Subex Limited (532348) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Subex Limited Q4 FY '20 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. GV Krishnakanth, Company Secretary. Thank you, and over to you, sir.

Thank you very much. Good evening to everyone who have joined the earnings call for the period ended March 31, 2020. And I would like to introduce you to the members of the management who are present on the call. I have Mr. Vinod Kumar, who is the Managing Director and CEO of the company; and Mr. Venkatraman G., who is the Chief Financial Officer of the company. I would like to start the conference call by going through the safe harbor clause. Certain statements in this call concerning our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements includes, but not limited to, fluctuations in earnings, our ability to successfully integrate acquisitions, competition in our areas of business, client concentration, liability for damages in our contract, withdrawal of tax incentives, political instability, unauthorized use of our intellectual property and general economic conditions affecting our industry. So with this, I hand over the call to Mr. Vinod Kumar to take it forward.

Good evening, everyone. I'm mighty glad to see all of you in the call today and sincerely hope that you and your family are safe and in sound health. The recent crisis due to COVID-19 has led to an atmosphere of uncertainty resulting in disruption that most organizations had not foreseen. At Subex, we are very clear about our priorities in such a situation, and that is to ensure the safety and well-being of Subexians while minimizing the effect of this disruption to our customers. I'm very happy to inform you that, at this point in time, all Subexians are sound and safe. So far, only one Subexian was tested positive and another one had shown clear symptoms of COVID. Both these 2 Subexians are based in our regional offices outside India and currently recovering well in their homes. We have had a robust business contingency plan in place to ensure the continuity of all critical functions in case of emergencies. This was updated with the relevant standard operating procedure to specifically handle pandemic-like situations. Expecting a lockdown, we quickly expanded the work-from-home capacity and also got the clearances from customers whenever it was required to move to a work-from-home mode. We then involved the work-from-home element of the business continuity plan even before the lockdown was announced, and this allowed us to work through some of the initial hiccups effectively. We also brought back all Subexians who were temporarily at site for various projects back to their base. Our customers have been very supportive, and the transition was very smooth without any disruption whatsoever to our customers. We are also very proud to be partners to telecom operators who are playing a critical role in enabling the society to quickly transition to functioning from home and, thereby, limiting the spread of the virus. Amidst all this, we closed the financial year FY '20. And overall, it has been a good one for us. Before going through some of the financial details, let me give you a brief update on the qualitative aspect of the business. With our purpose of unlocking possibilities and vision to be the global leaders in Digital Trust, we have continued to execute on the 3 Horizon strategy. On our core, that is Horizon 1, we continue to see interest primarily from Tier 1 customers who are refreshing their outdated technologies. The machine learning-based packages that we have launched around fraud management solutions have been a big success and enabled us to compete very well in most of the competitive situations in all geographies. Around the core, we started working on 3 new products, which we intend to launch during this year. The first one is the next-generation augmented platforms, analytics platform based on open-source components, which will help our telco customers to manage their huge volume of data and drive very meaningful insights out of it. The second is a partner management solution leveraging blockchain. And third is a network capacity management to handle the advanced planning needs of 5G deployment. Coming to Horizon 2, where we have 2 products offering. The first one is on IoT security platform, Subex Secure, has been significantly improved from a capacity handling perspective and user experience. We can now handle terabytes-per-second speed per box when it comes to Subex Secure. This will help us to cater to very large customers with huge data volumes. We have also strengthened honeypot capabilities, wherein we are finding almost 3x 0-day issues from the previous levels. On the business front, we have started deployment of IoT security solution in a 5G Edge cloud setup in a major geography in APAC, and we expect to make it into a major 5G security reference site for us. We have also strengthened our go-to-market channels with more strategic partners and OEMs. On ROC Insights, the second product in the Horizon 2, adaptable analytics as a service offering, we have expanded to adjacent verticals of fintech and mobile money and are currently executing a project in the Southern African region. On Horizon 3, we have 2 products: CrunchMetrics and IDCentral. On both these products, we are in the phase of making necessary adjustments to get the product market fit right. On CrunchMetrics, we have added multivariant capability to our anomaly detection and now are focused on solving specific business problems in the e-commerce and fintech segment. Areas around business operations like pricing error, transaction glitches, supply chain issues and on the IT op side like platform and infra issues are our focus areas. Coming to IDCentral, the digital analytics, ID analytics platform. We have soft launched in Indonesia and currently have a coverage of about 40% of the population with 5 data custodians. Both from a revenue and new business acquisition standpoint, we experienced delay towards the end of last quarter. Even cases where we have been officially selected have been delayed on account of lack of people at the customer end available to go through the contracting process. The impact on some of our new business had been even more severe as most of the new projects have been put on hold on account of this crisis. Things have slowly started to progress, and operators have resumed discussions now. Now navigating such a global crisis is a new experience for everyone. While doing our best to ensure the safety and well-being of Subexians, we have been closely monitoring the emerging market situation. Strength of our good balance sheet is helping us to avoid any knee-jerk reactions whatsoever and to operate with a right balance between preserving what we have and building the future. Our intent is not to wait for the perfect solution, but to proceed with what appears to be a good one with the openmindedness and willingness to course-correct as we go along. Further, setting clear priorities and alignment has become more critical than ever. Towards this, we are implementing the OKR framework, that is objective and key research framework, very prevalent in the Silicon Valley and used by most of the successful technology companies, and we hope that this will have a significant impact on our overall performance. Further, we are using this period of relatively low market activities to upskill our team and enhance our Digital Trust portfolio. The intent is to be very well prepared to take advantage of the pent-up demand as and when the market reopens in various geographies. With that, I will hand it over to Venky, our CFO, for an update on our latest -- last year financials. Over to you, Venky.

