctor understanding the true problem and prescribing accordingly as opposed to say take a green pill, take a red pill or yellow pill, and go for it. So our approach is very concentrated. I don't know what the competitors are doing or not doing. What I will say is we are doing it, and we are doing a reasonable job because the prospects and customers are both appreciative of us understanding their problem and trying to work with them to solve for it. This year is an extended arm of their organization, helping solve their problems. So they're willing to pay a little more for that.

And, Rohit, on the question on competition, I want to say 1 thing very interesting here. We recently lost a contract in Sri Lanka. The company which won the bid, bid 5% of what we had bid. I just cannot understand how that's possible. I also cannot understand how the regulator accepted a bid like that, which is completely unviable. So is there competition, meaningful competition? Not really. Instead, what's happening is there is certain consolidation happening in the industry. This company called [indiscernible] has a quite a few companies, and you will see more such consolidation happening going forward. I don't see too many companies coming up with competitors in response to the increased business opportunity. Because I think, again, regulators, at the end of the day, want to work with tried and tested people, with tried and tested providers of software as opposed to new players. The biggest competition comes from a regulator's difference for a bespoke solution, probably we may go to a typical software developer and get it done. But the value of the contracts are so small that the big guys will not do it, and the small guys are too risky to trust things to, unless, as I said, in case of Sri Lanka where the contract was awarded at an abysmally low price, which is completely meanings. So are we having sleepless nights because of competition? No. But to add one more thing to what Servo said a little while ago, when the price actually goes up when we can charge more, we can also attract better quality channel partners in those countries for whom we can leave more money on the table for them to work with us to make it more attractive for them. So we currently still follow a hybrid model with some direct approaches along with partners, but that's another digital benefit, which actually comes on a counter increase in price. I hope I answered all the questions, Rohit.

Looking forward to the future.

The next question is from the line of Rinit from Chris BMS.

Congratulations, first of all, a good set of numbers my hotels with respect to the market size, like can you please tell me in numbers that what is the total addressable market size and at what rate is it growing?

Sir, I have 1 request for you. One of the reasons we provided the reclassification or recrispening of our different business segments is that you can actually Google them. If I tell you the numbers, you would fall off your chair, so let me not tell you the numbers. Why don't you Google Sup Tech? Why don't you Google Reg Tech? Why don't you Google Tax Tech and Google Data Tech? You will find estimates of market size on your own. And you will find on your own. And when you find on your own, you will find it much more acceptable than if I give you any numbers. So I'm not going to give you numbers on market size and how fast it's growing. Take a look at, do a search and get the numbers for yourself. Please forgive me if I don't give it to you because I really believe the reason why we've actually done the reclassification is to help answer such questions and find -- and help investors find answers on their own for the market size.

The next question is from the line of Deepak who is an Individual Investor.

Congratulations on a wonderful set of numbers and also wish you all a happy Diwali. My question is related to the Sup Tech segment. We noticed from the presentation that we do provide taxonomy-related services, both in development as soon as ongoing modification. And I presume this is for the ESG reporting side of things, which is a very large focus area for regulators. We've also seen a lot of social media presence by IRIS on taxonomy-related webinars and so on. So it is wonderful and very informative and that deserves a lot of cost [indiscernible]. My questions are actually twofold. So the regulators have this focus on ESG, which is supporting institutions and regulators. But given the expanding regulatory focus on, let's say, financial crime, digital assets or newer emerging risk, just wanted to understand if IRIS any sort of broader plans to support regulators in these areas, which may -- which have possibly started or may come up in the future, right? And the second question is related to the workflow tool, which is a sort of new product that we are working on the Sup Tech segment. I mean will these tools help us establish more sort of key ongoing business, more tighter relationships, working relationships with the regulators on an ongoing basis?

