Subex Limited (532348) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q3 FY '25 Earnings Conference Call of Subex Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand over the call to Mr. Ramu. Thank you, and over to you, sir.

Thank you very much. Good morning to everyone who have joined for this earnings call for the quarter ended December 31, 2024. Now I would like to introduce the members of the management who are attending to this call. Ms. Nisha Dutt, Managing Director and CEO; Mr. Sumit Agarwal, Chief Financial Officer; and myself, Ramu Akkili, Company Secretary of the company. I would like to start the conference call by going through the Safe Harbor clause. Forward-looking statements. Certain statements in this presentation concerning our future growth prospects are forward-looking statements, which involve several 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 are 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. So with this, I now hand over the call to Ms. Nisha Dutt to take it forward.

Thank you, Ramu. Good morning, everyone, and welcome to our investor call. Thanks for joining us today as we share updates for quarter 3. By now, you have seen the results. On a consolidated Q3 basis, we remain flat, but we do have some good news. Our telco business has grown 2% quarter-on-quarter. And that is my key focus area, as you are all aware. We are trying to get our telco business back on track. We have stabilized our telco revenues while improving our EBITDA margins. So, our YTD EBITDA margins are now at 4% versus minus 5% last year and 9% this quarter versus minus 3% last year, same quarter. I think importantly, it's worth noting that we have achieved this while maintaining our cash position with EBITDA being positive in 4 of the last 5 quarters. After an year of evaluation, we doubled down on telco. We have deprioritized our noncore initiatives to reduce cash burn and reinvest in our growth. We see telco becoming a cash-generating asset for us, driving profitability and enabling reinvestment into high-growth areas like fraud management. And by this, I mean new age fraud management. We already do fraud management, but there are a lot of new areas of fraud that are emerging. And you must have experienced it personally yourself, and this is a rising challenge across the industry. So, we want to double down on this and start reinvesting in this area. Our priority remains a successful transformation, ensuring a long-term growth and profitability of this company. On market dynamics, headwinds continue to impact us, including telcos delaying investments. So that is affecting our order intake right now. While we expect this to stabilize in a few quarters, but any potential tariffs or threat of tariffs could create currency risks for us in some of the geographies that we work in. We are actively mitigating this risk while focusing on business fundamentals to stay competitive. As you know, in uncertain times, playing to our strength is [Technical Difficulty]. Despite these challenges, I would say Q3 saw strong wins. We secured Tier 1 logo in Americas, Tier 1 and expanded with a Tier 1 Middle Eastern operator. They upgraded to our latest HyperSense FM and BA product, including AI-driven use cases. Additionally, we extended an MS contract with a Tier 1 operator in APAC customer. So, this actually tells me that our recurring revenue is sort of, we are shoring up our recurring revenue. And competing at this level when you win Tier 1 contracts across geographies like Americas, Middle East and APAC, this reinforces our leadership in RAFM business. Beyond new logos, we also continue to deepen our engagement with key accounts, upselling and cross-selling to meet evolving business needs. AI adoption in fraud management is growing. Like I said that the fraud is growing, so is AI being used to counter fraud. Actually, AI is being used to both create fraud and then counter fraud. So, this has become a really interesting area. With over 80% of our new deals include AI use cases now. So, this validates our investment and positioning that we need to invest in this area. Customers are also actively engaging with us for POCs and we are currently running next-gen AI POCs with 3 clients across Americas, Middle East and APAC. On the thought leadership front, we continue to strengthen our partnership with industry leaders like GSMA, [ FASG#4 ]. At a recent event, our AI agents for fraud management received excellent feedback. So, this reinforces our belief in innovating in this field and being one step ahead of our competition. In coming quarters, I would say the focus remains on strengthening our telco core business while identifying growth levers in our fraud portfolio. So with this, I will cover the consolidated financial results for Q3. All numbers that I will read are in INR. So, revenue for the quarter stood at INR 727 million against INR 742 million for the previous quarter. EBITDA for the quarter stood at INR 25 million as against INR 19 million for the previous quarter. PAT stood at minus INR 33 million against INR 6 million, which included an exceptional item, as you are aware, in previous quarter. But overall, the telco business has grown 2% quarter-on-quarter and delivered a 9% EBITDA margin. So, this is insofar as consol financials. Thank you for your constant support. We really appreciate you being here. Now, I'm happy to take your questions and comments.

Thank you. [Operator Instructions] First question comes from [ JM Kumar ], an individual investor.

The first question is related to [ cost ]. Do you have any target for reaching double-digit operating profit margin and double-digit net profit margin? The external environment is not in your hand, but internal things are under your control. So, what are the measures you are going to take to bring back this operating profit margin to double-digit numbers and net profit also to double-digit number? That is the first question. Second question, on operation technology front, what is happening? Are you continuing that business or you are not going to pursue that business anymore? These are the 2 questions.

Okay. Can you just clarify your second question when you say what business are you referring to just for my clarification?

Operation technology, security for operations technologies called Sectrio.