Thanks, Vinod. Good evening, everyone, and thanks for joining, and I hope you all our safe and working from your respective homes as the respective state regulations have called out. So coming to the performance highlights for Subex for the financial year ended March 31, 2020. Our revenue for the year was INR 3,650 million as against INR 3,481 million in FY '19. We had a decent growth of about 5%. EBITDA, excluding ForEx, for the year was at INR 862 million as against INR 514 million in FY '19. And profit after tax -- excluding exceptional items, because we did onetime big payment in the last quarter, profit after tax excluding those exceptional items was at INR 485 million as against INR 252 million in FY '19. Moving on to the quarter for -- the highlights of the quarter ended March 20. Revenue for the quarter for March was at INR 1,043 million as against INR 961 million in FY '20 -- quarter 3 of FY '20. EBITDA, excluding ForEx, for the quarter was at INR 300 million as against INR 230 million in the third quarter of FY '20. And profit after tax for the quarter was at INR 320 million as against INR 49 million, excluding exceptional items in Q -- quarter 3. We are -- we've also been focusing on our -- managing our liquidity well and ensuring our collections continue to keep up pace. So all that has resulted in us generating free cash flows of almost INR 57.47 crores in financial year '20. And this has also resulted in us ending the year with a healthy cash balance of about INR 90.43 crores. So that concludes the update in terms of the financials. So over to you, VK, for opening up for questions.

Sir, do we open it up for questions?

Yes.

[Operator Instructions] The first question is from the line of Sanjay Shah from Alphaline Wealth Advisors.

Congratulations for great numbers. Wish you good health, too. Sir, we saw in your support and services and other business growing very well from around 25% to 36% of the revenue. But geography-wise, we have seen that America is going down, and [indiscernible] rest of the world is going up and India is being stagnant. Can you explain why it is so, sir, when we are growing such fast in India? How do you see that? And what is the prospects going ahead?

Okay. So I think you are talking more from a quarter-on-quarter perspective. And on quarter 3 -- so let me give you a flavor of the North American market first, you mentioned. So this year, overall, if you look at from a yearly perspective, we had a very good growth in North America from a year-to-year basis. Obviously, there will be variations from quarter-to-quarter because if you look at -- we are a product organization. And when we get a new product and resell this bulk, the big licenses, on that quarter, you will find that there is a revenue jump. But so far, in the quarter -- last quarter, we would have a new contract in place with a very large license revenue. But if you look from a year-to-year basis, North America has significantly grown this year as a region. Coming to India per se, India, we have had a steady stream of revenue because most of the -- we are in a -- we are sort of in a consolidation phase, so we are supporting our customers at this point in time. So from the percentage of revenue that contributes from the Indian market, it has been pretty -- remain where it is. And most of our focus now is to drive business in North America and Europe region where most of the activities with respect to the 5G deployment and other investments are happening. So while you see the difference from a quarter-on-quarter perspective, if you look at from a year-on-year perspective, we have had North America -- a good growth in North America.

Okay. Now you explained about some new business that is the objective, and I could not understand that. Can you elaborate? And what is the prospects of that? And what money do we require to go through the [ setting up ] of these virtual start-ups and all? Our cash flow is very strong. How we are going to use that? That was my main question.