Mr. [indiscernible], you may be very, very happy by pointing out that you've noticed the heightened social media presence. When people like you give such independent feedback, it makes us very, very happy. I just hope our clients also notice it because clients also need to notice it for us to get business out of it. So thank you very much for noticing it. Now as far as the product development question that you asked is concerned, we develop products where there's a requirement, where there's a need, where there's a possibility using existing components. We have fairly well-defined contours within the company in terms of what we will do and what we will not do. So for example, do we -- wherever they're reporting in a structured data format, we are very much there. Now there are situations like in the case in the case of banks, there is large amounts of data being submitted. When then there are corporate filing with regulators, with ROCs, business industries, capital market regulators where the data is presented very, very differently. Now you talked about money laundering, anti-money laundering and all this stuff. Now -- or something on those lines we may not recall what you mentioned -- fraud detection. So we have done pilots in the past with Government of India in terms of using XBRL data and using business rules to be able to detect fraud. Some of the work that done with RBI, with the business rules that we actually build for them allows -- equips them to detect frauds better. Do we have a product for it? No. Do we have a plan for a product at this point in time? I don't think so. Is that a priority for us? Not really because there's enough on our plate right now that we need to focus on and grow the business in. On ESG, I did not understand your question. Balu, what the question is...

No, not fully. But I would just like to say that ESG reporting also is very much on regulators' minds these days. So since we are working with a couple of standard setters, global standard setters who work on ESG reporting. We expect to engage some of the regulators on what they should be doing to digitize ESG reporting going forward. So we are engaging some of our existing customers. And I see that also picking up in the coming months -- coming quarters.

So one other thing we actually see going forward is the fact that we have a huge presence in the Middle East. We are in 6 countries. And as you know, it's an energy-rich area. So we're trying to see whether there's a possibility of selling our products there for ESG reporting.

The next question is from the line of Sid Shah, who is an individual investor.

I think we were talking about sales where, of course, you built out a team and you're doing this direct sales approach. But you also partnered with Prophix where I think IRIS CARBON is being sold as part of a bundled solution to various customers. Can you talk about which segment is driving more growth? And do you see kind of one outpacing the other maybe?

I think it's too early to draw a definite conclusion as to what will actually happen. I think for Prophix to start doing customers -- start doing customer calls and getting ready for it, it just took a fair amount of time because it's a fairly complicated product. We actually spend time with the Prophix team, training them, we participate in Prophix conferences. Now ultimately, while we will also do direct sales, we also do channel sales through partners. Which one will take over what? I don't have an answer right now. I don't think we have enough data at this point in time. We are -- the challenge here is actually to avoid channel conflict to ensure that the 2 -- the 2 channels don't conflict each other that where we go and sell directly, the partner doesn't show up and say, no, it's my customer. That's one thing you need to be mindful of. But I think that's a good situation to be in if ever it happens. But right now, we don't have enough data to give you a definite view in terms of which one will do what, which one will do more and which one will do less.

[Operator Instructions] The next question is from the line of Sunil, who is an individual investor.

I'm a happy shareholder. And I have a few questions about your deal with the Telangana state government. You're enabling the MSME in Telangana. So what was the IRIS' role? How would it make money from this arrangement? And like there are something like 26 lakh MSMEs in the state. Has XBRL being mandated for them? How will you do this? How will you -- what is the revenue model based on one state of Telangana? And do you expect to strike such deals with other states?

Thank you, Sunil. Many of you may not be aware of this, but I think -- and I don't know if it's a coincidence, but I think our stock price started moving from the day Sunil published his report on the company almost 1.5 years ago. So thank you for your continued follow-up on the company. I see your tweets. And I think having somebody like you follow the company also keeps us on our toes. Next to Rohit, I think you won with your tweets who keep us on our toes. Secondly, to answer your question about Telangana, when companies make their GST filings, it throws up a lot of data. And we believe that the data that's thrown up in the course of company filings, whether it be GST or MCA or whatever, allows the possibility of it being leveraged to enhance credit, allows the possibility of many other things that -- for many other things based on that data. So we're actually building data-based applications to help the MSME ecosystem, starting with enabling credit. Will we ever lend? No, that's not the business that we are in. We already have a relationship with several fintechs. Gautam, how many fintechs are currently using our data APIs? Gautam? Gautam?

Yes, we have about 5 fintechs using our data APIs.