You mean, Sectrio. Okay, got it. All right. So coming to your question, I think I completely agree with you. I was very candid in the first quarter call itself that the environment and -- the environment doesn't seem to be under our control and we are faced with geopolitical situations. I mentioned that in the last call as well. And you are right, that's not under my control. But what I can certainly control is the cost aspect and that's what we have been doing consistently. So, if you really look at our cost base, right, compared to last year, it has been consistently coming down. So, while you will see that my top line hasn't grown dramatically, my profitability is starting to come back in the business. And that's because we have been constantly working on our operating margins, both gross and operating margin. So, some of the levers that we are using, obviously, the biggest lever, I think we are using ourselves is automation. We are able to automate quite a few tasks that don't require as much manual effort as we had to do earlier. So that goes both in things like implementations, it goes in engineering efforts. So, we are starting to automate quite a bit. The second one is, I would say, in terms of EBITDA margin itself, right, you can see the difference there. This is the highest EBITDA we have achieved since quarter 1 of 2023. So, we are reducing continuously. We are focused on productivity. So that's an ongoing thing. I completely agree with you. So, we have been working on the cost aspect quite a bit as we sort of counter a lot of headwinds in the market. On Sectrio business, again, this goes back to the margin question that you had. I have been refocusing on the noncore businesses right now. And which means that everywhere I feel that there is cash burn to my business, which does not allow me to reinvest in core, I have been sort of consistently taking calls on those businesses to either divest or to deprioritize. So on Sectrio, we have deprioritized that business right now. What that means is that I'm currently servicing the contracts that I have. I've not sold the business, but I'm focusing on servicing the current contracts. So, what that does is that arrests my cash burn. And I'm not doing any new GTM right now. So that's how we are also trying to bring margins back into the core business. Does that answer your question?

No, do you have any target when you will reach 20%...

Target, I mean, I can't tell you which quarter we will reach, but definitely, the effort is to -- like you will see, right, this quarter, it's 9%. We are almost getting to double digits. So, we want to get to double digits. I can't say 20%, but we should be consistently making this better as we move forward.

But what happens is this performance is not consistent. It is going up, down, going up, down. There is no consistent performance.

Agree and which is, I think, a part of stabilizing the business, right, because we are coming off of quite a few very bad years. So this is all, I would say, a part of transformation. It's a part of making the business stabilize. So, sometimes it does have up and down, but we do have a destination margin that we are working towards. So to your point, there is a destination margin in mind that we are working towards. It might just take us a little bit of time. And again, the calls that we are making consistently and I always say that in every call capital allocation decision, right? My return on investment must be greater than my cost of capital. So that's the bottom line. And I'm very brutal about it and all decisions are being made by that perspective to make sure that we get to our destination margin next year. So, I mean that's all I can say. As you can see, we have been consistently doing this every quarter. And I hope...

Manpower cost is not coming down?

It is coming down. It is coming down. Actually, our manpower costs have come down. If you look at -- if you look at the analysis from the last 4 quarters, I would say last 6 quarters, manpower cost is consistently coming down. Actually, it's come down.

In percentage terms, it is not very high number. When you are using AI and all those things, automation, the cost should come down drastically.

It doesn't come down drastically, but Y-o-Y, there is a reduction. And also you have to remember that whenever we make -- first of all, manpower optimization is something that we have to take a little bit seriously because it's not as easy to do or it's not a trivial thing. So, we have to be very careful about how we do manpower optimization. But beyond that, I think more importantly, you will see there is a Y-o-Y reduction. And on manpower, whenever we reduce, you will not see the impact of the full year impact to actually come, I would say, after 3 quarters, right, because we carry manpower. Even if I put someone on notice, I carry their cost for almost 3 months. And you will see the full year impact only [indiscernible] a few quarters down the line. That's why I would ask you to please go and compare Y-o-Y. And you will find that there has been quite a bit of reduction there actually. It's been almost, I think, 11% or so Y-o-Y, it has reduced. So it's not insignificant.

[Operator Instructions] Next question comes from [ Jitendra Bokadia ], an individual investor.

I just wanted to know that the share of loss from LLPs, which is being part of the P&L. In last 4 years, it's showing a loss of about INR 71.50 crores. '21-'22, we made a loss of INR 12.73 crores, '22-'23, INR 31.59 crores, '23-'24, we made a loss of INR 10.1 crores and in this 9 months, we made a loss of INR 16.97 crores. Now in the last December quarter, it was INR 6.38 crores, which we made a loss. And the September quarter was INR 3.8 crores. So, I see that the loss is increasing wherein the -- and the LLPs are essentially, I suppose, this is Subex Assurance and this Digital LLP. Out of that Digital LLP, we have already sold that IDcentral. So, now what are the components of these LLPs, other businesses like Sectrio and this where we have decided that we will be focusing only on telcos and we'll be divesting or deprioritizing the other areas. So, why not we are -- these are limited liability partnerships, if you are not making money. We are burning cash every quarter. And last 4 years, I've been looking at it. So, what is the way forward? Why don't we shut it down? Why don't we -- I know it's not easy to shut down in 1 day. But still, it's already 4 years and the losses are not reducing. As you said in the previous question that you are not taking new contracts, you are trying to service the old existing contracts. Can you just tell us when these contracts will come to an end, at least we will know that we are not burning cash? And is there any steps taken for divestment of this Sectrio or any loss-making non-telco businesses?

So okay, I think that's a great question. So first of all, a few things that I'd like to clarify. First is that actually, our losses are consistently coming down, but you are right. So I mean, you are on point when you say that there are assets that are sitting that are burning our cash today. And that was one of the first priorities when I came in, I said that we'll look at all the businesses. So, there were 3 essential businesses that we had. One is telco, other was IDC and third one was Sectrio. So, Sectrio and IDC to me are non-telco. And hence, I decided to deprioritize those 2 only because when I saw the numbers, they were burning quite a bit of cash for us. In that process, we did put IDC on the block, as you know, and we divested out of it. So that has been my priority from day 1 to see if we can sort of reduce burn and free up our cash actually because I do want to go back and reinvest in telco. On Sectrio, on the LLP that you're talking about, actually, Sectrio is sitting in that LLP, where you are seeing the losses. So largely, Sectrio is in Subex Digital, right? So Sectrio is sitting there. So, what's happening is that when I said that we'll service, so there are 2 big contracts that we need to service. Out of that, one of the contracts we are trying to actually close down in the sense that if we are able to negotiate our way out with the client, we should be able to close that down. One of the contracts we might have to still service actually. We may not have a way out. In which case, I will not need all the people that I have today to service because Sectrio full team wants to service a lot more contracts, right? Now that effectively GTM has been cut -- you can imagine that I don't need a lot of sales, presales, those kind of people like marketing. I already don't need that. And I only need people who can service contract. So, one has -- one, I'm trying to negotiate out of, which hopefully we'll be able to negotiate out of within this quarter. The second one, I think we might have to still service, but we can service with a very lean team. We don't need as much of bulk that we have sitting there. So, what you will start seeing is, I think by Q1, we would have significantly reduced losses in this LLP. And you will see the cost reduction will start coming in because a lot of people are currently serving notice actually in this business. So, you will start seeing the impact of it in Q1 and you will see that it will start getting cleaned up. That has been my effort from day 1 to somehow curtail this cash burn. Once we have done the other one, I would say, in my opinion, we are 80% there actually. Give us a quarter and you will start seeing the impact because we have taken a lot of drastic actions at our end. So, cost reduction will be seen after the notice periods are served and everything is done, you should start seeing that.