Okay. So with respect to the projects, new projects that we are looking at, post last year, we have had a specific emphasis to expand our presence in the North American and European region, both with our existing products and the new versions of our core products. When I'm talking about core products, we are talking about Fraud Management, Revenue Assurance and Partner Management from a digital perspective because most of our operators are moving digital. So that's what we have been pushing. Now with my update, I mentioned about 2, 3 new products that we are working, which is primarily oriented around 5G and related areas. So again, the developed markets will lead that effort. So therefore, we are focused in that direction. With respect to the capital required, we have sufficient capital required based on the good cash flows that we have to invest around some of these growth areas. So the capital allocation is being done based on the demands of the specific product line and the business line to progress these efforts in those regions.

The next question is from the line of V.P. Rajesh from Banayan Capital.

First question just on the order book. The year-end order book is around $44 million, which has come down quite a bit from the last year's order book. So if you can give some more color around that, Vinod.

Yes. So the like-to-like comparison, Rajesh, is about -- against $55 million of last year. We have done about $50 million of last year. The reason why we are only showing it as $44 million because the regulatory business we have decided not to include it as a part of the order book and book it as and when we get the revenue because there is a lot of delay in getting the contracts in place and initiation of the project. So if you look at our last year, $55 million, we did have a $5 million regulatory business. So the comparable number would be $55 million last year to $50 million. Or if you remove the regulatory part, then it will be last year $50 million... [Technical Difficulty] Sorry, Rajesh. So I was just saying that towards the end -- towards -- after about 10th of March, we did have a big challenge in getting telcos. Again, most of the telcos were shut. So a lot of cases that were -- even were selected got moved out because they weren't many people around to close that. So that did affect us both in our core and new areas. So some of those things have had happened. In fact, we just -- while in this kind of remote situation, we just closed one of those deals, which was sort of pushed last week. We closed that. So that's primarily the reason. So that's the reason why we have some dip in the order intake perspective, but these are the -- it's just kind of a delay on account of people not around in office to close the deal, Rajesh.

Okay. Sorry, Vinod, since we were disconnected, what I understood is that $55 million became more like $50 million at the end of fiscal year '20. Is that the right way to understand that?

That is correct. That is correct. And we did have an impact of almost about $8 million or so, what has sort of moved out, which we are expecting to close. But people are not even there at the customer [ side ] to do the paperwork. So we are working through those things during this quarter to get those things in, Rajesh.

Okay. So what I'm hearing is that by the end of this quarter, it will be back to $53 million kind of level. Is that correct?

That is correct.

Okay, okay. All right. And then the second question. If you can share with us the Horizon 2 year-end booking and revenues, that will be helpful.

So we had -- from a revenue standpoint, we booked about $1.3-odd million in Horizon 2 and the order booking was around $2.6 million, Rajesh. Now where we have the bulk of the movement is happening from this IoT side. That is where we were tracking some very, very large deals from the governmental sector, and that just got moved out. So we ended the year with order booking of about $2.6 million. The big chunk of those things which moved out from an order intake, order booking perspective is on IoT.

I see. And if I remember correctly, last quarter, your guidance was that this will be closer to $5 million, right? So from $5 million it has come down...

That's correct. That's correct. Yes.

Okay, okay. And do you think this also will come back in this quarter? Or is it too early to comment on this?

Look, it is too early to comment on this because I can definitely tell you that telcos have assumed the engagement, and I think most of the things which were sort of pending have sort of moved on. But some of the governmental things, their priorities are at this point in time to address this COVID issue. So therefore, we do not know how the things will pan out, Rajesh. So we'll need some more time to figure out how that some of these new project issues, which are sectors outside telecom that we are focused on, how that will pan out because we don't -- we are not in a position to take a view at this point in time.

Understood. And then on the implementation revenues, there was a decline of about 16% Q4 over Q4. And is it primarily because of the COVID that folks were not able to finish the implementation? Or was there something unusual in that particular number dropping as much as 15%?

15% -- Venky, would you have a view on that, Venky?

Sorry, Rajesh. Which revenue are you saying has declined 15%? I need that.

So if you look at your Q4 -- Slide #15, Q4 fiscal year '20 is 36% of implementation, customization and license, which was a year ago was 44%. So that's about 15% decline. So I was just trying to understand, was it because there was COVID-related delays and that's why some of the projects got pushed out? Or there was something unusual in that decline?

No, no, no. I think there's no COVID-related impact on this one, Rajesh. I think this is a function of what point in time we will do license implementation deals and what stage of it is it in, in terms of our implementation cycle. So if you look at last quarter, Q3, we had some of these implementations picking up. And therefore, we had a higher share of revenues. But this has not come down because of any particular reason, given our nature of the things at the point in time that these license deals come through. For example, last year, last quarter, we had 1 or 2 big deals, which kind of contributed to that number going up. So this is very -- episodically, it doesn't have any other reason for the drop in that sense.

