Subex Limited (532348) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q2 FY '25 Earnings Conference Call of Subex Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Avi Chakraborty. Thank you, and over to you, sir.

Thank you very much. A very good afternoon to everyone who has joined the earnings call for the quarter and half year ended September 30, 2024. Now I would like to introduce the members of the management who are present for the call. Along with me, I have Ms. Nisha Dutt, Managing Director and Chief Executive Officer; and Mr. Sumit Kumar, 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 include, 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 contracts, withdrawal of tax incentives, political instability, unauthorized use of our intellectual property and general economic conditions affecting our industry. With this, I now hand over the call to Ms. Nisha Dutt to take it forward. Over to you, ma'am.

Thank you, Avik. Good morning, everyone, and welcome to Subex's investor call. We are delighted to have you with us today, as I share important updates for second quarter. So let's start by reflecting on our performance this year and my perspective on the business. So while we achieved quarter-on-quarter growth of about 9%, and I would say our order intake has also grown substantially compared to Q1, I think that the growth rate could have been better. Our targets were ambitious. And from that perspective, this growth seems muted. However, we have managed to improve our bottom line with a cost reduction of about 9% on a year-on-year basis. And we have turned PAT positive after 7 quarters. In 3 of the last 4 quarters, our EBITDA has been positive. And I would say that this success is due to our unwavering focus on making the right capital allocation decisions. That's why you also see PAT positive quarter. Divesting IDC has given us significant uplift and our continued focus on gross and operating margin improvement through specific initiatives is now bearing fruit. So we'll continue to make these decisions as appropriate for the business. And so let me also talk you through what are the specific reasons for our muted quarter-on-quarter growth. Firstly, there is an overall slowdown in telco investments due to the continued lack of 5G use cases materializing, which impacts their decision-making on new software projects. So most of the telcos did a lot of CapEx spend on 5G, but they are not really able to monetize these use cases. So what's happening is that they are also holding back on some of the other decisions now while they wait for monetization opportunities. Secondly, we are facing a tough geopolitical climate in some of our key operational geographies. So Middle East region is currently very fragile and volatile, which is causing telcos and other businesses to delay their decision-making. Similarly, we have seen some unrest in some of the countries in APAC region as well, Asia Pacific. And as you can see from our investor deck, you will see that we have significant exposure to Middle East right now. So additionally, the U.S. elections, which just concluded, a lot of -- caused a lot of spending to be on hold. People were in hold-and-watch mode. So now that they have concluded, we hope that the pace will pick up again in some of the least developed geographies. So these events, as you can imagine, are beyond our control. But what happens is that they do end up significantly impacting our business. So despite these challenges, I want to assure everyone that our business fundamentals remain strong. We have retained our clients very well. So in fact, I would say that we have converted every single renewal opportunity and even managed to acquire a competitor account in this quarter. So our core business remains healthy despite the setbacks. And in this muted environment, because we are seeing some of the decisions being put on hold, what we decided to do was we started refocusing on bringing Subex back to profitability to create an engine of reinvestment in growth. So since top line is getting muted, we said that at least we need to go and create the bottom line. So this is what we have been spending a lot of time on. I believe that we have the right strategy in place. We are focusing on long-term sustainable growth rather than quick fixes. So our multiyear transformation journey emphasizes market expansion, product expansion and cost efficiencies. These are things that I'm still working on, and these remain my core focus. Our AI investments that we have been making have also led to a higher contracted order book of AI model to be delivered to the clients. This is replacing the traditional rule-based models that we were selling to the clients earlier. So while this may not immediately reflect on the top line, the good thing is that the internal composition of revenue is significantly changing for me. So, AI is actually taking the bigger piece of our revenue mix now, which is where we want to be as a company. And as fraud becomes more complex, we think that AI is the only way to tackle it, and I said this earlier in calls as well. So this momentum gives me confidence that we can actually transform into a telco AI company. There is positive moment on the revenue. The revenue composition is changing. So this actually positions us very well to be the actual telco AI company. The other thing to note is Subex generates 99% of its revenues from telcos in global geographies. We are not an Indian -- we are an Indian listed company, but our revenues are quite global, actually. So I do our peer comparisons with telco vendors who have a similar profile. And if I do comparison of the vendors today, I have seen that on a TTM, a trailing 12-month basis, we have delivered 16% growth, which is significantly higher than many of our peers in the market today. So my focus remains on delivering value to you even in slower periods. I think I have the right team with me to navigate these challenges, and we have the right strategy. It might be slow, but we will prevail, I think, and we will create immense value here. So I urge all of you to stay with us on this journey and have faith despite the frustrations that I actually shared with you. So while challenges may temper our short-term results, but I think we are building foundation here for sustained success, and that's important. I always think about this as the saying goes, the only way out is through. We have to go through this. That's the only way out for any of us. So thank you once again for your trust in standing with us as we work to emerge stronger on the other side. I will quickly read the financial results, which I'm sure all of you have already seen. But for performance highlights for the quarter that ended on September 30, 2024, compared to the previous quarter that ended on June 30. Revenue for the quarter stood at INR 74.16 crores as against INR 68.2 crores in the previous quarter. EBITDA for the quarter is at positive INR 1.89 crores as against negative INR 6 crores for the quarter that ended previously -- previous quarter. And PAT is at INR 62 lakhs, which is positive compared to negative INR 11.21 crores for the quarter that ended on June 30. So those are the performance highlights, as you can see that we are shrinking our losses. So thank you for your constant support. And now I'm happy to take questions from you.