One follow-up question. Now as you said that the 2 contracts which we are servicing right now, one, you are negotiating to wind it up by maybe your negotiation on this quarter itself. And the second one will you need to continue. And I think probably you have 57 to 60 people in this Sectrio part employed. So I would like to ask you, when is the second contract which you think you have to continue servicing will end actually? And secondly, in case if you are able to put an end to this first contract in this quarter itself, how much manpower cost will be reduced in this quarter?

So the way -- okay, this is -- I mean, it's a little bit complex to answer only because -- but I'll be candid. I think the issue is only that the resource pool is typically common at services contracts, right? It's not like we have people for every contract. It doesn't work like that other than on-site resources. Typically, the resource pools are common. So, what that will do is if I'm able to close down one of the contracts, that will definitely take out some of the reduction. But in -- if I were to give you an order of reduction, I would say I would be able to cut out 50% right away. So -- and the service contract that I have to service, I probably still need to keep some people there to ensure. That contract, by the way, is another 3 years or so. We'll have to service the contract for another 3 years. Yes, we'll have to service that because there is no way out to service. Again, we will negotiate and see if we can get an early release on that. All the efforts are on. My focus is on these 2 large contracts to somehow see if we can exit and reduce our burn. I think you will anyway see a 50%, 60% reduction right away actually. The other part, we will have to see if we are able to get early release and all that. So that's an effort that's ongoing right now.

The next question comes from [ Ajay Joshi ], an individual investor.

Seeing full year's working, the customers have been good slightly, [Technical Difficulty] month-on-month, quarter-on-quarter, year-on-year. Now the contracts that you are signing, is it not possible to get a price revision? And the competitors that are quoting against you....

I'm sorry to interrupt. Your voice is very low. Can you speak a bit louder?

Yes, you are breaking up a little bit. I can't hear you very clearly.

The revision in contract size can be amended. And what are your competitors quoting against you because it seems that you are working too hard, but you are not getting the value of money that you're working. This is what is letting you down. I see many software companies renegotiating, giving something extra, freebies, but then winning the contract at a premium amount. Now, the turnover is also very stagnant. I don't know the technicalities of the company as I am investor. I can give you one example of Tanla Platforms. It was INR 14.45, now it's INR 1,700, ex bonus, INR 900. So, what your competitors are doing is better you track them and how they are running so fast.

Okay. I think I understand your question. It's a fair ask. So just...

Thank you very much that you got my point.

No, no, absolutely. I get your point. And I think you have a very fair ask here. So, just to give some clarity, a lot of our contracts that we win are in an RFP mode, right? So, these are -- these contracts are awarded after a long RFP process, which is like I mentioned that our sales cycles are getting longer. So, customers don't award RFPs of $1 million or above without a competitive process, which is an RFP. Doing an RFP process, we are very well aware of what our competitors are quoting typically because we have been in this business like for 30 years almost, right? So, we know what they are and where we are. There are places where they win and there are times when we win. So, we know what the ballpark numbers are within which we need to operate. But telco itself is very -- this space is very competitive, right? So, in an RFP process, you can put your best foot forward, but you will understand that there are 2 aspects to an RFP evaluation. One is that we have to be technically strong. So, if I -- technically my product works, I can be the first vendor, let's say, I'm first ranked. But I also have to be financially very competitive. If I'm technically #1 and I'm financially #2, actually the win goes to, we call it L1 wins, right? The lowest cost vendor gets the bid. It's basically telcos or elsewhere, I think generally, people work like that. So financially, also number side also, we have to be competing very, very strongly. So, while we revise our prices constantly, obviously, with inflation and salaries and all that going up, we do revise our mandates and that's something that we do that. But we have to be competitive in the market. So, it's not that I can make dramatic changes to my pricing. And the key for us is to deliver fast. It is to deliver with productization, which means that I need to make sure that every project that I do or the way I think about it is that if I win a project, I need to ensure that every project has gross margin that I'm able to improve. So, if I sell a project at a certain x percent margin, by the time I end the project, that margin should have improved. So that's how we are trying to see if I can extract more value from the wins that we have eventually, right? But getting into a price war, we do keep tabs for all competitors. As you can imagine, that's something -- that's an activity. I think our competitors do, we do. There is -- it's a given. And we do revise our prices to answer your question. But please understand that we are in a very competitive market. All the awards and all the wins are RFP driven.

You are operating in 100 countries is what got from your website.

Correct.

Now with local, Jio, you have a standby agreement with them? It would be better if you push with local, that is Airtel, Idea, Jio and BSNL.

We have actually -- okay, your point is taken. All right.

So pushing with them the way Reliance Industries, Jio is expanding, we may -- this company may get a small peak, even a small piece of cake lands into your lap, in the long term, it would be very beneficial.