Okay, okay. And then just in terms of the cost for the coming year, can you share some guidance on the R&D expenses? Because, obviously, for the last couple of years, we have been heavily investing in Horizon 1 and Horizon -- I'm sorry, Horizon 2 and Horizon 3. So any particular thoughts around for R&D expenses in this year?

So what -- all the new areas, Rajesh, what we are now doing is that we have -- on an immediate basis, we are investing about $1 million on -- around the new areas, primarily on account of beefing up some of the capabilities both in creating the infrastructure required for us to progress some of this business and also bringing the right team when it comes to track researchers and in various geographies, et cetera. Now our approach currently is to wait and watch until we have a good ability to look at how the revenue and other predictions can be done and take a year-end view. So immediately, we are looking at releasing about $1 million towards some of these things, which are very critical for us to go ahead and do towards scaling the business. Particularly I'm talking about in the new areas, Rajesh.

[Operator Instructions] The next question is from the line of Raj Kumar Ojha, individual investor.

I'm Raj Kumar Ojha, individual investor from Allahabad. First of all, sir, congratulations for giving such a good number, profit of INR 48.5 crore before exceptional item against INR 25.2 crore in FY '19. My question is, IDCentral has not yet seen the light of the day, maybe due to COVID-19, in Indonesia and Malaysia. Should we now take steps and launch the product from India, really from Bengaluru itself? Number two, are we doing any POCs for CrunchMetrics in fintech and retail? Have we made any inroads in fintechs and e-commerce? And my last question is, has SEBI delivered no objection to Subex for capital reduction?

Okay. Let me take the first 2 questions, and then I will hand it over to you -- to Venky for the last one. Now on the IDCentral, our whole business is towards enabling the digital side of the business. And as I indicated, we went into the market, and we are at the stage of doing the use cases that are relevant to the market. Because we went with a proposition, we got more feedback from the market. And those changes have been done. And we now -- as a total, we have about 40% of the population covered by our platform, meaning we have an ability to do identity analytics around 40% of the population in Indonesia, which is a very large country. And we are now in the process of reaching out now to the service providers who are going to be our paying customers to start using the service. So I think that our decision of going to the Indonesia and the traction there is quite well, quite good. And the time that will take is with respect to getting the product market fit right. So that's the first question. So we still feel that Indonesia will be the -- is the right market to start with. There are other countries that we have in the pipeline. But India, we are -- is not there in the top 5 countries that we are approached based on our assessment. When it comes to CrunchMetrics, yes, we are doing this -- the POCs both in fintech and e-commerce. Obviously, one of the segment that we were tracking was on the travel industry, e-commerce travel industry and -- which had a big impact on the COVID crisis. So unfortunately, at this point in time, other than the POCs, most of the customers are wanting to wait for some of these lockdown situations to be over. Earlier we were doing only POCs in the country. Now we are generating a lot of inbound interest from North America and Middle East. So we will be slowly opening up, doing more POCs in those regions as well. So we expect the things to pick up as soon as some of these markets start opening up. And obviously, their priority -- again, all of them -- some of our customers have seen a huge increase in the demand, and their current focus is to cater to that demand, understandably. And therefore, some of these projects have been deprioritized for this time being. We hope that, as soon as the lockdown is over, things will pick up. And we will have more opportunities, not just in India alone, from other countries to do the POCs and then convert them into our revenue paying customers. Venky, can you take the question on the BIC approval -- SEBI approval, Venky?

Yes. Yes. So you know that SEBI approval is still -- we are waiting the approval from SEBI. I think with the COVID situation, I think all the regulators also have only a limited number of people coming into offices and working and most of them are working from home. So that has led to some of these approvals taking longer than usual. So we are working closely with the regulators, and we will give you an update once we receive the approval from SEBI.

Next question is from the line of [ Jay Daniel ] from [ Entropy Advisors ].

Yes, sir. Earlier, our plans were for FY '21, that is the current year, to be the growth year, Horizon 2 and Horizon 3 kicking in. So now with the changed situation, how do you see growth for the current year?