[Operator Instructions] Our first question comes from Mahesh Kumar, an individual investor.

See, 4 years back when Vinod Kumar took over as MD of the company, he told in multiple investor calls that since telecom market is saturated, we are venturing into other areas like IoT security and identity verification. Okay, after you took over, you told you are not going to focus on that area. Telecom itself is a big market for AI and all that. And so you are divesting in all those areas. Now what is happening? And when Vinod Kumar announced this strategy, that time you were on the Board of Directors?

That's correct.

Okay. So you also give concurrence for that strategy?

Correct.

Now you are doing flip-flop on all the strategic basis. And what is happening on that front due to that? There is no growth in the company? See, the IoT security, Vinod Kumar was highlighting that we are next to Cisco. Why we are not able to grow that market? That is my first question. Second, why you are doing flip-flop in the strategy? See, when the vendor company has decided strategy 4 years back, all investments were done in that direction. IoT security products was built, IDCentral was built for identity verification. And now you are saying those strategic -- those investments are wrong investment because you want to do capital allocation. So why this flip-flop is happening on strategy? You were on the Board on that time. You could have resisted that time, you should not venture into this area.

Agree. Okay. So is that your question? So Mahesh here is a thing, right? I completely agree with you. I was on the Board, and we had concurrence when Vinod wanted to do [ Sectory01 ] analysis. We were with him actually on this. And I think this was -- and that was correct at that point of time. But when you take...

Now also, it is correct. IoT security is now also correct.

Yes, it is. If it is...

But you are not focusing on that area and you are running behind AI where you don't have any core strength at the moment.

No, no, I will tell you. So there are 2 things, right? One is -- let me break this question down into 2 parts. One, I will agree with you that I was on the Board, and this is something that we had concurrence from the Board that we will take some bets in non-telco areas. So that was the right bet to take at that point of time. Now whenever you take a bet, right, there is a business case with it and the business case of a bet that you take has to pan out. It has to pan out in terms of there is only a certain amount of investment that as Subex, I can put in an initiative, and it has to generate a certain top line and certain profitability profile. Forget about profitability. At least it has to generate a certain top line for me. And what happened was that, that business case did not pan out actually for us.

See, it was not panning out...

No, that is the reason. See, otherwise, there is no reason...

No, but I will tell you...

Why would I come and kill it, right? I mean think about it from my perspective. Why would I change or divest IDC? If it was generating revenues, if it were doing well for me, why would I change the strategy? It's in my interest to keep it going. The strategy redecision or a relook happens when something is not working as expected. And in this case, I found that they were way behind targets. They were nowhere close to what the targets of the business case were, and it was burning my cash.

But you don't give targets. You are not giving targets to investors also.

Investors don't know, but I definitely knew the targets that they were carrying, and I can tell you that they were burning cash. It's good cash. So see, I have 2 choices. See, we are also a company with limited resources, right? So I need to now know, can I keep burning cash in chasing something that might work, which has not worked so far with significant investments? Or do I save myself some cash and focus it on core business? Because telco, I know how to do. For 30 years, I've done telco. I know how to do. IDC was focused on BFSI sectors, not fintechs, BFSI. BFSI, as a sector, is not something that Subex understands actually or ever understood, I think. The assurance was always that we would have domain experts and all that. But when I came in, there were losses, right? Let's be honest. You guys have seen the numbers. They were losses...

But the thing is you never gave break up, right? [indiscernible] what is the investment, what is the...

No, no. See, also IDC became very specific to document identity in the country, and it was not broad-based. So it's not like I was able to take IDC offering to other telcos globally. As I said, 99% of our business is outside of India. So it's not like I could take that product and port it to my other clients. So my hands are tied, okay? If there is an initiative that's not working as I want, it is burning my cash. It's also not something that I can take to my telco -- other telco clients in other geographies and make money off of. So if you think about it, my hands are tied from outside. And I have resource-constrained environment. So I have to make the right call at that point. So for IDC...

When Vinod Kumar has an investor call and he mentioned about all these ideas, I told him categorically, either you get a consultant from U.S. who is a technology management professor or somebody industry expert. Either you take him as a consultant or you take him on the Board. See, you are hiring on the Board people who are not having...

So to give Vinod credit, he did, I think, onboard some SMEs and all that in domain. See, the issue is that -- so let's say that if I do -- so you are saying why AI against IDC, for instance, right? AI in my telco...

I'm not saying AI. I am saying strategic flip-flop you are doing.

No, It's not a strategy flip-flop [indiscernible] No, no, I am very clear. There is no flip flop. I am very clear. Anything that does...

[indiscernible] you are focusing on IoT security?

Because our product, Sectrio is not an IoT product. I have said it many times on the call, and I want to clarify it again...

It is for industrial IoT.

Mahesh, it's not an IoT product, as you understand it. It's not an IoT product. It's an OT security product. It's very different from IoT. [indiscernible] So we are an OT product company, Sectrio is OT. It's not IoT. I don't even have an IoT product in [indiscernible]

But you invest in IoT.