Okay. I agree with you. That's an effort that we have been making. But if you look at the portfolio that we service like fraud and all that, right, the fraud size is much larger in developed markets actually versus developing markets, although we constantly get a lot of spam calls on our phone. But actually, the people who pay for fraud are sitting in developed markets. And as you can imagine, the market risk component, the beta is also lower in developed markets, right, versus developing markets. So, I don't disagree with you that we need to focus on India, but we are actually making all efforts to see if we can break through into some of the accounts. But your point is well taken. We'll do that.

Every day in newspaper, I read INR 10 crores fraud, taken away from the account, siphoned off. Is it possible to bring Reliance on the platform of Jio? Join Hands with them.

We may call at that.

Make an effort, make an effort, move 10 steps ahead with Reliance. Make an effort. It will come into the lap. What is need is strong marketing and the confidence that I see in your voice, you can make it.

Okay. I will definitely make an effort. Thank you so much. No, I think you have a fair point. Let's make all the effort. We'll make all the effort.

Because you need someone big now. You are totally stagnant, you need someone to take you up.

I agree with you actually. I can't disagree with you on that. We will try and get some key partnerships in place. And I will -- we'll also make sure that internally we strategize to see if we can break through some of these accounts in a big way. Sure. Your point is well taken.

[Operator Instructions] Next question comes from [ Santosh Array ], an individual investor.

So, good to see some good improvement in operations side and the improvement in margins. So that's a good part. Still the top line is not growing. I mean, looking quarter-over-quarter and by year-over-year, its' reduced. So, is it something now like your focus is now growing on the core business, that's the reason some revenue has come down. So, is there any case because we have not heard any new deals much. I mean you mentioned 2 deals, 1, but not much -- maybe not large in size that's why you didn't announce in last quarter. So, one is like how the deal pipeline looks like and the demand for the services looks like for Subex? And any of the deals, which are surely not closed in Q3, but it's more to Q4, that's why it happened. If something happened like that, that some deals are not closed in Q3, but it will be closed in Q4. So generally, Q4 is the strongest quarter for the company. So in this year, are you going to see that Q4 is going to be stronger and we'll be seeing sequential growth in both top line and bottom line?

Sure. So, here are a few things, right? I mean I just want to place some facts on the table. Your question was -- taken, but see, our growth quarter-on-quarter growth, while -- and from an overall perspective, like I said, right, earlier in the call, from a consolidated perspective, it looks like we are flat. But if you look at telco, which is where our focus, so once we take out all the noncore assets, you will -- obviously, a few quarters down the line, you will start seeing only telco. But if I look at telco, we have grown 2%. Now that may not sound like a very big number, but it's an industry. If I look at all the results that have come from other telco vendors and industries, it has grown only at 1% or 2%. So in that industry to grow by 2% is not trivial actually. I think it's good for us. So that's one part. The second is we continue to see if we can get some of the deals closed. Like I said, what happens is with some of the political changes with some big office changes, there are people who are being cautious when it comes to spending money. So that's what we are seeing in telcos also. Like I said, the deals are getting from quarter-on-quarter. So, there are some deals that we were pursuing in Q3, which didn't close. We are hoping that we'll be able to go back and close them in Q4. The other challenge that we often run into and it's not a new challenge, it's a very well-known thing. It is that rest of the world follows a calendar year of like December and we are in some calendar year of March, April like in India. So the way the budget cycles work, it's a little bit off for us. But I think good thing is our installed base is robust. We are trying to upsell and cross-sell into accounts. And we should continue to do better, Sanjay. I think that we should start getting better. And whenever we are faced with uncertainty -- market uncertainty, we are going to make sure that we focus on cost and start throwing profit. At least that's the goal really here. So you are right, deals have been moving. I've been saying that since Q2 when I started noticing that the deals that should have closed, we start seeing a slip of almost a quarter. So, we have seen a similar pattern even in Q3. So hopefully, we'll have some closures in Q4. So that's what we are looking forward to right now. Deal pipeline looks robust right now. So, deal pipeline looks good for us. Pipeline is good. It's just that at what rate it will convert is the only question that I am faced with. But obviously, we are making all effort to make sure that whatever we have in the pipeline, do the best to sort of make sure that conversions happen there. But to answer your question, pipeline looks robust right now.

As seasonality works, Q4 looks better, I mean that's what we are expecting or you are saying things will be different this time?

I wish I could answer that should be forward-looking. I mean, obviously, I want every quarter to be better than the last quarter that much -- the effort is always that. But I won't be able to give any specific guidance right now.

It's just a seasonality factor. I think it's everyone knows, right? It's like a seasonality factor. Q4 is stronger. Only whether any change there or whether it's going to be like every year. I mean it's not something you are revealing something different on that.

I think it should -- technically, it should follow pattern. So, I would think so. But of course, things like that when you get there are some threats like tariffs and all that, those are not seasonal, right? But these are some things that hit us out of nowhere. So -- but yes, I mean, barring, I would say that if nothing changes dramatically in terms of external environment, then we should be able to do something, we should be on track.

Sure. And just as the previous caller was asking about, so definitely, as you guys are really working hard and it's a very niche company focusing on niche areas, it'll be required to get the closure of the deals and getting more business. And it may be challenging because of company being small and maybe whatever challenges small company face compared to large companies and where they have funds and investment into marketing and other things. And so it may be a challenge. So, are you guys now looking into definitely as you are divesting noncore businesses and now focus on core business, are you looking into now it's very important that you one is like how to present yourself maybe going independently, it may be challenging to get business. But are you looking into partnering or merging with any big companies because that will be really adding more value as you -- that's what -- I just want to understand you, how you want to see the growth of the company and strategy going forward?