We are unable to make it -- make any view at this point in time. The fact that we have closed the last year with a good backlog means that we are able to focus on delivering the projects that we have won. And as we mentioned earlier, those are Tier 1 and a lot of net new projects during the course of quarter 2, quarter 3 and quarter 4 of last year. So we are focused on delivering the backlog at this point in time on this new mode of completely delivering from remote kind of operations. Now with respect to taking -- giving a full view of how the year will be and the growth, it is extremely difficult at this point in time. So we are unable to take -- give you any guidance on that now, [ Jay ]. I hope you appreciate that. At least, our view is that during the course of -- I mean, our telco operators are also looking at how the revenue pans out during the course of this quarter because this quarter revenue for our telco customers will give them a good view of the impact of the COVID on their revenues and cash flows. And thereafter, we will get something definite from them. But by and large, at this point in time, the telcos, their long-term investment plan remains the same. But based on the revenue trend and cash flow, it is possible that some of the phasing or the reprioritization of projects might happen, but we are not able to give a view about this -- a view about that at this point in time, [ Jay ].

Okay, okay. Are you seeing any pushback on pricing and debtor collection?

Not in a major way. 1 or 2 customers requested us for some relief while they were -- during a lockdown phase. But by and large, we have not seen the issue coming from that. But we do expect in some geographies like Middle East and Africa to get some requests for some relief, by and by. But as of now, we have not seen it as a trend as yet, [ Jay ].

Okay. So the DSO of 103 days, will it stand? Or it will marginally go up for the year?

Our plan is to maintain it, if not slightly bring that down during the course of this year. That's our plan. We'll have to wait and see how that turns out.

Okay. Actually, telecom is one vertical that's been quite stable. In fact, it's done well in this pandemic. But -- so how has been this -- you are not nearly halfway through the current quarter. So what has been experienced until now on a general basis, if you can share?

So -- yes. So I think the last 2, 3 weeks, we have seen a renewed engagement from the customers. Most of the customers are engaging with us. Obviously, there are big changes that have happened. The work from home is major trend that has happened, which means that, from an industrial cost, most of the traffic and the data usage is happening on the residential cluster. So there are things that operators are looking at. They don't know -- they are not able to figure out whether they need to change the configuration because will it be permanent or will it come back. So I guess that they are also -- by and by, they can wait and watch more. But those projects that have been already, let's say, started have started progressing because there's no overall -- there's nothing like a stoppage of all the projects or anything like that. But like you said, that telcos are relatively less affected. But again, connected with the context, the country, the coverage, the dynamics of the population, all of them play very differently on the response to the COVID and how the revenue impact of the COVID situation is on the operator. So -- but by and large, we have started seeing the engagement picking up for the last 2, 3 weeks, [ Jay ].

Okay. Okay, sir. And this $44 million of order book is executable in the current year?

Of -- not all of them. The executable backlog that we started with is in excess of about $40 million.

So $40 million, if all goes fine, should be executed in the current year?

That's correct.

Okay, sir. And as regards to your -- you had an earlier plan to declare a dividend in the current year if the capital reduction goes through. So what is the thinking on that as of now?

I don't think that we have ever said that there is a plan to declare the dividend. Probably, the clarification was that if the restructuring goes well, and if the company decides, there is a capability for us to declare -- if we have the resources, we have a capability to declare the dividend. But we didn't have any, -- at no point then [ Jay ], did we give an indication that there is any declaration of the dividend going forward. So as and when the restructuring is over, we do have ability if we require. But again, that is a decision that probably we will take when we get there based on the situation then, [ Jay ].

Okay, sir. Okay. And EBITDA margins, you will be able to sustain at current levels?

Too difficult to comment. Again, it is a forward-looking thing. We are unable to take a view at this point in time, [ Jay ]. But I think our current view is that -- our current focus is that the whole aspect of Digital Trust, our portfolio and the proposition around Digital Trust is translating well, particularly with the larger operators, Tier 1 operators. And we believe that, as we get more and more digital, with this COVID crisis, post that crisis, it will again push most of the enterprises to go digital. And so therefore, this whole aspect of Digital Trust will be more important. So our current focus is to look at how do we make and scale the whole portfolio both from a portfolio perspective -- portfolio coverage perspective and a growth perspective.

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

Sir, I want to understand that whatever revenue and EBITDA we did in FY '20 is the same that we build 5 years back in FY '15 and it is significantly lower than what we did 9 years back in FY '11. Sir, so can you explain to us -- and sir, this is in nominal terms. If we adjust for inflation, then we are way down. Our performance is actually in real terms way short of where we were 5 years and 9 years back. Sir, so what's the reason for this?

