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

Ladies and gentlemen, good day, and welcome to the IRIS Business Service Update Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Asha Gupta from Ernst & Young. Thank you, and over to you, ma'am.

Thank you, Alek. Good evening to all participants on this call. Before we proceed to the call, let me remind that the discussion, which -- may contain any forward-looking statements that may involve any known or unknown risks, uncertainties or other factors. It may be viewed in conjunction with our business risk that could cause future result performance or achievement to differ significantly for what is expressed or implied by such forward-looking statement. Today, we have the top management of IRIS Services Limited, represented by: Mr. Balachandran, Co-Founder, Whole-Time Director and CFO of the company; Mr. Vinod Agarwala, Chairman of the company; and Ms. Deepta Rangarajan, Co-Founder of the company. We will start the call with the update given by Mr. Bala that will be followed by Mr. Vinod. And then maybe we can start with the Q&A session post the opening remarks given by the Bala sir. With this, I will now hand over the call to Mr. Bala. Over to you, Balu.

Thank you, Asha. Good afternoon, and thank you for attending this investor update call in good numbers. I'm Balachandran, Co-Founder and CFO of IRIS. Along with me participating in this call are: Shri Vinod Agarwala, Independent Director and Chairman of the Board of Directors of IRIS; Deepta Rangarajan, Co-Founder and Whole-Time Director, IRIS, P K X Thomas, CTO and Whole-Time Director of IRIS, and other business leaders of IRIS. We thought an update call like this would be appropriate in the context of the untimely demise of our Founder and CEO, Shri Swaminathan. This call is, of course, happening in a period where our full year audit has commenced, and we are in a silent period. Given this backdrop, we would like to use this opportunity to purely look at reaffirming our business continuity at IRIS. Having said that, now I would like to invite Vinod Agarwala, Chairman, Board of Directors of IRIS. Vinod?

Thank you, Bala. Good evening, everybody. Swami, my friend, CEO of the company, Founder and Whole-Time Director died suddenly. It was totally unexpected. He has given his life for the company, sacrificed a lot, worked a lot. He is irreplaceable, that we all know, but we all have to accept God's wishes. Meanwhile, I want to assure you that our company remains strong and robust. Swami, the Board of Director has contemplated this situation can happen. And therefore, we have considered and we have a well-thought of [indiscernible] in place. In fact, over the past year, we have built a leadership pipeline with [indiscernible] one that is designed especially precisely for financial growth. Following Swami's unfortunate demise, the Board has entrusted, Balachandran, Co-Founder and CFO of the company to be responsible to rule us with day-to-day operations of the company on an interim basis. The Board is also planning to make an additional plan.

I'm sorry to interrupt sir, your voice is a little muffled. Could you come a little closer to the microphone on handset.

Now is it fine?

Yes, much better.

Is this fine now?

Yes.

Okay. So Board of the company is also planning to meet in this quarter and formally appoint a CEO in place for Mr. Swaminathan. The three promoters of Swaminathan, Balachandran and Deepta Rangarajan have been together right from the inception of the company about 20 years ago. That is the same reason for the future of the company and Deepta and Balu [indiscernible]. The shares of the company [indiscernible] getting evolved to Deepta and I may assure you that there will not be any change in the percentage of the shares shared by [indiscernible]. The company's growth trajectory remains, Swami said, we are seeing momentum across a few segments. Sales pipeline is getting better and better, and our partnership continues to [ deepen ]. We are also on track with our new initiative, we should be leading [indiscernible] from development execution in the coming years and quarters. I assure you that everything is being done by the current promoters in the port to maintain and increase the [indiscernible] of stakeholders to the company. I thank you for joining. And now over to Balachandran for further presentation.