I mean, obviously, I mean, obviously, without giving too many details away, I think one thing is that our partnership is definitely a big thrust area for us because if I partner with the Big 4, for instance, my go-to-market becomes easier, right? I don't have to spend that much effort in doing GTM. So, those are strategic. So there are 2 types of partnerships that we are keen on typically. One is the partnerships that help us unlock new markets, new accounts and make our GTM easier. I think the other partnership that we look for is product partnerships, which is where if I can -- if there is a person that -- or there is a company that has a product that is complementary to my product suite, then I go and do a partnership with them to see if I can maybe push their products, white label their products or there are different kinds of modalities that are possible. But those 2 kind of partnerships we are constantly scouting for and we actually have good robust partnerships with Big 4. On product partnership side also, I would say we have good partnership with 2 or 3 companies that we sort of work hand-in-hand with and we do take their products into the market using our distribution. So that is an effort that obviously is on all the time. In terms of funding and things like that, obviously, those are conversations being listed, we have to be a little bit mindful of how we, I would say, approach some of those conversations. So that's also something that's definitely an effort that we keep making to see if there is a possibility for us to make sure that we are in a better place than where we are right now. But as you can imagine, we are cash positive. We are -- we do have money in the bank. So, there are bets that we can take even while looking for -- so I wouldn't say that we are cash starved, right and debt-free, 100% debt-free. So, I'm not cash starved, but of course, we can always use some cash. So that's an effort that we constant -- I mean I would say that it's on an ongoing basis, we do have a lot of conversations. But if something good works, hopefully, it will be good for all of us. But beyond that, I can't really say anything because it's an effort that we make on an ongoing basis.

[Operator Instructions] We have a follow-up question from JM Kumar, an individual investor.

Now, you are trying to deprioritize Sectrio, okay, now you already have some contracts which are multiyear contract. Why you are not selling the Sectrio business to a security company? See, instead of killing all the contracts and making business 0 and then closing down the business, you are not getting any value out of that. Instead of that, if you sell the Sectrio business to a security company like [indiscernible] or some other security company, you will get some value out of it. Why that is not considered at all?

No. So first of all, cybersecurity and OT security are different. I mean I said that multiple times. But -- so for instance, the protocols that one goes after is very different. GTM is very different.

What I'm asking there are different technologies, but there are companies who are focusing on operation technology security. Why you're not selling this business to them instead of killing the business slowly?

No, no. No. So I mean, obviously, when we were divesting IDC, this thought was in our mind to see if we could do something with Sectrio, but it's an effort that we are making. I can definitely tell you that we have explored many options before coming down to this option. This is -- as you can imagine, this is the least preferred option, right, to slowly service contracts and wind it down. This is the least preferred. So, I assure you that all options are very diligently pursued.

That is wrong capital utilization. We should sell the business and get money out of that.

That's what I'm saying that all options have been explored already. I mean this is what I'm doing today is my least preferred option. So, I have explored all options and I have come down to this. So otherwise, I would go with something that would have been attractive. If I had a buyer...

You have not got any buyer for Sectrio?

No, I do not have any buyer. So that option has been explored. In fact, alongside IDC, we explored that option because obviously, that is my most attractive option for me, right? Why wouldn't I do that? If I can get some money for the business and reinvest in core, why wouldn't I do that? I mean that would be my number one thing, right? And to a lot of questions who are asking me that why has this thing carried for so long? It has been carried because we were trying to see if we could explore other options. Now that a lot of roads are close to me, I'm here now trying to wind it down and try to stem the losses. So obviously, the choice I'm left with is the least attractive option, but that's the choice I have right now. So, I can assure you all that has been explored and very diligently, not just by us with bankers. I mean we didn't do it ourselves. We hired top-tier bankers and we have done all the diligence possible. But this market belongs to OEMs, this market has always been OEM market. And that's why it's very difficult to be competitive in this market. Even the peer group, the peer group of Sectrio, their valuations are sitting in billions of dollars and they have raised a tremendous amount of capital. So, it's not a market -- this is an OEM market essentially. OT security is an OEM. They take it all. So, for us to be very competitive in that market is going to be extremely difficult. So, that decision was coming -- we arrived at that decision the moment I took over. And we said that let's see if somebody can -- let's explore all options in front of us, which we did actually. And I am today, everything has been explored, I can assure you.

Now in the presentation, you are using some abbreviations like MS and all that. That is not very clear for us.

That's managed services. Okay. I can clarify that. We'll make sure. We'll make sure that we do that. Okay. That point is well taken.

See, telecom market itself is stagnated. What different thing you are going to do so that, that core business will grow because that is still there is no clarity on this front?

So in core business, the way we are planning, first of all, I think that there is enough headroom for us to grow. And I think that if we are looking for double-digit growth, it's easily possible within telco business. Telco doesn't have to grow tremendously for me to do a double-digit because my size comparatively is not that big, right? We have enough and plenty of headroom to grow here. And in terms of adjacencies, when I say telco, I also look at adjacencies like OTT, fintech and all that. So, I look at everything adjacent to telco. And today, I think that double-digit growth is actually possible here. So, we are trying to fix our house, right? I feel that I don't want to -- in past, we have done that mistake in Subex, right, where we have gone to unrelated areas and which haven't really panned out very well for us as we are all aware. What I want to do is fix the fundamentals of the business, fix our house. If we are able to do this, I think we can get to a double-digit growth and profitability very easily where we are. And then I will have more degrees of freedom in terms of cash to start taking bets in other areas. But today, where we are, we really need to double down. And I think we have enough room, headroom. And the areas of investment, like I was mentioning for me are going to be fraud. As you have seen the fraud, right, how it has increased. It has increased on WhatsApp, it's increased on call. It's just exploding actually right now. So, if we are able to position our portfolio strongly in fraud, I think that's going to be the growth lever for us in this company. We are already known for fraud management. It's something that I need to double down on and ensure that I have new types of fraud that I can tackle. And I believe that we can be that #1 fraud management company in this space. So, that's really my endeavor. So, the growth levers are very clear to me of how and how our core portfolio will grow.