Okay. When we look at 9 years back, just from a product standpoint, we did have another stream of revenue from an activation product, which was subsequently we offloaded that product because of the situation of the company at that point in time. And then probably some of you who have been invested for a long term understand that we went through a problem for the company -- from a capital structure problem for the company for a relatively long period of time, and we got out of that only by FY '17. During that period, we did have a lot of constraints as to what we could do towards enhancing our portfolio, et cetera. So most of these activities towards enhancing and looking outside our core, they are all started some time during the 2017 -- in FY '17 kind of time -- in FY '17 and FY '18, where we completely got out of all the debt situation and we were able to compete well with our new product range. So I think that was a period where after -- from the 2008 time frame, we were in a sort of a difficult mode for a long period of time. And we got out only by about FY '17 kind of time. So the whole aspect of this technical debt that we had because of our inability to invest after on this thing allowed us not to compete at all. We lost some of the market -- not just the market share alone, but we were not able to bring anything new as a product to the company -- product to the market. Only now in the last couple of years, we have had some of these new things and new products. So we hope that these new products will go up and our revenues will start going up.

Sir, so even if we look at FY '17 numbers, so we applied -- basically, we are -- in FY '20, we did whatever we did in FY '17. So basically, what I'm trying to understand -- what is past is past. Question is that, in future, when are -- when do you expect us to break out of this range that we have been starting for whatever reason since a long time?

Right. So I think in the core, if you look at our core where we are driving bulk of our revenue, as a market the telecom BSS/OSS market, which we are playing in, is relatively flat. And the only way we are now doing well is we were competing well, and we are gaining market share, slowly though, because the replacement cycle kick in a particular point in time. And we are preparing ourselves so that we expect that, with 5G, there will be a replacement cycle coming in. And therefore, we will have an opportunity to replace some of the existing vendors and improve our market share. So in our core area, the market is not growing. So if we have to get the breakout growth, we -- our Horizon 2 and Horizon 3 products, which we have -- which I've provided an update on earlier, should start doing well. And that's why we have -- our focus on investment is around making those product sets work for us.

The next question is from the line of Sanjay Shah from Alphaline Wealth Advisors.

What is the idea behind writing off the accumulated losses under the current paid-up equity reduction? And what will be the gross impact on -- what is the idea behind the reset?

Yes. So Sanjay, this is Venky. So I mean the idea of doing that work, if you look at the listed entity, because we've been carrying these accumulated losses and if you look at the size of the balance sheet, given the size of our business, the balance is way too large. And that is because of the historical reasons of how the company has gone through over the years. . So A, we wanted to address the size of the balance sheet to make it -- bring it down so that we were able to manage it in line with the size of the business and also service it on an ongoing basis, number one. Number two, the fact that we have accumulated losses in the listed entity -- if we want to look at any form of potential dividend and supply it in the future, until you wipe off these accumulated losses, we will not be in a position to declare a dividend if it all, whenever the Board chooses to do so. So these are the 2 factors, which we have been looking at. And we were able to -- thankfully for us, we were able to address that both along with the impairment which we took last quarter. So the idea is now with all these things, the size of the balance sheet becomes smaller, and we're also in line with the size of the business. And it will help us manage our business more efficiently going forward.

So Venky, what will be our -- equity and accumulated loss will be completely 0?

Yes. Once the approval comes through, the size of the equity will come down by half. So from INR 56 crore, it will become INR 28 crores and accumulated losses will get wiped out.

[Operator Instructions] The next question is from the line of V.P. Rajesh from Banayan Capital.

Vinod, you mentioned that $40 million of order book will be executed in this year. So should we assume that $40 million also includes $2.6 million of Horizon 2 or that Horizon 2 could be going beyond 1 year?

So a part of -- I think about -- the Horizon 2 component of the $40 million is about $1.5 million, Rajesh.

Okay, okay. And the other thing is most of this is going to be managed services and the support services, is that right? That's the way to think about this $40 million?

No, there is about -- I would say that about -- that has got a sizable implementation component as well, so that construct of the $40 million pretty much flows the construct of our revenue by type. Because we won a lot of contracts in Q1 and Q2 -- I mean Q3 and Q4 of last year and typically, it gets deployed over a period of 9 months time frame, so there's a lot of projects that we have won which are under execution and revenues for those will come in the subsequent quarters, Rajesh.

Okay, okay. And Venky, just on the capital restructuring side, so once this is done, how much of goodwill will still be on the balance sheet? And secondly, does the capital restructuring process precludes you from, let's say, doing a stock buyback?

Sorry. Repeat the last part, Rajesh, the capital restructuring process.

Will it precludes you from doing a stock buyback? And where I'm coming from is that we are sitting on INR 90 crores of cash. Our market cap is around INR 220 crores. So could you -- potentially, could the Board decide to do a buyback while this capital restructuring is going on? Or because this capital restructuring is going on, you can't do a buyback?