No, it's not IoT. Actually, Sectrio pivoted 3 years ago to OT security. All their clients today. So if I talk about their client base, which we have also said in the past, right, Coke, Coca-Cola, it's not an IoT business. They are securing their factories and plants. It's an OT. It's an industrial security business...

So that is what I'm saying. It is industrial IoT.

Correct. It's industrial IoT. And industrial IoT. So look, there is an offering, and it is -- we have to make sure that -- look, again, the point is, Mahesh, if a decision that was made in past still is good decision to carry forward, I have carried forward all those decisions of Vinod, where I felt that they were good decisions. But wherever I felt that decisions had to be revisited, we have revisited those decisions. And I think that is what we need to do on a consistent basis. We should not get married into decisions because we did something once, we are married to it.

What is the targeted addressable market for the OT security?

Target addressable -- you mean the TAM, the total addressable market? I don't have the number, but it is a few -- I'm sure it's a few hundred million, for sure.

You see the report generated by Gartner and all that, it goes into billions of dollars.

It could be $1 billion, yes, it could be $1 billion. It could be. It's a huge [ tap ]. See, there is a market opportunity and there is your ability to tap into that market, right? There are -- those are two different things.

Multiple investor calls.

[indiscernible] market, everyone would grow. That's not the case, right? Every company...

In multiple investor call, I have told Vinod, your salespeople are not able to target that market. You need to change the salespeople and get somebody who has experience in selling such products.

I can also tell you that the sales team has turned over twice. Twice over, we have changed the sales team in that business. It's not like -- so Mahesh, we see there is something happening, right? We are most bothered by it, right? We are changing sales team. We are changing product mix. We have gone from [indiscernible] we have done everything. It's not that we are sitting. We have done everything. Despite that, if a business does not yield value for [indiscernible] then you have...

I have interacted with your OT security person.

Mahesh, sir, I'm sorry to interrupt you, sir. Could you please join back the queue for more questions?

No, let me complete this question.

Okay, sir. Please go ahead.

See, I have personally interacted with your OT sales team, salesperson, and he has no idea about this.

Who would that be? Are you talking about Kiran or Suraj, I mean, who are you talking about?

That name, I don't want to disclose on the investor call. And he also told me one of the European electric vehicle company is using your Sectrio product. That's why I written in mail to you before this call, whether any EV company is using because previous investor call, you told you don't want to target automobile market.

Yes, it's not true. It's not -- see, we do target, but the conversion hasn't happened. So I am not sure who told you this, but I can confirm that's not. We are not working with any EV company right now. I can confirm that.

Employees are giving false information.

And also, our product will not work for EV, by the way. So it won't work for EV. It's not built for it. So the product itself is not built for it. And it will not work. It will require a lot more product investment for us to make it...

First announcement for Sectrio was a car company from U.S. partnership. That was happened when Vinod took over it immediately after that, and he announced that in investor call.

Okay. I -- honestly, I do not -- I'll have to go back and look, Mahesh, but I can confirm today that we do not have it.

I'm not you. I'm again telling you, you need to change the Board, get somebody in technology management guru on the Board. See, stock traders and punters on the Board is not helping company, neither it is helping investors. [indiscernible]

I'll take your point, and we are -- we will work on doing a better Board consultation. So I take your point.

First investor call, I told Vinod Kumar [ get ] professor Vijay Govindarajan, who is a technology management guru, and he is giving advice to Fortune 500 companies, which technology work, which technology will not work because he has seen the global market. He knows which technology works, which will not work. Now HyperSense, Vinod Kumar told it is a gold mine. Now it is not even generated revenue for the company.

No, no, it's has generated. I can confirm that, for sure. See, HyperSense is our core product, right? So there were 3 big bets we took in this company, IDC, Sectrio and HyperSense. HyperSense has actually generated revenue. It does generate revenue. I mean, in fact, that is what we sell to our legacy customers as upgrade. So it does generate revenue. So I can definitely -- that's true. I mean, Vinod was not wrong about that. It has generated that.

See, there was an announcement...

I'm sorry to interrupt you, sir. Could you please come back in the queue, sir, for more questions?

Okay.

[Operator Instructions] Our next question comes from Ravikanth Agarwal, an individual investor.

Congratulations on the operational front. At least we have turned cash positive. So I have 3 questions. One is a basic query, the sale of this unit at INR 4.22 crores, does it refer to the sale of IDCentral?

That's correct. Yes, it does.

Okay. So that is the profit we have made on the sale of IDCentral, but no cash has accrued to the company because we have taken equity against it?

That's correct.

So in that case, we would have paid a capital gain in cash to the government of India?

We have carryforward losses. So there's no like a capital gain per se, but there's no cash outlay for the gain. It will -- definitely there is a gain which...

So there is no cash outgo as such in the transaction?

That's correct.

Okay, ma'am. My next 2 questions are more of observations and concerns. So just hear me out and address it the way you deem it. In the last con call, when the revenue number fell from INR 83 crores to INR 68 crores quarter-on-quarter, we were asked to compare Y-o-Y numbers as there is seasonality involved, right?

Correct.