No, when you say you're fixing house -- last question. When you are fixing house, do you mean to say that you are trying to get a new talent which is having track record -- proven track record to drive the business.

Absolutely. Absolutely. Spot on. We are getting new talent. We are actually going to where I would say the talent is because I think this is one of the efforts that we are making. We are -- one is I've hired new talent. Two, on fraud, for instance, right, we will go and actually hire talent from where I know it's actually good because fraud is going to be fought with AI and Gen AI, right? So, we are going to get best-in-class talent.

No such announcement has come that new talent has come.

We don't make talent announcement, but okay, I think we can make. I don't see why we can't make it. We generally haven't...

Some top level talent if you are getting from, we are going -- trying to go in the right direction.

Understood. Okay. I think that can be done. We haven't done that in the past, but for sure. Okay. Understood. We'll do that. We are hiring. We are hiring and we are hiring from good places. So, I do that. Actually, in fact, I almost feel that by the end of the next financial year, the company [Technical Difficulty] that's really the endeavor to see if we can get fresher people because obviously, new blood helps, right?

Not fresher, at the top level to drive the business.

No, no. I meant fresh blood. No, no. By fresh -- I don't mean freshers from that perspective. What I mean is that people who come with different kind of perspective have worked at different places. I think that sort of thing really helps. So, I'm of the same opinion actually on that.

So, I will wait for such announcement. Let's see whether we are going in the right direction.

Next question comes from [ Abishek Kali ], an individual investor.

You mentioned in the deck that we won 2 Tier 1 opportunities, one from Americas and Middle East. I think we had one significant win in the last quarter as well, which is highlighted in the deck. But I have specifically asked about whether the company would provide any disclosures regarding the ticket size. Let me finish. I think at that point in time, you said that you would go back because there are certain nondisclosures that you have and you have to get the client on board with what we can disclose, right? My point again is if whatever is the customer comfortable with, we have not given those numbers from the past quarter, it was promised in the call that you would look at and get back. Nothing happened on that. Same thing here as well. The announcement is there at the time when we see the deck, right? These announcements should actually happen as and when you sign the dotted line. Take this as a feedback. It's been going on forever. You guys say that you will make an announcement, nothing happens. But then we see this in the deck. See, Nisha, one thing I think the management should appreciate is the fact that we do a very horrible job when it comes to communicating to investors what we are doing. It is only during our conference calls, we end up sharing some details. I understand the restructuring part and we're looking at certain avenues, which, again, our day-to-day company operations, which we cannot. But if there are certain significant things like a contract win, that must get communicated to the investors. I mean look at the horrible state of our stock price. We have lost about 60% or 70% from what we were when we -- I mean, the COVID highs, post-COVID highs, Hyper-Sense announcement, right. Investors need confidence in the way we operate if we continue to do and we continue to expect the investors to show patience, right? I mean we can show patience provided you give us -- I mean, what you have done in like you have said that our telecom EBITDA have improved. Great. I mean we appreciate. We are seeing the green shoots. But we should also see these announcements as and when you sign the deal. And we would appreciate if the contract value is specified, if it cannot be, okay. And then one more thing you have also mentioned that the telco business, EBITDA margin stands at whatever percentage, right? If you can share a graph in your deck, if you can include what each segment brings in as revenue? Because if you say that my telco business is, say, 80% of my top line, right? I would like to see how my revenue mix is, right? We are right now specifying the revenue mix by managed services, licensing and implementation, support and others. But within this, the managed services, maybe I'm seeing 80% of, right? Implement, maybe 20% of services, right? So I mean, in order for us to better understand as a company, like you said, our key focus area, we are going to focus on for a significant future the time we generate significant cash to then probably look at other areas if we want to, right. So that is something that can be a part of the deck. I mean I was the one who initially told when you came on board as you took over the CEO that your deck probably is far too long and it doesn't give me any clarity and you worked on that got it shorter. But now we are specifically I'm asking you to -- I mean, segmental revenues, if I may say so. These are some of feedback pointers I'm giving and probably some of the questions are answered. But the top line continues to remain stagnant. I don't just have to be a rocket scientist. Nobody in this call needs to be a rocket scientist to notice that. I hope that changes. I hope that changes. I mean I would like to see that first INR 100 crore number coming. When? I don't know. I'm just right now, I mean, if you are an investor in the company, I'm looking at what the stock has done, would you continue to remain an investor in the company is the question that I would ask you as a CEO of the company. Would you, after seeing so much happening, right? I mean, it is really tough now. Okay?

No. So I agree, Abhishek, I understand your frustration. I share your frustration as well. So -- but one thing, right? One is fixing the fundamentals, right? I think that my job from day 1 has been to fix fundamentals. I would repeat that because -- and which means that figuring out what our priority was going to be and putting the other 2 assets on the chopping block. And that is not an insignificant piece of work or it's not easy to do, okay, in a company that has been running in a certain way for many years. So, those actions were taken. I think, like I said, right, telco has enough headroom. We can get to double-digit growth. I want to see if we can make this cash generating so that I can -- that gives me some degree of freedom to go invest. In terms of stock market, we are all aware what has happened. The market dynamic is really poor. All shares, I mean, including ours, right? I mean you guys invest not just in Subex and many shares. I'm sure your shareholding is quite vibrant. You know everything is on a discount right now. It's not just Subex.

I understand. We are not at a discount. We are still quoting at a premium because we are not P/E positive. Okay?

That I understand. But generally, market has been taken a beating. Small caps have been...