So we have 5 fintechs using our data APIs to lend money to various MSMEs in the country. So we will be basically -- our objective is to leverage the data in a consent-based framework, take the consent of the MSMEs and share the data with lenders who can possibly lend to them. We see no reason why -- RBI currently is talking about something called frictionless lending. They're asking a very fundamental question as to why there should even be a delay between the time the company submits data and the sanction? It should happen instantaneously quite literally if all the data streams are in place. So we're actually working in that direction. And we believe that with all the data that's being thrown up, with all the footprints that companies are leaving behind through the economic activity, if we bring all of those footprints together, it's possible to speed up lending. It's also possible to help MSMEs lower their cost of borrowing from various lenders. So our first objective, our only objective is to try and see how to leverage the data that's coming out of SMEs to help them either make it easy for them tomorrow, make it easier for them to handle the receivables and so on and so forth. And that's the basic model that we're going to have, where we take a little bit from the lender for origination and monitoring. And with 28 lakh MSME there, I think it's a big possibility. You see the people -- that the existing system is still chasing the people who are at the high end. So micro, small and medium, that's what MSME stands for, enterprises. So micro is below INR 5 crores, small is below INR 50 crores and medium is below INR 250 crores. So now it's very important to see -- so while everybody is chasing IRIS to lend money to IRIS, there are companies who are smaller who people don't lend money to, so for -- because of the transaction cost of lending. So we are hoping that with the platform that we are trying to create, it will become easier for MSMEs in Telangana to be able to borrow from these existing lenders and improve either their operations or reduce their cost of operations or so on and so forth. These are all possibilities. It's still early days to talk about how it's shaping up. We will run a pilot initially in a few places to take it forward. Our early feedback from MSMEs is that they are thrilled at the possibility of being able to borrow and at a lower cost and borrow speedily. So the feedback is very, very good. We are hopeful of signing up other states going forward. As I said, none of them have signed up yet, but we are in discussions with several states at this point in time.

Okay. Just 1 more question. In your cash flow statement there's. In your capital expenditure item of INR 3.78 crores, may I know whether this is a business that has been acquired?

I think Balu can take that question.

Sir, it's essentially, capital expenditure, which we have capitalized, we have built software products, 1 for the Malaysian invoice platform. another 1 we are revamping our Sup Tech platform. So as we spend it, it gets capitalized because it is software that is built for revenues, which are going to come across many years. So most of the money is from there. Some of the cases we have bought computers. So maybe about INR 35 lakhs would be from computer purchases.

The next question is from the line of Ankit from Adesa Ventures Family Office.

I see on the slide that IRIS CARBON has won a lot of awards starting, I think, mostly in fall 2024. So is this a function of some changes in product? Or are we kind of -- just are we getting into these spaces to be visible to the award people a lot more?

I think it will make Anu very happy. Anu, that's your question.

These awards like through reputed organizations like G2, Gartner, et cetera. These are awards which actually are given or accolades, which are given to us. So it's a function of customers, customer review, customer satisfaction. So they also contact customers who are giving reviews on the product independently to have conversations, et cetera. So it is definitely a combination of the product overall and overall the product experience and the customer experience as well. I think this is one way where we are very unique where from a product perspective we keep bringing a lot of updates based on customer feedback. So that actually really helps in making sure the customers have a great experience. So it's a combination of both the product experience and the overall experience the customer gets end to end. So these are badges accolade, et cetera. Not that we've applied for them, and these are something that has been given to us by G2, Gartner, et cetera.

Has it changed -- has it been because of any changes in the product or it's just probably more customers using it and hence, they're getting more feedback?

Overall, if you see the product, definitely, like I said here, we have regular product updates. So overall, if you see from a customer's perspective as well, we have a very systematic, what we call, a customer satisfaction survey that goes to customers every quarter. So we actively seek input and feedback for the product and for the overall let's say customer engagement, support and various aspects of the offering. The feedback is something which keeps coming in, whether it's customers who are new or move from other products or even existing customers. So that's how we are able to plan thing like the product road map, product releases, et cetera. So definitely, the product goes through changes by every release. And by every release, the product actually gets better, and thanks to our customers. We take feedback from them very seriously. We take -- of course, not just the customer feedback but also in the market feedback. When we issue demos, et cetera, also we get very good input from people. So we contribute all of that, take all of the feedback, introduce into the product, and that way, we are able to make sure that the customers are really happy. The short answer is yes, the products definitely goes through changes and improvement by [indiscernible].

Okay. And secondly, I mean, we hit a great milestone of INR 100 crores in revenue last year. What about the next INR 100 crores? I mean, are we looking at certain trajectories for us, but when do we kind of think about INR 200 crores?