But in the Q2 investor presentation, revenue numbers are being compared quarter-on-quarter, highlighting a growth of 9% in revenues when, in fact, they have gone down by 3.5% to INR 74 crores from around INR 77 crores in the previous year. Now subsequently, in the efficiency section, cost reduction of 9% has been again shown Y-o-Y, which, of course, is commendable. But the basic question remains is how can we use 2 different time periods to compare 2 different parameters under the same set of results? So what is happening is the result is that the presentation is not correctly highlighting the challenge of revenue growth that our company constantly faces. Rather, it should have provided a context on why the management thinks despite the degrowth Y-o-Y, it's a good number and how it paves the way for further growth going forward. So if you could please further throw some light upon it. [indiscernible] my basic issue is the presentation is not contextual. It should have been in the right context. And then it should have provided a management's perspective. So now if you could please throw some light on it.

Okay. So see, we -- our attempt or at least we always do Q-o-Q and Y-o-Y. We don't do just...

Ma'am, here, we are doing a mixture. On one parameter, we are comparing Q-o-Q and...

[indiscernible] we are doing Y-o-Y. So you're saying cost Y-o-Y and the top line quarter-on-quarter. That's the concern, right?

Yes. Yes. And we were categorically told in the last con call that we should compare Y-o-Y because there is seasonality involved. So you cannot compare Q-on-Q numbers, you should rather compare Y-o-Y numbers.

That's correct. And I can do that because I -- it's not like the numbers are hidden or you will forget about it. So that's not really the idea. If that is confusing, we can go back to doing corresponding quarters and corresponding years. So that's fine. We can do that. But I think in terms of muted numbers, I just spoke about it, right, that we are seeing the market is...

Ma'am, actually, I was facing some log-in issues. So I missed the initial 2, 3 minutes.

Okay. So basically, the market is a little muted right now. So I was saying initially in the call as well that, look, we -- from the investor presentation, you can tell that we have exposure to APAC and Middle East. Middle East is quite fragile as a continent. As a geography right now, it's really fragile. So what we are seeing is that a lot of decisions are on hold. So Middle East, telcos are not making the decisions that, obviously, the region is a little bit unstable right now. And we have exposure to Middle East. APAC also some of the countries have not really been stable. So all our contracts that we were talking about there, they are on hold. The U.S. election, there are markets, developed markets that put their decisions on hold, looking for the outcome of U.S. elections, actually. So it's almost like a perfect storm for us. So there are 2 geographies where we have unstable. There is a whole Middle East region, which unstable. There is APAC, where there are some countries where we had key exposure where there was quite a bit of stability issues, and we continue to have stability issues. And then there was this U.S. election. This was almost like a perfect trifecta of things that happened. People were putting their spending on hold. So that is why I -- actually, I'm the first one -- I was also reflecting. See, there is a seasonality in the business, which is true. But it's also true that this could have been better. This result could have been better. I'm the first one to say that, that despite seasonality, this is still muted. Even from that perspective, these results are muted on the top line. So how do I -- so what are the reasons, right? So we start doing RCA, almost like root cause. What is really causing this decline? And it has come down to that. So one is there's a geographical geopolitical risk that we are faced with. The other is that the telco industry itself is muted right now. So if you look at -- that's why I said that if you look at TTM basis, trailing 12 months basis, we have actually performed much better compared to the peers, right? Because I also do peer set comparisons. The whole industry is actually muted right now.

So ma'am, for the -- going forward for the second -- for the H2 since the expenses from the customers have been deferred, they have definitely not been canceled. They cannot do it. So can we look at a more optimistic H2 going forward? And I mean, how soon can we achieve the internal target of INR 100 crores per quarter that you have?

So that is my -- see, that's where my challenge today is, right? So what has happened is that, see, should we do better in H2, I would -- my guess today, sitting where I am, I think, yes. But the point is that will we get to where I wanted to get to? I am not so sure because Middle East condition has not changed significantly. And it does not show that this will resolve itself in the next 6 months and all that. So what happens is that I'm recalibrating internally, right? So there are 2 recalibrations that I'm doing internally. One is taking more exposure in geographies that are more stable, which, obviously, as you can imagine, pipelines have to be built and business has to be generated, although we are present in all geographies, but we are sort of pivoting away from some of the geographies. Even in Asia Pacific, we have countries where we have trouble. So that's one issue. The second one is that given the situation that I'm seeing that this is happening, we have started taking cost corrections and taking measures on the bottom line. So let's say that if the top line doesn't go to where I want it to be, can I at least generate a profitable scenario still for investors and still -- can we still make this a little bit win-win situation for everyone. So I have also kind of refocused my thinking, and that's why you see this losses coming down and all that. This is a lot of effort on the bottom line that we are putting together today. So this is what we are doing. So if I see that the situation is a little bit uncertain for me, what can I do, which is within my span of control? And at least the cost element is more within my span of control, right? So we are acting on that aspect, at least. While we recalibrate and do exposures in different geographies, while we take stock of how do we pivot away from some of the geographies for temporarily, at least. So I think that's the thing that's happening. But as you can imagine, right, these things take a little bit of time to pan out. You can't overnight -- like if Middle East gives me a certain like a few million dollars of pipeline, that cannot suddenly get shifted to Europe overnight. It does not happen. Business doesn't work like that. So we are shifting away. But again, these are things that take time.

So ma'am, going forward, geopolitics is the key determinant?