Thank you, Vinodji. Thank you so much. In fact, Vinodji is taking this call from outside India. He has gone for some trip, but he has been kind enough to come in and take this call. So thank you so much. Let me share a few thoughts of mine. Swaminathan did play a very key role in articulating the vision of IRIS, which is an IT-driven software products company addressing global markets and helping to build transparency while driving growth for our customers. This has been our philosophy, our mission, and Swami has articulated it over the last few years. Over the last couple of years, Swami has been spending more of his time and energy in exploring medium-term and long-term business opportunities for the company. As the management bingo goes, one can say, Horizon 2 and Horizon 3 models. The existing business foundation of IRIS remains strong and robust, and the SupTech, RegTech and TaxTech businesses are poised to do really well going forward. We have experienced business leaders in charge of each of these business lines and there are well-articulated business and operating plans that govern each of these businesses. You will, of course, know that our growth had moved to a higher growth trajectory, higher trajectory and we continue to be excited about these businesses. Our Board meeting took concerned approval that Q4 and full year results were to be taking place in the middle of next month, post which we would hold an investor call to discuss both the business and the numbers. That's the normal course of activity for us. Every 6 months, we do have investor call to discuss business numbers. Now, I would ask Deepta to share her thoughts.

Thank you, Balu. Firstly, thank you all of you for coming in on this call. What I'd like to say, I think, from many of you, we have heard how close Swami was to all of you and how much he was in touch, he made on several people's lives, including, I know, many of you, too. Thank you for your expression of condolences that came in and also thank you for being with us through this journey. So, like Balu mentioned, Swami, Balu and I have been together for decades now. Actually, we just concluded some of our business plan meetings for each of the business divisions along with just before -- just a week or so before his unfounded demise. So we are, together, committed along with all of the business leaderships of IRIS to take a step forward to roll things out because it also sets and that's the direction we're all headed in already. We've also had some of the key investors express the fact that they are solidly supporting us and will continue to do so. So we thank you very much for that expression of trust and confidence in us as well. With that, I will turn it back to you, Balu.

So we could -- we could have questions if any, from the investors. I would like to say at the outset of that, we are not in the position to discuss hard numbers or facts or statements related to business status at this point of time. But we'll definitely invite if any of you want to share thoughts or questions to the management. Over to you.

[Operator Instructions] The first question comes from the line of [ Pawan Gupta ], an individual investor.

Thank you very much for arranging this call, Balu and Deepta. I think, surely, first of all, I must say, the loss of that's a great person is an enormous loss for a family, for investors and for employees. And I think we appreciate the great job done by him. Since you have been kind enough to arrange this call, we would like to know going forward, whether the plans will continue, whether the vacuum will be filled and how growth will continue as per the vision laid out by Mr. Swami. So thank you very much.

Thank you so much. Thank you for your remarks. As we mentioned in our initial remarks as well, we do have a plan, and this plan is as per the vision, which is set out by Swaminathan along with the other cofounders. And we have a robust business from this and we do have both business and operating plans for the short term assets as for the medium term. And the prospects are looking good, and we see no reason why there should be any change in the trajectory that we have currently embarked on. Swami's void is definitely something which is very hard to fill. I will be the first person to admit that. Having said that, we are committed to make sure that we have the business leadership to take the company forward in the past that we have already earmarked for ourselves. Deepta, anything you'd like to add?

No. I think like Balu already mentioned before and like Chairman sir also mentioned before, we have already started kind of strengthening the management across the board, Pavan. So we had also laid out business plans for short term, which is the next year as well as the next couple of years. And of course, Swami was also working on longer-term plans, but we are now picking up together. But we are staying the course, we are staying the course of what was already kind of decided and charted and we are going with that. So while we will miss him, we are definitely committed to the direction that we set in the outcome, and we believe that we are equipped to meet these outcomes, most certainly in the near term.

Yes. Actually, I will say I'm an investor for the last many years. I think after COVID, and I have a large investment in the thing, but it is my belief that it's a great company in the making and really look forward to the growth of this organization.

I really appreciate the confidence you have in us.

[Operator Instructions] The next question comes from the line of [ Rohit Potti ], an Individual Investor.

I would offer condolences to everybody, I mean as Deepta said, you've been together for decades in both personal and business life, and that's a hard void. It's a loss for the company also as it's quite...

I'm sorry to interrupt, Rohit, you're not quite clear, you're breaking up.

Sorry, is it better right now?

Yes, please go ahead.

Yes. So just want to offer condolences. It's obviously a large void given how much time you guys would have spent together in personal and in business life and definitely a bit hard for IRIS also. He was -- I mean, he had a course of character, which will be difficult to replace sure. And I mean, my heart goes out to the team and everybody. Deepta Ma'am, your post on LinkedIn also was quite -- it was nice to read the post. It was inspirational. Also it is quite nice feedback. And I think it's a testament to the governance that he and all the leadership have shown to have this call out of term just to convey the thoughts to the investors. It's very highly appreciated. So thank you for that. Just a couple of questions. I just want to confirm that the shareholding goes entirely to Deepta Ma'am or how is it being distributed right now?