I do not play guessing games as far as these things are concerned. We also don't do any future projections. We don't talk about -- we don't provide forward numbers. Obviously, when you're INR 100 crores, you want to go to INR 200 crores, when you go to INR 200 crores, you want to go to INR 2,000 crores, and when you go to INr 2,000 crores, you want go INR 20,000 crores. When will it happen? I have no clue. Do we have plans in place to try and grow to reasonable size within a reasonable period of time. Yes, we do. But as I said, to put a precise time frame on this and say how fast it will happen, I'm not going to have a guess. So before we close, I'm going to get -- I'm going to ask -- I'm going to get 1 of my colleagues into this call to talk about some of the technology changes we've brought in since he joined. Thomas, can you talk about the technology changes that we brought into the company in recent times?

Sure, Swami. Actually like...

Thomas is CTO of the company by the way. Go on, Thomas.

Good afternoon and Happy Diwali to everybody. Yes, there is a lot of changes actually we bring in for the technology, that become actually the processes we standardized and not on the processes. We refined a lot of processes and let me ensure that the development happens with the product -- in the product mindset and that's how the whole thing happened. So the -- we call it productization of the products. So we use all the standard productization methodologies to actually improve [indiscernible] on the product. Like I've heard many asking about how product is improved, et cetera, the kind of how the feedbacks are taken and how it is prioritized and what are the feedback which we put it back into the product. That happens through that process. That is one. Second is actually expanding the 3B expansion as a team in Surat. And we are further expanding the team because that we want to have best set of resources who are available wherever in the country. So we are more open to actually having more development centers and things of that sort. So that way [indiscernible]. But we encourage people to come and work within the organization like work from office environment. We are pushing forward for that, even though we have a lot of people who are actually doing a hybrid kind of work environment. Okay. So -- and we added newer technology and technology tools like [indiscernible] you're talking about the BPM that business process. So those are [indiscernible] we are [indiscernible] the business people or the regulated connecting change in workflow of various systems. So [indiscernible] dosing are actually getting in, and it's all net [indiscernible] production. Again, the last and not the least, [indiscernible], that is actually on the AI side. We are doing a lot of AI technologies, which [indiscernible] our products, wherever it is actually open and that also is improving our technology set.

thanks, Thomas. And one last thing, the question did not come over -- come up about AI. But Gautam, if you take my question about use of AI in the LMS in the context [indiscernible].

So if you look at AI, I think there are 2 ways to look at the benefits that AI can give. So one is improving internal productivity, which our developers are doing. The other is using AI to enhance the value, which that can be offered to customers and you have a product called litigation management system where we are looking at using AI extensively. So a couple of use cases, if I can just give an example of. One is, with GST, there are a lot of notices which companies are receiving because this is all automated. So we are using AI technology to actually read the notice and not just read the notice, but classify the notice and create a case in the system, create a summary. So this eases the whole work of any tax person in the organization to manage and replace the box case system, which we're currently using. And our next goal is to start looking at auto drafting replies based on the various case laws and the depositories, which is available. And also putting a layer of understanding the notice and giving a reference to a similar case or a case laws based on the repository which is available. So these are some of the work that we are doing in -- using AI, especially in the legal tax piece.

And, Gautam, you already have customers on the product, right?

Yes, we already have customers of the product. So we have some large marquee -- some of the big groups in the countries who have -- who've really appreciated and like this thing and have started signing up. So this is something which we feel is going to be a big driver for us in the coming years.

So the point I want to leave you with is, we are leveraging AI internally for both internal selectivity as well as improving our products. Second thing I want to -- second message I want to convey through what Gautam said, right now is we work in a number of adjacencies to our core products to try to serve those customers, and that also goes back to what Rohit asked about how you increase the price? You want to increase share of wallet from a customer by offering them additional stuff over and above what you're currently doing. And that's what we try to do in this context. So thank you very much. Over to you, Sejal.

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

I think I'll refer to Balu in terms of closing comments because I've spoken enough. Over to you, Balu.

Thanks, everyone, for coming in for this conference call. Really appreciate your time that you spend with the company and ask a few question.

There is one question. One question from Prateek Chaudhary. Yes. I think we can take that.

The next question is from the line of Prateek Chaudhary from Saamarthya Capital.

For this, I had just a few questions. One on the order that we have got. So first, we'll be building that platform or product for the Telangana government. And then thereafter, post building, we might, as operator of that platform, we may charge a certain fee to whoever is using that whatever is coming -- whatever data is coming out of that platform. Is that how it will work in terms of the life cycle of the product and what we may earn out of it?

We will develop the platform, and we will charge on the outcome -- on the benefit to the lender in terms of a percentage of the loan that the lender provides to the borrower.