It is going to be -- I think it's not just for us, that is for every business, you will see that all the businesses that have exposure in Middle East, they are suffering a little bit right now. And...

At least can we say that whatever could go bad has already gone bad in H1. So can we say that at least with some confidence that H2 is at least going to be better than H1?

I hope is certainly so. I mean [indiscernible] is definitely, effort is definitely that.

Okay. My last query is regarding -- this is an observation from the annual report that we have received. So ma'am in annual report, we have mentioned that we are spending some $4.7 million on R&D. So that is roughly around 12% to 13% of our revenue. So under key risks and concerns, there's a few things which have been mentioned. So like adequately protecting our intellectual property may not be possible because despite having patent enforcement is a challenge in some geographies. Then what is more alarming is under departure of employees, especially to a competitor, it goes on to mention and I quote, "we generally require all employees and advisers to sign agreements, which require that our information be maintained as confidential during and after the employment engagement. These agreements also assign or otherwise vest rights in the intellectual property developed by these employees and advisers to the company. Even so, these agreements may not be effectively -- may not effectively prevent disclosure of our information or effectively assign right to us." Ma'am, now this is really alarming. The company has been candid enough to put it out in black and white, but nothing that even if the employee goes and if he violates the nondisclosure agreement, there is not much that you can do about it. But nothing has been mentioned to allay the apprehensions and concerns that arises in the mind of investors after reading this disclosure. Rather on a lighter note, we are making an open declaration to all the employees who'll depart that even if you violate the NDAs, there isn't much we can do about it. Ma'am, I would like to have your take on it.

No, no. So first of all, all employees actually sign an IP agreement. So it's a part of our employment contract. Our employees have to sign IP agreement. Any patent that's filed when you are an employee, the assignment is to the company. It's not to the employees, just like it's in any other corporate. So our agreements are same in standards as peers. The only thing is that, let's say, that there is an employee who has developed a key piece of code. I have an IP agreement with [indiscernible] I have noncompete, I have nonconfidentiality. I have confidentiality, noncompete. We have everything in place. But if he -- and there are -- but I cannot stop him from going and joining a competitor because our employment agreements don't actually talk about that and it's not allowed by law. I cannot stop someone saying that you may not join a competitor...

But can't we definitely incorporate a cooling off period before they join any competitor?

It's fair. That is fair. actually. We have some cooling off period, but it's only for key employees. It's not for all employees. It's not for all level of employees, it's for senior management, usually, that you cannot go and join XYZ...

Because my concern comes from the fact that both Mr. Vinod and Mr. your previous CTO, I don't remember his name, Mr. Chintada, both of them have joined some -- they have -- both of them have joined AI start-ups. Though right now, they are not into a similar line of business. So -- but since they are in the same space of AI and their core competence lies in this field, that is where my concerns were coming from. And when I went to the annual report, so it was like the company doesn't have any safeguards as such.

No, no, we do. Actually, so for instance, Vinod could not have joined a direct competitor at all. In fact, there was a negative list for Vinod, which he cannot go and join. But Vinod joining an AI start-up that does HR kind of work is allowed because I mean, today, you would be hard to find a company that is not doing something in AI. That's like me telling Vinod that you will not do anything in India or any company in Bangalore. Almost everybody is doing something in AI. So that's too much of a blanket thing. AI is a...

And same thing with Mr. Suresh...

Could you please join back the queue for more questions?

[indiscernible] startup is my understanding but I am not...

Let me finish the query. This is my third query. This is -- let me finish it, and then I'll come back.

Sure, sir. Please go ahead.

Please, ma'am, you were saying something.

No, no, sir. I was saying Suresh, I'm -- honestly, I'm unsure about what he's doing. But the last I spoke to him, he was thinking of doing a start-up, actually. So it has nothing to do with -- so there is no competition with the core products and all that. And every time a senior person leaves, we also mention it in their exit letter. I remind them of their obligation to the company that you have noncompete, you have all these things. So please be mindful of that. And every single time we have found people, they respect that, actually. There is a cooling off, they respect that. I have not found violations in that case. And of course, we have recently seen also given a patent for methods and systems for correcting SKU in images. So there is a patent that we have filed recently. So this helps with our contract assurance. I mean -- so this is what's going on.

Our next question comes from [ Sanjut Kari ] an individual investor.

Nisha, first of all, congratulations on a good operational results. Definitely, the market conditions are not good and company is really doing well from the managing operations. My question is related to -- one is like, yes, IDCentral is already sold out. And so what's the plan for Sectrio? Are you seeing the Sectrio is having good potential? And how many -- what's the revenue and how many employees are working in Sectrio? That information is not visible much anywhere on that. And the second question is about in the presentation, it's mentioned that there is a co-creation of product through users meet, something like. And then -- so what does that mean? Like what is that company is doing and whether what kind of revenue or business you can see through it on that? These are 2, I will ask a question later.