Yes, Rohit. The shareholding goes entirely to me.

And I also wanted to get more clarity on the thought process on -- I mean is it going to be a council of leaders who will be formulating the long-term strategy for the company? Or is it that you would appoint a CEO because the idea -- the question is more coming along the lines of Swaminathan and we had a strong independent Board for sure, but sort of you had somebody with, right? So are you thinking in terms of council of leadership or are you thinking of in terms of a single person? So how is the thought process there? Is the one question I had.

The Board will be meeting on the next steps in terms of deciding on CEO. So that hasn't -- I expect that to happen over the next couple of months. And that's also a statutory requirement. I would say that our interim directors also are really actively involved in talking about the strategic trajectory for the company. And that has been the past as well. If you are asking whether there will be a separate independent council for -- of leadership from a strategic point of view, that we would need to discuss with the Board. But within the company, of course, there is a council that's an executive committee, which meets and which looks at all business-related matters on an ongoing basis.

So last -- I mean, I was just want to say congratulations on wining the deal also and look forward to the quarterly call.

[Operator Instructions] The next question comes from the line of Aayush Rathi from Aditya Birla Money.

Firstly, heartfelt condolence to the entire IRIS team. The untimely passing of Swami sir is a deep loss and all strength to the Board and the management, as you navigate through this transition. I had one question on the tech side. So how have the responsibilities on the tech and product side being reallocated internally in the deal. So my question here is that are there any key individuals stepping up to drive the road map and execution and on the client tech support internally -- in the internal team? And just to maintain in the second question, what steps are we taking to proactively engage with the clients after this transition? And also like how -- what the road maps are we seeing with the global clients? I understand in the opening remarks, I mentioned that there are no changes as of now. But have you done any communication to restate that confidence amongst the clients as well. These are my two questions.

So on the client side, let me take that first. Of course, we have communicated to all our key clients. In fact, many of them have reached out on their own and expressing their condolences. That way, the clients know that Swami has passed on, and they know that there is continuity and there is a shared vision, which 2 of us are taking forward. So the client-side, communication has definitely been all, and it continues to be part of our normal business as well that we are in touch with clients. And on this specific area, we did communicate, and we have been in touch with them. On the other side, when it comes to technology, of course, we have promised to the technology -- Chief Technology Officer and the entire structure, which is working under him and Swami has been looking at, from a vision point of view, looking at what kind of products we need to build and what kind of product strategy that should be there in the company. And there is a well laid out road map on that. And the technology team, and of course, the customer support team which is our social products. They're pretty much working along those lines. Do you want to say anything on that?

No. Nothing specific to add. I did see that there's one part of the business, which is run by the individual business leadership as well as the technology teams under them, pretty reasonably well-obeyed basically. I don't think that Swaminathan per se or even Balu or I are in the depth of those. I mean, those structures are set, those teams are running, everything is running well. Like Swaminathan always used to say, he used focus on the next -- he used to say, in fact, if you remember in the previous conference calls, he used to say "I focus on the long term, while all of the teams focus on the immediate term", when he means he immediate, he means next 1 to 3 years, and he focuses on the longer term. So we are certainly picking up the trends on that. But we don't see any immediate impact from a technology or perspective at this point in time. Balu?

Yes. Does that answer your question, Aayush?

Yes.

The next question comes from the line of [ Manu from MVV Capital ].

My heartfelt condolences to the family and the entire IRIS team. I have two questions. One is -- are we looking at a CEO position from somebody within the organization or from outside the organization. And secondly, your shareholding. Will this get impacted? Is the company looking at divesting Mr. Swami's shareholding and bringing in somebody, some organization or some individual from the outside?

Do you want to take the second question first, Deepta?

Yes. I'll take the second question, Manu. I'm Deepta Rangarajan. I'm one of the shareholders [indiscernible] divest shareholding in us as the promoter group, which was earlier Swami. Now, there is Balu and me and the promoter share.

I'm sorry to interrupt, ma'am, you are breaking up. Could you please come closer to the microphone?

Can you hear me now?

Yes, please go ahead.