Okay. So the goodwill is already reflected -- Rajesh, if you look at the balance sheet, we will have about INR 344 crore of goodwill. So that -- the impact of this is already reflecting in the financial. Once the approval comes, you'll just see the line items, so we will have the share capital coming down when the capital reduction approval comes. On the second part of the question, once -- there is a pending application with the NCLT. Then no other such transactions like buyback will be -- the company will not be able to complete it until that process is complete. So to the extent -- to your point, should there be a situation like that the Board has to consider, then until this is complete, it will not be taken up.

Okay, okay. So if I heard you right on the goodwill, you're saying INR 334 crores will -- of goodwill will continue after this capital restructuring process is over. Is that right?

INR 344 crores. So what is happened -- in December when we did the impairment, the goodwill has already brought down to that extent. Otherwise, we were running at about INR 658 crores earlier. So that has now come down to INR 344 crores.

So the INR 344 crores is going to continue in the future years, right? That's the way to think about it?

That's it. Correct.

Okay, okay. And then CapEx this time was INR 9.6 crores, which is significantly higher compared to the last few years. So any particular big onetime thing in there?

No, I think our laptops, which are used by Subexians go -- come through their annual refresh process. So we had a bunch of them getting refreshed in this year. No other specific unusual thing which has led to the higher CapEx.

Okay, okay. And last question on the cost side, Venky. So we did tremendous cost reduction from INR 296 crores of cost last year to now INR 278 crores. So my question is, what do you expect in the current year? Do you think INR 278 crores is a very good number? Or you think there will be something -- some cost inflation? What are you thinking about the wage increases, et cetera?

See, I think we have not yet framed up our mind on the wage increases yet, Rajesh. So I think what we want to do is wait and watch and then take a call on that one. So we want to see how the business is coming through in quarter 1, and then we will make a decision in terms of when and at what point in time we will make those increases. But in terms of overall costs, I think there have been some benefits we have got in the current year because the way we true-up our sales commissions and other stuff for our -- it will be based on achievements. So there have been some reductions we've been able to achieve over last year because some people -- just because we had already done actual true-up of this payable as an outperformance happened. So to the extent there could be -- so that has also helped us decrease cost in the current year. In terms of how it will look next year, I think we're not planning to do anything unusually different next year, except for the new investment which Vinod has called out. But you know our business, right? It's a function of how the revenues pan out. So our costs, you can never necessarily move linearly based on how the revenue grow. So therefore, we are not planning anything unusual apart from the newer investments which Vinod called out.

[Operator Instructions] We move to the next question from the line of [ Amit Mishra ], an individual investor.

Yes, congratulations on good set of numbers. I just have one question. The other questions are answered by the other participants. Okay. India business is still quite small for us, while there's a lot of activities happening, yes? So one part of the question is like do you see future -- in future, the business growing proportionately or whatever? And the other question is what is your engagement with Jio and Airtel like? The major telecom operators, what type of engagement? And what is kind of business you're doing? And what are the scale of [ putting yourselves ] there?

So first... [Technical Difficulty] All right. So I was saying that the ratio of -- I mean, proportion of the business, we expect it to be relatively similar to what it is current. With respect to the customers, we don't want getting the details of what the customer, let's say, engagement is, but we can confirm that all the operators are in India other than the [ currently big one ]. That is a BSNL analog customer at this point in time. And we have a good level of engagements with them. And so that's how I would talk around this. But the amount of business that we expect is going to be in line with what we had in the previous years.

Right. Okay. So you don't think that the percentage of business in India will increase tremendously in coming years, right?

Right. So for our new areas, like new areas like IoT, CrunchMetrics, obviously, there, the business from India will be significant because we have now -- for the IoT, we are working on 2 governmental sector. One of the governmental sector is in India. So therefore, the engagements there are -- I mean you expect that area to grow. So out of the core, which is the telecom side, the percentages will be similar to what we have. On the new areas, we expect India to be significantly more than what it is currently.

And on fintech, the new area where you're trying to extend -- well, that and e-commerce, are you going to look at that extension as something like what Jio is doing with Facebook? I'm just trying to -- I'm just mixing up which [ third party ] in India. Is Subex well placed to take some benefit out of that deal or similar deals in future from telecom players or digital players or [ other ] players that are going out into this field? And is Subex [indiscernible] to this system or...