Okay. So the first one on Sectrio, we have about, I think, 56 people. That's the headcount in Sectrio, or I think maybe around 60 employees 56, 60, okay? So it's in that range, for sure. So those are the number of employees we have in Sectrio. Sectrio also, we are -- I mean, I'm taking a hard look at that business and the metrics that they are doing. I can't make a forward-looking statement, but rest assured, we are looking at what would be the appropriate course -- of course for Sectrio, actually. So this is something that is getting debated and decided upon internally. I can't unfortunately give you more information. Hopefully, we should be able to speak more about it in the coming quarters. But right now, I'm not able to say much. But at least, we are going through a decision process right now. In terms of the co-creation event, that's a user meet that we do. So Subex stresses the user conferences or user meets, I would say, we try to do at least 1 every 6 months or every quarter, which is where we do formal voice of the customer, right? So whenever I build products, I want to make sure that we don't build something that customers don't want or will not buy from us. So we do user conferences to capture voice of customers, we call it POC, to understand what is their need exactly, how do they use our product, how do they interact with our product? What else can I add in the product, what? Is missing? And what enhancements are required? So we use this as sort of working sessions where we co-create products with them. And if they like it, then we go and come back to the office, build it and take production versions to them. So we are literally iterating with the customer. So we are sure that when we build it and spend all the R&D effort in it, at least there is a buyer at the end of it. So we do regional UC. So for instance, this one was done in Bali, where we got all the APAC customers into a room. And they are customers of different Malaysia, Indonesia, Philippines, all of them showed up. And all of them see our products, we show them what the road map is, road maps are. We ask them how they interact. Do they like our products? Would they buy it again? So we do some candid conversations and we co-create products with them. So this is what we have been doing. And they also tell us what are the new product features they want to see? What are the new frauds I'm facing in my business? Like WhatsApp fraud came up as one of the things that Subex should solve WhatsApp fraud for me. So we also get a lot of feedback on the product and the areas that we should be working on internally. So that's how we use our user mix actually.

Sure, sure. And the third question is about -- you mentioned about the Middle East is struggling and there is an issue probably in the growth in that area. And we are not seeing much business happening in India, like India is still having a good telecom growth, whether it's Airtel or Jio and things. So are you guys looking at India as a market? Right now, it's completely whether not looking at India as a market? And about the partnership, like I think you had some partnership with Tech Mahindra, [indiscernible] telecom companies are focusing on that. So similar to that, like are you looking into partnerships where you can really -- because your product and your specialty in telecom AI, which is really, I'm sure like many companies have been interested in partnering. So like that, are you looking into partnering any of these companies because last partnership we heard about one is like technology partnership with Google. But like that, are we looking into partnership with NVIDIA or any other SIs or companies to grow our business?

So we do actually -- so partnerships come for us in two ways primarily. One is, I would say, the go-to-market partners. These are people we work with. They may help us crack a client account, let's say, that if I don't know a customer and like my go to partner, let's say, big 4, right? They are in all customers, usually, they are either their auditors or consultants. So big 4 have a great reach that way. So there are a lot of big 4 companies that we work as GTM partners actually. So we go to market with them. They open the door for us. They do their consulting with and then we go and do our product implementation. So we work with almost all big 4 right now. So those are my go-to-market partners. Then there are SI Partners. Now SI Partners are the ones like Tech M and others, where we jointly go and say that some part of my implementation revenue, I will do a revenue share with the SI Partner, which you have to do if you go with SIs. So that's another kind of partnership that we strike. And that's a partnership bucket that we keep expanding, actually. So Tech M and we work with many others also. NVIDIA, we use. We don't have a partnership with them, we use. And the third kind of partnership that we look for is product partners. So are there products that are complementary to my product? So if there are products that are complementary to my product and that product company does not have reach into telco, then I will do a revenue share with them, and I will take them into my client base. So we do product partnerships as well. So partnerships are a key. I would say it's almost like it's a key growth driver for us, and it's a key cornerstone of our strategy. So partnerships are something that we are very, very focused on. And we do all the 3, SIs, go-to-market, GTM partnerships and product partnerships. So all the 3 we do, actually, all the time. So this is -- we may not announce it all the time, but I can assure you, we work with all the big 4s. We work with some of the biggest SIs. We have a lot of product companies that we work with that we bolt on their product to our product suite and take it to market. So we do that. That's something that's an ongoing activity for us. In terms of India market, we -- actually, we don't do much work in India. I think it's also because of the players in India, I think they are trying to build a lot themselves actually. So a lot of in-sourcing is happening, for instance, in Airtel, in Jio. A lot of our understanding is that they want to build platforms themselves and actually roll it out. So that's one of the reasons why we are focused a lot more outside. Although we are -- like I said, we are an India company, but then 99% of our revenues are coming from outside of India right now. That's not to say we don't look for opportunities to work with Airtel, Jio. We do look for opportunities. But as things stand, we feel that our focus is better off being outside right now, even from a margin perspective.

And just update from the CFO about any -- our status update on the income tax refund of INR 8 crores from the government. When is expected?

We have not gotten the income tax, right, Sumit?

Yes, yes. So -- so this quarter, we did -- so this INR 8 crores, which we filed to the stock exchange is still it has not been received. And we are continuously in touch with the department, and we are just working. So the update is it is still not in the bank.

Okay. Any estimation? I mean been 1 quarter, 2 quarters, any idea?

Difficult to say that around because it's very difficult, but we are in touch with the respective authorities to get this money released.

[Operator Instructions] our next question comes from Abhishek Kali, an individual investor.

Am I audible?

Yes. Hi, Abhishek.