Okay. And when you're building this platform for the government, what is the cost for that?

We're not building it for the government. It's a PPP model. It's a public private partnership model where we incur the investment, we do the investments. And the government has a say in terms of how -- of the specs of the whole thing, but ultimately, it's owned, managed and operated by us. Much of the company the components already there, it's a question of bringing in the components together. I will have a more accurate information in terms of how much it costs once we reach a certain scale. We're right now in a discovery phase, and we will be able to get a better cost estimation only in a few months' time.

And would this be -- you said you will charge a percentage fee of the loan being disbursed?

Correct.

Okay. Would this -- can this be upwards of 10 basis points? Or would it be lower than that?

It depends on how desperate the borrowers are quite to get a loan and how desperate the lender is to acquire a customer. We don't know price discovery has not happened. Currently, when you look at the market, I've heard anything from 20 basis points to 1 percentage point from -- on the origination side. Nobody is charging on the monitoring side. So as I said, we have to do price discovery before we come to the conclusions. All that I know is the volumes are big. The numbers are big. The need for credit is high. So we are optimistic that whatever we do will pay for itself at a reasonably -- in a reasonably short time.

Right. And what would be the typical development cycle for -- roughly for this product? And when could we see this commercializing? Can it happen in 6 months?

In a year. Maybe a year.

And you said there are a number of states who are planning to do something like this?

I did not say that. I said we are talking to a number of states with similar ideas. I don't know who will accept, who will not buy. So far, we only have Telangana.

And there are a couple of other companies and websites also, which give out such data. So how will this be different from the other players that are already servicing such use cases?

The market is huge and there is a place for many different kinds of providers of solutions like this. Where we come in is the fact that we are a GSP. There're only so -- a handful of GSPs in the country who are well positioned to take a font this. We're also on IRP. There are only 4 IRPs in the country. That gives us a competitive edge, and that's what we will basically leverage to try and create a moat for ourselves in those markets.

Okay. And this what you had roughly mentioned a 0.2% to 1% on the origination side. This will be solely given to you, or you would have to share this with the government?

At this point in time, based on the discussions we've had, it's for us, but it's quite possible that the government may ask for a share tomorrow as it is legitimate and they have a legitimate right to that, we will cross the bridge when we come to it.

And sir, last question, just out of our current quarter's revenue, approximately what percentage came in from the South African contract?

We don't provide customer-wise breakup. I'm sorry about that. And for Africa is mentioned as an aggregate, but it includes multiple countries. Africa is 36% that includes Nigeria, that includes Mauritius, and that includes South Africa. But we don't provide customer-specific -- because South Africa also includes the ROC filings apart from the Central Bank work that we actually do. So I'm sorry, but that's not the level of granularity we provide at this point in time.

No worries, sir. And so if you could tell the percentage of the contract that is still remaining to be -- the value of the contract that is still remaining to be executed over the next 2 quarters?

Yes. I think the last May call, we mentioned about the 30%, 35% was completed. I would maybe add other 10% to that.

Roughly 50% to 55% is still to be completed?

That's a reasonable assumption from an arithmetic point of view, yes. I think Mitesh Mehta still got a question.

The next question is from the line of Mitesh Mehta from Long-term Lester Group.

I have a few small questions. One is regarding the team size of the company and especially how much people are involving sales part and how much are in admin and implementation parts? And third question is regarding revenue distribution geographically, you can provide anything regarding geographically, which are a part and what is the percentage of revenue in each geography?

As far as geographic distribution is concerned, that's already there in the presentation, if I'm not mistaken. You can actually see it there. As far as employees are concerned, we have 550 people and sales is about 30%. So sales is about 10, 15 people or 20 people [indiscernible].

So we have got a little less than 550 people at this point of time and the sales and marketing together I would say, would be about between 30 to 40 people or 30-odd people.

30 to 40 people and how -- what is our expansion plan for sales people?

Yes, the sales, we are giving a lot of focus, especially for the SaaS business. So there is a plan which is getting executed to further strengthen the sales and marketing team. So the expectation is underway. So I think you can see that expanded as we go forward.

So thank you very much for being on the call. Sejal, I think we can wrap up.

Okay, sir. Sir, is there any closing comments?

Not really. I think we've done more than closing comments. It's time for people to go home, too.

Okay. On behalf of Irish Business Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.