I said Manu, my name is Deepta Rangarajan. I'm one of the shareholders and Swaminathan and I have also been married for the past 30 years so he's my spouse [indiscernible]. I hear some noise on the background.

Ladies and gentlemen, there's some technical problem. I would request you to stay online while we get the lines fixed. Thank you.

Asha, there is a lot of background noise. I'm not sure that Manu can hear me.

Yes, I can hear you now, ma'am.

Okay. So I was saying that.

I think again, it's gone blank.

I think this line is very, very choppy, can you hear me?

Yes, I can hear you, ma'am.

Okay. I'm going to try this for the third time. First, addressing, Manu, your question about Swami's shareholdings. What I was saying is Swaminathan, Balu, and I have all been together for decades. As me as the founder and Balu and I as co-Founder, I'm also Swaminathan's spouse. Company's shareholding devolves to me. We do not see any change in the shareholding of the group in either.

The second question, Manu had was related to the CEO. Manu can you hear me?

Yes, now I can hear you.

Okay. Good. To answer the second question, the first question, which you posed, which was about the CEO appointment. You are asking whether it's going to be from the company or from outside. Now, this is a matter which will be debated by the Board, which have been deliberated by the Board. And we expect a Board meeting to happen in the month of May or perhaps by early June, where this will be taken up and we'll come to a decision on that. So we'll wait till the Board is looking at this and taking it. Okay.

We have a question from [ Gary Nam ].

So first of all, my condolences to the entire IRIS team. I hope you guys have decided to go ahead in these trying times. I have 2 questions. One, I think we recently announced that we had won a project with Accenture. So if you can shed some light on what the project entails. How long is this project for? And what kind of -- I'm sure you cannot give the exact numbers but still to get an estimate of how large the project size is. Secondly, I believe we have been trying to build our sales team to push the sales numbers of our Create product in U.S. and Europe. So what is the progress on that front? Are we seeing some traction? Because I think our Collect progress has been significantly better than Create, but we had envisioned that Create will drive our company's next 4, 5, 10 years of growth.

Okay. Let me try to answer your first question within the constraints of what we could do at this point of time. So we have seen the exchange filing that we made about this particular award. So this is an award from Qatar Central Bank as the end client, and we are working with Accenture, which is a primary contractor who is the system integrator for this particular project. And this is central bank kind of offering from IRIS, where we are looking at the supervisory data collection and associated software for the Qatar Central Bank. And I think we mentioned that this particular project is for a duration of 18 months in the filing. So that's what we mentioned. And the commercials would be typically in the region of other central banking projects, and we are not in a position to say anything more than that. We would have mentioned that in the past when we do typical supervisory data collection kind of platforms, what kind of numbers we typically deal with. So I would say that this could be pretty much in that range. So that's where it is. On the second part about the sales progress, et cetera, I would say that perhaps we would touch upon some of these areas in our next call post the announcement of the results. Thank you.

The next question comes from the line of [ Vasant Bansal ] from [ NDV Investment ].

Yes. First of all, my heartfelt condolences to the family and entire IRIS team. I have 2 questions. The first question is, are you open to any sort of strategic alliance or you are exploring that or not immediately but in the near future? And secondly, after this demise of Mr. Swaminathan, has there been any cancellation or discontinuation of your order relationship with the customers?

I'm sorry. On the first question, maybe, Deepta, if you could hear that. I didn't really understand that.

I think your question was, are there strategic alliances that we are looking at? Was that your first part of the question?

Yes.

I think we always explore strategic alliances in our different business verticals. It's part of like business as usual. So that continues in any case. And I think the second question was, are we seeing any orders being canceled as a consequence of Swami's passing? No, no, nothing.

No discontinuation of business by any of your clients?

No, sir. No discontinuation of any business. Business relationships are extremely strong, and they're run a lot by the business teams. So it is business...

It's institutional in nature.

And as you said that you are open to the strategic alliance in the various verticals of your business, but are you open to a strategic sale of your business?

It all depends, I think.

No, this is a question that Swami has answered in the past when people asked. It's not that we are actively looking out for any strategic sale of the business, okay? Having said that, finally, we look at the best interest of the investors based on if something is offered. But that is very hypothetical at this point of time is what I would say.

No. My question is basically, are you open to this idea or thought, if you say that, no, we will do it organically with the help of your team or sometimes there is a willingness to sell the business or join hands with someone?