Nisha, a couple of things, if you may want to share the details. I think in the deck, we have shared that we have had some deal wins, right, in the past quarter. Would you be able to spell out the ticket size and the nature of these wins?

We are actually working on these disclosures right now, Abhishek. So you should be having a ticket size. So when we do a disclosure to the stock exchange, we have to anyway give the ticket size and the duration for which we have won. The reason why we have not gone with the formal disclosure right now is because we are working on the client side to get their approvals and all that in place because this has to be bilateral, right? They have to be agreeable for us to disclose their name and be able to do sort of a disclosure. So we are working on that. You should know it shortly. It will come.

Perfect. Okay. No problem. I'll wait for that disclosure then. Another thing, in the last quarter, I think you mentioned it that we had some revenue spillover. That is we did the work, we got the money, but -- so because it was past 30th of the month, close of quarter, right, we could not show that money as from Q2, right -- from Q1, sorry. So how much was that amount that has contributed in our Q2? And do we see something of the same nature happening in Q3 as well? I mean a couple of percentage points, I understand, but if it is significant, then would that alter my revenue mix?

I mean it's not significant, usually. It will be less than I thought. Yes, it's not significant. What happened when we are not able to -- because we have a hard stop on when we close quarter, right? So our auditors have to come in and start doing their work. So we close -- we always have a hard stop on every quarter. So anything that happens a little bit even after that is taken in the next quarter. We just move it to next quarter because we have to close this...

Another question...

Maybe Abhishek, you're confused on the revenue and OI. OI there is -- there are spillovers. So I spoke last time OI moved. So for instance, like I said that we have not lost any contract. It's getting shifted...

[indiscernible] clearly mentioned. Sorry to interrupt you, but...

I got that. I remember now what you're talking about. I got it. Yes.

Because I'm seeing the earnings transcript from the previous call, that's right.

That's right. Previous call. I'm sorry. Because I remember OI was also -- because last quarter when OI was getting shifted or orders were getting shifted, I said that we didn't lose it. We should get it. But in some geographies, decisions are still on hold. So what do we do?

No worries. Okay. Next question, like you mentioned, the appraisal cycles are done. How do you see that impacting our employees' cost because that is the most significant cost that we have. I mean, by no means, I would like our top talent to go away, rather they should all stick with us. But what would be the impact in terms of the remuneration and the cost on our expenses?

So we have completed the appraisal cycle effective from 1st July. So the entire impact is already buried in this quarter on a quarterly basis. So we -- to be very honest, we don't see from now the cost increases on the personnel cost because we have completed. And we did mention also, there is -- we are not -- to be very honest, with this cycle, we have not seen much of the attrition issues also. So it has kind of been taken. And so don't feel -- don't see there is a major impact of cost increases from now this year.

Yes. And I think generally, the raises were quite muted in the industry this year. So we didn't see any attrition also. So typically, if the increment that you're giving is lower than the industry standard, then we expect to see a lot of attrition, which didn't happen actually this time. And we have also done a comp and ben recently. So we have to do C&B every few years, we must do. So we know where we are losing people to who do we hire, where do we hire from, how off are we from the market. So we have been doing comp and ben as well. So we are sort of recalibrating. But like Sumit said, all of it is -- the whole impact is already there in the numbers in front of you. So it has not gone up that much.

Perfect One more question, if I can squeeze that in. I think in the deal wins you said you were able to land grab a contract from a competitor. I mean, like we come down heavily in terms of criticism on not being able -- company not being able to deliver on certain things. But I would like to like you guys to kind of share more about probably a story as to what had happened. I mean that builds more confidence on the sales, right, that we have got our act together. So if you can speak for a couple of minutes on that, that would be really appreciated.

So what had happened there was that -- so basically, see, there are -- there was a merger happening in APAC. Like telco consolidation is happening right now. So there was one entity that was taking over another entity, and we were already incumbent. So we were serving one of the entities, but the merger, right, the second part of the entity was being served by a competitor. So when mergers are happening, we have seen -- in consolidation, usually, the M&A team say that which is going to be the survivor platform. So they call it the survival platform concept. And that's where you have to fight really hard because then your competitors are also on their -- because the pie is much larger. Obviously, I was serving 1 now, there are 2 after the merger. So the pie is much larger, the contract size increases. So the fight becomes really intense. And I think in that, we actually prevailed over our competition. That's our direct competition. We were the survivor platform that was chosen. So I think in that sense, that gives us a lot of confidence in our technical capability in the customers that we have cultivated for a period of time that they went with us. So it's not just technical, right? Sometimes it's also the relationship. It's how we have delivered to them in the past. So a lot of things come into play. So that -- and it's a Tier 1 in Indonesia. So it was like amazing actually. It was -- so these are -- there are some wins that you get and then there are some wins, which you actually feel that I did something here. And I think this was one of those wins for us, and it's sizable also. Just from my average ticket size, it's much greater than that. So it's -- everything was -- it's almost like there is a deal that checks all boxes. This was a deal that checked all boxes for us. So that's why I even spoke about it that it's a land grab actually for us. So we've chosen as platform for them to retain us. And for us to get larger contract at the back of it. I think that was kind of, I would say, it's a great moment also because it's a Tier 1. It's a Tier 1 operator. It's not like a small opco. It's a very big opco. So that's what gives us confidence that we know how to do this.