So one of the things that globally the telecom operators are looking at is the enterprise side of business, and same is the case that you asked for. So as and when that happens, we will have -- we have a strong portfolio that can support that movement of telcos from retail to an enterprise-heavy business. And in line with that, we will get benefited because we have a very strong portfolio to that. But to answer your question on the fintech, of course, the fintech industry in India is very, very robust. And a lot of activities happening in fintech in this area, and we definitely want to take leverage -- I mean, leverage that particularly around other new areas. But on the core, as and when the business -- enterprise business gets a ramped up, that's what the Jio is planning with a relationship with Microsoft and others, definitely, we will have a play, [ Amish ].

With Facebook you mean?

Sorry, sorry. I didn't hear that. Can you come again?

Jio is planning with Microsoft, but it's Facebook, right?

No, no. They have also -- they have -- Facebook made an investment, but they have made a strategic relationship with Microsoft for, I think, the Azure platform. So that happened about a month back, which happened. So that was towards beefing up their enterprise business.

Yes. The Facebook investment, we are given to understand that deal is quite large for WhatsApp, the application, for their e-commerce business side of things. So I was just -- so does that mean Subex is going to leverage...

So we don't have a direct play there, but some of the -- if you look at what we are doing around the areas of analytics, revenue management, things like that, so we will have coverage of that area. But the big change will be when they are talking about going to the enterprise customers in a much quicker way. And the globally, the telecoms are expected to drive upwards of 40% of the revenue by 2025 from enterprise business. So it's a big push globally, all telecom operators should start offering to the enterprise side. And that's where our play would be much more prominent.

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

My question is for Mr. Vinod. Are we focusing on consumer IoT or industrial IoT in Europe? And if it is industrial IoT, I haven't seen any partnership with industrial IoT platform companies.

Okay. So our focus is definitely on industrial. That is operational technology IoT, OT/IT, where there is a convergence between OT and IT. OT means operational technology. They're large industries' use. That's where we are focused on at this point in time. And we have several OEMs that we are working with at this point in time, creating unique propositions on that area. So they are not announced at this point in time because we have not come into that phase as of yet. But just to reconfirm that, we are focused on the OT/IT convergence as -- with our IoT security. And we have several OEMs that we are working within the area.

Okay. So in Europe, you are mainly focused on industrial IoT?

Not just in Europe, but -- I'm talking about globally, we are talking about industrial IoT. When I talk about industrial, it is also anything to do with a large operational technology, so large [indiscernible] like utilities, water, power plants. Anyone who has got a large operational technology, industries such as manufacturing, pharmaceuticals, all those companies -- let's say, entities, who are doing -- have a large operational technology, who is now in the verge of deploying the Industry 4.0, where they are bringing the OT and IT together, that is where we have a large issue of cybersecurity and IoT security, which we are trying to address.

But I am [ not seeing ] that IoT in any of the major players like ABB, Honeywell, Bosch or Siemens.

We are working with some of them already. We are not in a place where we can announce a partnership, but we are in various stages of discussion with many of the OEMs around that.

Okay. Now coming to the Digital Identity service. Do you foresee usage of this digital identity service in [ geomarket ] platform for digital onboarding as well as identification of the kirana stores?

There is definitely a utility for those kinds of applications. But as I told to you, at this point in time, we are not focused on the Indian market. So to answer your question, Digital Identity, verification and analytics will be key for any player who is in the digital and e-commerce space. And that is a big problem area, but we want to drive our strength from some of the experience that we are doing in this. India is a very large market with very large operators. So therefore, we wanted to ensure that we do well in some of the emerging markets where the appetite is even more. That's why we picked up Indonesia. So once we have our platforms working with a few countries and we have some large customers who are already supporting us and using our platforms, we will bring back to India.

Okay. How many virtual start-ups you have integrated in the company until now?

Yes. So how many we have today? We have 3 in the new areas, that is IoT, digital -- IDCentral and CrunchMetrics. And in the core area, we are talking about 2: one is on capacity management, and other one is partner management and blockchain. So 3 new areas and 2 on our core again, so 5 virtual start-ups is what we have currently.

Ladies and gentlemen, this was the last question for today. I now hand the conference over to Mr. Vinod Kumar Padmanabhan for closing comments. Over to you, sir.

Thank you. Now as probably you can appreciate, these are special situation that will definitely test our resolve, and we are confident that, with adequate caution, we will overcome this crisis and even emerge much stronger. Now as we gear up to handle any eventuality, we look forward to the continued support of our investors and shareholders. And thank you all for attending this call. And I request all of you to take care and wish you and your family good health and happiness. Stay safe. And thank you very much.

Thank you. Thank you very much from the Subex management. Ladies and gentlemen, on behalf of Subex Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.