I'm not asking about. Jokes apart, look at what the broader market has done, not in the times when it has started to tank, right, post October, okay? Probably the curve was a bit different for the entire broad market. And compared to that where we were? I mean I cannot do an apples-to-apples comparison with everyone. It won't be fair to judge Subex and compare it with the Tatas of the world or anybody else of the world. But I think you appreciate the pain. I think you acknowledge it as well. I'm just hoping that things change. That's it. And I have all the good wishes that I can give from my side. But I would like to see more disclosures, more communication made by the management. I mean we are like hiding in hibernation and then probably at the time of results, we come up with some announcement. This should not happen. If you are...

I would say we are working very hard actually. It's just that -- but I completely take your point on cadence. See, we do have a process. It's not that we don't have a process. We do have a process where marketing, sales and the company secretary get together. And we do try to make as many disclosures as possible. Now all disclosures to the stock market have to be backed by customer consent, right? So, sometimes -- but consent may not be there for numbers. Many times, they just say that...

You don't give the numbers. I mean, this exact line that you have added in growth, it did happen on a day of this announcement because it would not have been a part of this deck, right? So, it happened in the quarter. As and when this happens, you at least tell that we were able to close a deal with this, but because of certain restrictions by our client, we are not able to disclose the ticket size. Look that black and white. I don't care. But actually show that you had a contract win. I mean, come on, the marketing guys are -- would not have a problem in disclosing that. You guys are very active on LinkedIn and everything on social. Why not this on investor deck and disclosure to the exchange. It shouldn't be that difficult. Don't disclose anything in terms of client if you have a problem, at least mention the geography and the segment, maybe which part of the business you won that contract. And that then would translate into my revenue mix as to -- like you have said, with the services that you have specified here that I generate x amount of revenue from x business, right? I mean do a segmental number on the deck as well. I mean another pie chart or whatever should do the job for us. It shouldn't be that difficult. I mean these are very low-hanging fruits, which I'm expecting the company to do. I'm not asking for stars.

No, no. Agreed. Agreed. Okay. We'll try our best to be better communicate.

I am -- I don't want to sound harsh, but I invite you guys to sincerely make an effort in this direction as well. I know you guys work hard, I'm not taking that away from you because that is showing on certain numbers. It will take time. I understand restructuring is a big process. I completely get it. But these are low-hanging fruits. We can do that.

Point taken.

Next question comes from [ Bhavin Mehta ], an individual investor.

Just to [Technical Difficulty] early in the call you mentioned that when you have technical capabilities, but there are certain restrictions on the financial parameter where because of which you are not able to win the deal. So, is that counterintuitive, but if you continue to grow with this space, the probability of Subex win order would be low. And this space is coming up very fast and for large players in the IT space who can have a huge capital and quickly catch up on the technology and the relevance of Subex will be limiting as we move forward in time. So that's number one. Second, how are we trying to increase the wallet share from the client perspective because the size of the company, the offers we know and would it be even for them if some new player comes in with high capital and with high, what you call financial backing or technology backing or maybe some certification, which sense they can easily probably move Subex out of their list, clientele list.

Okay. Okay. So, 2 questions you asked. The first one I would answer by saying that, see, relevance of Subex cannot be -- if somebody with more capital comes in, can they necessarily replace us in contract? I would say no. The answer to that is no because the switching cost for a customer, once our system is in, the switching cost for a customer is very, very high. It's not a trivial thing actually. So that's why you will see that our logo churn in Subex is actually only about 1% or 2%, we are able to retain all clients. So, it's not to say that we have not faced competition from people who came with lower cost, which came with a lot more financial backing, but the switching cost is very high for a telco. So, it's not something that happens very easily. So, I don't necessarily see that as a big threat honestly, even from IT service providers because we are -- the essential difference being that we are a product company and service providers aren't exactly that. They are in services business. So, I think there is a clear line of demarcation there. So, I don't think of it as a big threat, honestly. And there is a lot of customization that happens around our product, right? So, when I put in my system, I do a lot of custom controls around it. It's not something that a telco can get up one day and say that I have this person, so let them replace. It does not happen like that. The replacement typically happen on an RFP cycle, which is typically once in 3 years or whenever telco wants to upgrade. So, these are onset cycles. And that's why you will see that there is a revenue base, while we may struggle for growth, but there is a revenue base that we have maintained and we continue to maintain. And that comes from the fact that our churn is very low in accounts. So, I wouldn't worry overly about that. That's first. The second is in terms of while my size might be smaller, but one of the strengths of Subex and I think one of our great competitive advantages is that we are present in 100-plus logos today, right? All the 75% of telcos in the world have many product somewhere in some shape or form. So what that does for me is that it gives me access to a lot of companies, customer base and logos. So, every time I upsell -- if I have to upsell or cross-sell in an account and if I have, let's say, that I have 2 new AI use cases that I want to take to market, I don't have to spend that much effort on the go-to-market and how do I reach new customers. That is not the challenge I have today. I can go to market very quickly. If I have some enhancement on the product, if I have some upgrade, if I have new offerings, it's easy for me to access the base that's sitting for me. So, I think that is, I would say, the biggest advantage of Subex. Even though we are small, that is something that we have been able to do extremely well over the last 13 years. And that's what we are trying to do. So, our incremental cost is -- for a customer an incremental cost to upgrade our system is lower than to get a competitor system in actually. And we are also making our tech stack more cloud and AI enabled, right, cloud enabled so that we can go to newer markets. So that's how I see it. So, to answer your question, I don't see that particular thing as a threat right now.

So, fair enough. But then why are we leveraging? So the way then it looks that while you -- because of there's a stickiness because of the switching costs, we are taking clients for granted. We can't -- sorry, I'm sounding off. But if you have such a good potential, then leverage, we should cross-sell the product. We use this opportunity of high switching cost to leverage. If we're not able to cross-sell some or the other, the client may not be able to satisfy our services where they are not willing to give us a more wallet share of their spend.