Kudos to the team, wonderful effort. I hope that we continue on this path. Last question, if I may squeeze it in. Like IDCentral, do we have any divested areas which the team might be looking at? Because I think you clearly mentioned in the last call that we are going to focus on one of our key areas. I mean that's where we are making -- that's what is bringing in the biggest bang for the buck. We will focus on that area. So are there any divest areas? Or are we looking at something of that sort?

So I can't obviously, Abhishek, make any forward-looking statement, but I can tell you that this is something that -- so for me, it's a very -- see, the business case even I said last time, right, your ROI has to be greater than my cost of capital. That's the first benchmark. That's the first test. If that -- if any investment we have made, it does not pass that test, that's like the smelter test for me. It does not work, then it has to get the axe. That's it. There is no question because that business you are not going to make money in. So I think somewhere, some sort of very, I would say, analytical fiscal decision-making happens, right? I mean in some of these things, we can't be emotional. We have to be very, very practical about the constraint. See, my degrees of freedom in this company are very few. You guys know, you have been with us for a long time. You know how much cash I have in the bank. You know how much reinvestment capital I have with me. I have to keep talent in Bangalore market. I have very acute degrees of freedom. So I have to make -- and I know some people don't like me saying that, but I have to make -- I think if I have to do justice by shareholders and everyone, I have to make the right capital calls. That's my #1 job here. So anything that does not pass the smell test has to go, actually. And that's an evaluation I keep doing. I think we have to be a little bit more brutal in these things. And that's -- ROIC is the only metric, right? That's the only metric that really matters at the end of the day. And we have to be very, very -- I mean, everything has to pass that test. That's all I can say. So I'm always putting every business under that scrutiny, right? If it works, it works, do we carry it for some more time or do we not carry it? At what point do you cut your losses? That's the question that we are always asking. Is there a better business that I can go after? And especially, I really want to rebuild core. I'm very clear. I really want to rebuild because that's where I think our biggest banks are. That's where we are. That's what we are known for. That's where my domain knowledge is. That's where my network is, my logos are there. Everything is there. So for me, it only makes sense that that's my cash cow. I have to feed my cash cow.

Right. So in my trader...

Sorry to interrupt you, sir...

No problem. I'll come back in the queue. All my questions are answered. Thank you.

[Operator Instructions] Our next question comes from Satish [ Rikvala ] an individual investor.

[indiscernible] Coming to the Sectrio regarding the confidential information regarding banking sector, can I ask that?

Sorry, I didn't follow. Satish, can you ask me -- can you please repeat your question?

Regarding the Sectrio revenues from banking sector from -- I could see that there is a clients from SBI as well as per the Sectrio website. So how the revenues are happening? Even I came to know that as per the research, there are multiple clients in Europe as well as America. So what the future revenues and are the contract has been canceled or upcoming deals are there or not?

So see, so Sectrio has done work in past with SBI. We don't have a current ongoing contract with them. So that's number one. And we have a contract...

So we are running the SBI contract is currently into the support. It's the support. There's no new implementation per se. And the revenue also is not sizable. So it is running, and that is the only BFSI segment we are into Sectrio. Apart from that, then we pivoted out to the OT or industrial security side, which Nisha just mentioned, like our customer like Coca-Cola and other are more about the OT industrial side.

Okay. How come about the America -- and Americas region as well as Europe region? So is the same case?

So Europe region, we don't have a business. We do have a business into Middle East and Americas region. That is largely the business which we have in Sectrios.

It's South America.

Yes. And coming to the airport authorities and oil and industries and manufacturing. So are we still into implementation state or are we done with the contract?

No. So we do have a contract. It is running. So the Sectrio product like our solution has been uploaded and the revenues are coming. It's not a -- so there are -- so major of the customer is already either the live status or it is some of the -- it is in the work in progress. But we are already serving them.

Our last question comes from [ Manoj Bora ] from Adina Financial Services Private Limited.

My question was regarding the revenue. When can we expect to have a revenue of around INR 100 crores in which quarter? How many quarters do you think we can reach that figure?

I wish it was this quarter. Honestly, this is a goal I even articulated to everyone on a call. This is something that -- it's as much my aspiration and drive as much as yours, actually. This is something that I want to see as well. But the market is a little bit muted right now. So there are growth challenges -- and but I believe they are temporary, right? Some of these issues will resolve, actually, over a period of time. So am I able to tell you exactly in which quarter we will get there? I am not sure. I can't give you that, but I can definitely tell you that, that's absolutely 100% my goal, actually, to get to INR 100 crore quarter. I want to see it along with all of you. And that will be the -- I definitely want to do that. I'm not able to do more than that, but yes.

That was the last question. Now I hand over the floor to the management for closing comments.

No, thank you all for taking the time. This is like always, if you have any other follow-on questions or if you didn't get a chance to ask, you know where to reach us. So please feel free to write to us at Investor Relations or write to me, whichever way. We are happy to answer questions whenever we can. So we commit -- I'm always committed to full transparency, as much transparency as I can provide, I will always give you the answers. So please feel free to reach and thank you again for staying with us. Thank you for being on the call. Thank you so much.

Thank you so much, ma'am. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may all disconnect your lines now. Thank you, and have a pleasant day.