At this point of time, we are really focused on making sure that we traverse along this business trajectory and realize the vision which Swami has set for the company.

The next question comes from the line of [ Mitesh Mehta ] from [ Long-Term Investors Group ].

My heartfelt condolences to the family and the IRIS family as well as Deepta and all the colleagues. Swami -- loss of Swami is really a big loss for everyone, including shareholders. He was very live even in con calls and everything. But I'm sure he must have made a leadership transition like he must have made a transition system previously. So like can you just elaborate on how this transition would happen? And my second question is regarding the shareholding of promoter. Like there is a steady decline in percentage of shareholding. Is it because of new issuance of share or promoters are selling some shares regularly in the market? That's my 2 questions.

Let me try to answer the second question first. So as far as promoter shareholding is concerned, you are saying that there is a dip in the percentage held by the promoters. It should be -- we had privately placed shares, and there were warrants which were converted recently. And secondly, there were some ESOPs also allotted to employees. So that could be the reason why there is a small dip in the percentage. Otherwise, promoters are not selling shares in the market. That is the answer to the second question. The first question was, as the Chairman also mentioned in his initial remarks, we have actively cultivated a line of leadership in IRIS. So there is, of course, a different -- there are people who are in other different business lines, and that has been in certain motion well in advance. So there is no -- I would say there is no disturbance in terms of managing the businesses because of Swaminathan's untimely demise. So it has always been managed by business leads. And he, of course, as the mission, looks at horizon 2, horizon 3 kind of business models going forward. And that has been the situation for a few years from the past.

Okay. And if just I can add one more -- ask one more question is like what about the new initiatives. Especially, Mr. Swaminathan was looking on this MSME agreements with governments, especially with Karnataka and Telangana.

happy that you asked the question. So Swami has been a big proponent of this business line, something very close to his heart. And we have signed 3 MOUs so far with the state of Telangana, Goa and Karnataka. So work is afoot. That's what I would say. And in a phased fashion, I think we would have these initiatives bearing fruit.

The next question comes from the line of [ Ajay Nanandwar ] from [ Blue Iron Capital ].

Condolences to the whole IRIS family. I have a -- it's my first time being in the conference call. So in this situation, otherwise, what are some of the top 3 priorities for the company? And strategically, what are you looking for completion in the next 3 years?

Could you repeat the question, Ajay? We couldn't hear you.

Yes. So my first question is, what are the top 3 problems you're trying to solve at this point from the organization perspective or 3 sort of strategic priorities, right? Let's go with that, and then I'll ask the following question after that.

Top 3 problems. If I say priorities, I would say that we want to make sure that we continue in our -- the current growth trajectory and maybe surpass that. And we have 3 businesses which are already doing well. We want to sustain that growth rate and improve our profitability. So these are 2 things which is very much on the priority. And the third thing is, which is -- we just answered something on the data tech side with the initiative that just started. We want to make sure that, that also is built in a robust fashion so that also becomes value accretive to the company. That's what I would say.

Got it. Okay. And where do you think your next 3 to 5 years of growth is going to come from? What products or what market segments?

Okay. So some of these questions, we can definitely take in the next call. But I would say that, which we have in the past as well, our SupTech business, which is with regulators, is a good cash-generating business and which is based on the regulatory requirements across different countries, while the Create segment, especially from regulatory technology enterprise requirement point of view, that is very attractive in terms of what it can yield us going forward.

Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. K. Balachandran for the closing comments.

Thanks, Alek. And once again, thank you so much for coming in good numbers, and we really appreciate your expression of support and your emotions about Swaminathan because he has been someone who had been interacting very closely with many of you. So thank you for that, for your sentiments. I just would like to mention that Swaminathan, as a person, has been interacting with people across all levels within IRIS, outside IRIS. Within IRIS also, he has been close to so many people. He knows people by first name across the organization, and he has his own connect. So his demise is something which has really affected us at the emotional level. Having said that, everyone in the company, in a way, reenergized. And they want to make sure that the vision he has set out for the company is realized, is made into a reality. And we are working towards that with a renewed vigor. That's what I would say. So thank you so much, and we would meet again in the month of May.

Thank you, sir. Ladies and gentlemen, on behalf of IRIS Business Services Limited, that concludes this conference. You may now disconnect your lines.