So, I kind of agree with you. See, the first thing is that I don't think customers can ever be taken for granted. And I tell that to my teams internally as well that if customer is -- if we take customer lightly, then very soon we'll be out of business. So that's something which we never do internally. Customer is, of course, customer is king like they say. But in terms of our ability to cross-sell and upsell, that's one of the activities that we do consistently. I would say that Subex hasn't done a great job of it in the past, but this is something that I am very hyper focused on because farming an account is so much easier than winning a new deal, right? I mean hunting is always harder, much harder to convince a new client that come work with us than to tell a customer that you are happy, buy another thing from me. So, farming is something that as a strategy that we have been focused on since last few quarters. And that's something that we continue to do. My own focus is highly on that because obviously -- and how do you farm a customer is, you can only farm a happy customer, right? You can't farm a customer that doesn't like you. So, I think given that our churn is low, and that tells me that customers are sticky. Also, they are -- I would say, in terms of satisfaction, the customers are not -- barring 1 or 2 stray incidents, typically, customers have been happy with our product. So, we do want to farm much more aggressively than we have been doing in the past. That has been lacking in Subex in past. But rest assured, that's absolutely the strong focus right now.

But it should translate into numbers, focus could be there.

Which it will -- of course -- it will. And some of the accounts, even that I spoke about today in Tier 1, that was an upgrade that I spoke about, right, the Middle East. We upgraded a client from our old start into a new start, and it's a significant deal. It's a Tier 1 deal. That shows that there was a customer that was happy and went and I was able to upgrade a customer, I was able to upsell into an account. So, a lot of accounts are like that.

Of course, there would be -- I'm pretty sure that all the customers will not be and they will be happy with the services that is sure. But numbers that speak about. So, I think pretty much all investors on the call would ask for the same thing. And if we have much addressable market at least there has to be some numbers to be shown. How -- what is the churn if I may ask, how much churn in your sales team? Because sales team in this space has a lot of work to do. And they churn, if we don't have a stable sales force or maybe not a strong sales force, then the potential of Subex will not be good enough to reach to the larger addressable market.

I agree. I think in terms of sales, see, it's -- I would say that we have quite a few people who are old timers, see the fact that they have been with us for many, many years. Some actually go almost to the time when Subex was born. So, we do have a lot of old timers. But of course, as sales teams go, we keep bringing fresh talent also in. I think can sales do a better job? Absolutely. I think it would -- I would be the first one to say that sales should do a better job. But we do have old timers. We have a healthy mix of old timers versus new timers right now. And we have been revamping sales in the regions, doubling down on some regions, deprioritizing some geographies as we see business shrinking or growing. So that kind of, I would say, balancing act happens on an ongoing basis. But your message is well taken. I will take it back to the sales team. In fact, they are on the call. I'm sure they are hearing this. This message is well heard. So we'll do better.

And last question. I had this first question as well that because of the financial strength, you may be not be eligible for certain contracts. So, have you given us how much of such contracts we have lost because your strength was not enough for us to go into even RFP bid process.

I will have to come back to you. But as far as I know, none. I mean I can very confidently say never. Never have we lost an RFP or haven't been able to participate in an RFP because our balance sheet size is small. Absolutely, from the time I have come in, I can very confidently tell you none. Before my time, I would have to go back and check. But for the duration that I have been here, absolutely not. We have never ever not been able to participate in an RFP because of our balance sheet. We are, in fact, I would say, the first choice when it comes to RAFM contracts, right? We are pretty much in the market where there are 2 or 3 players that can compete with us. So, that I can tell you, very confident. It has never happened.

All the best for your future and please believe on the numbers, that's what I would say.

Thank you so much. Hopefully, please stay with us and hopefully, we'll deliver.

We have a follow-up question from Ajay Joshi, an individual investor.

Confidence is your asset. I can tell you that. You enter your cabin and chamber, put your hand on the desk and say, I can do it. I will do it.

Absolutely. I mean I don't know if I could actually tell you, but I strongly -- this is not just words, right? I truly, truly believe that there is strong untapped potential. We haven't been able to make it real. And this is something that we need to make it real for Subex. I mean from investor side, I know the frustration, but I can tell you that even employees sometimes don't feel good, right? Everyone wants to be part of a growth story. Nobody wants to be a part of story that didn't work out. And I feel almost that there is an obligation on all of us to do right by you and to do right by the employees as well. So, I think all of us want to be a part of the winning story. I can definitely assure you that. That's the conversation we have all the time that we want to be part of the winning story.

When you walk with a strong foot with confidence, I can do it, I will do it.

Thank you so much. I really appreciate it. I think we can do it. I mean I can -- I have no doubts in my mind. I think we have the potential we will get there.

Just remember one thing, talk with the local in India.

Sure. Absolutely. I've taken your advise.

Elon Musk is also coming. Keep it in your mind.

Elon Much, yes. He is coming for all of us. Absolutely.

Thank you. Now, I hand over the floor to management for closing comments.

My closing comments are actually that you have asked all the questions and see there are questions. I hope you got some of the answers. But again, my appeal to all of you is we are in a transformation journey. Transformation does not happen over a few quarters. It is a multiyear process. But as you can see, we will -- if the top line doesn't work for us, we will make sure that the bottom line does. But net-net, my effort is to make sure that we grow and we grow profitably and sustainably. And more importantly, we don't take bets that will not work for us. And I want to make sure that we are conservative on the cash side. So that's generally been my effort. I have spoken to a lot of you. You all always come on investor calls, so I greatly appreciate that. I would appreciate if you stay with us for this journey. I know the stock markets are volatile. They are a little turbulent. But that said, please have faith like the last speaker said. At least I have confidence that we'll get there. So, please stay with us for this journey. So, thank you so much, and I look forward to speaking to you again in -- after we do Q4 results. Thank you.

Thank you, 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 disconnect your lines now. Thank you, and have a good day.