Tanla Platforms Limited (TANLA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q2 FY '22 Earnings Conference Call of Tanla Platforms Limited. [Operator Instructions] Please note this conference is being recorded. I now hand the conference over to Ms. Ritu Mehta from Tanla Platforms Limited. Thank you, and over to you, Ms. Mehta.

Hello, everyone. I'm Ritu Mehta, and I lead Investor Relations for Tanla Platforms. On behalf of everyone at Tanla, I would like to welcome to our Q2 earnings call. Joining with us today Uday Reddy, our Founder, Chairman and CEO; Deepak Goyal, Executive Director and Chief Business Officer; and Aravind Viswanathan, our CFO. Uday Reddy, our Founder, Chairman and CEO, will share perspective and business imperatives and strategic progress made by Tanla. After his opening remarks, we will be happy to engage with the participants and address the questions. Before I hand it over to Uday, let me draw your attention to the fact that today's discussion may feature statements that are forward-looking in nature. All statements other than statements of historical facts could be deemed forward-looking in nature. Such statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. We have given a detailed disclosure in this regard in our presentation, which is uploaded on the website. Now over to Uday.

Yes. Thank you, Ritu. Good evening, and a very warm welcome to all of you to our Q2 earnings call. We have had a stellar performance in Q2 across all dimensions. Revenue grew by 44% and the EBITDA grew by 83% year-on-year. Our EBITDA margin improved by 452 basis points year-on-year. Our EPS grew 72% year-on-year, and we delivered a double-digit EPS in the quarter for the first time. I talked about Rule of 40 in the last call. Rule of 40 is aspirational for SaaS company. We have been operating at an incredible Rule of 60 for the 2 quarters in a row. What gives me a great pride is that we have been driving profitable growth while maintaining strong financial discipline, generating best-in-class free cash flows of INR 222 crores and maintaining a very strong balance sheet. Gartner recognized Tanla in the latest CPaaS market guide as a key global solution provider in the developer market. We are the only Asian company to be recognized under developer category. Let me give my perspective on what is driving our growth and performance. We are seeing a very strong demand environment in India. Growth is driven by the increase in volumes for the existing customers as well as a new use cases. Entry of new customers are also adding to the market growth. Growth is led by BFSI, and we're also seeing a global -- so good traction in areas like retail, e-commerce and government. We are gaining wallet share in our existing customers while gaining market share from newer clients. I talked about 3 things in the last call, platforms, partnerships and global expansion. We have made good progress on all. Let me start with platforms. We celebrated the first anniversary of commercial launch of Trubloq, world's first and the largest blockchain use case and we increased our market share to 63%. We are betting big on Wisely and making significant investments. We have added new features on Wisely platform, and we will continue making investments through drive innovation and create new revenue streams to expand our total addressable market. Our partnerships -- on partnerships, we have closed 2 significant partnerships on Wisely platform to further drive our one platform strategy. We are in beta testing phase, and we would like to announce this current -- in the current quarter with a greater detail. Our approach is to showcase Wisely in India and demonstrate value before taking it globally. We are working with one of the largest consulting firms in the world on Wisely GTM strategy to solve global markets, and this would be ready by end of December. We will be disciplined in our capital allocation. We'll be focused on the bolt-on acquisitions that would provide niche capabilities. Our investments will be focused on Wisely platform and global expansion. We are building the company for long term. We are integrating ESG into our business and working towards sustainable growth. We presented our first detailed shareholders report to help understand our business back up. We are very excited about the opportunities in front of us, and we are thinking big. With this, I'm opening the floor for Q&A.

[Operator Instructions] We have a first question from the line of Saurabh Dugar from Antique Stock Broking.

So my first question is, how has been the competitive intensity this quarter with the launch of Sinch and Twilio, they have entered the market recently. So how has the performance been? Am I audible?

Yes, Deepak here. So just to tell you, Sinch and Twilio, it's been a long time that they've entered into the market. It's not recently, I would say. And at the same time, they have entered by acquiring 2 existing competitors of ours, who've been there in the market for the last 2 decades. So I would say nothing has changed.

Right. No, my question was more towards after the acquisition, how have you seen the performance? Has there been a change or any sort of update?

Well, you have seen our results. We have been growing very well, right? So that is the one. And just to tell you, see, we are able to increase our wallet share with our existing customers. We are acquiring new customers, which is a very good growth coming in. So yes, that's how it is.

Okay. Okay. Okay. My second question is how are you targeting the new age companies or the relatively younger companies someone like Nykaa or Dream11. How are you sort of acquiring them? And how have they grown? I have seen that you've grown in the EdTech segment quite significantly. I was reading the presentation. Just wanted to understand how you approach them and what is the sort of the idea and the process?

See, we have a very robust sales engine in place, and our business team is best in the industry, I would say. Okay? And both the names, what you have just quoted, they are customers. And we have -- so we have been going after the new age companies in a big way. We have a very good funnel in place. We have been acquiring a lot of new age companies, not just EdTech companies, but otherwise other companies as well, and we will continue to do so.

Right, right. Good to know that. And last question from my side. Q3, I believe, is one of the strongest quarters for you people. So how are you expecting Q3 to go through this time? And have you seen any such trend in the past, the opening 3 weeks of the quarter, if you could highlight?

So it's too early to comment. And -- but yes, as you have seen, we have been growing more than the market, and we would continue -- we are very confident we will do so in Q3 as well.

We have next question from the line of Dipesh Mehta from Emkay Global.

A couple of questions. First, about the new breakup, which you have provided platform and enterprise. Can you help us understand how we are on divided businesses? What is included in platform business? What is part of enterprise? And how the cost is allocated across the business? Second question is about the partnerships. You indicated 2 new significant partnerships we added during the quarter. So if you can provide some broad partnership related things, let's say, in the last 2 to 4 quarters, how we expanded partnership on Wisely platform? And how we expect this partnership to help us first grow domestically and then internationally? Third question is about our strategy for non-SMS related revenues. Sir, if you can provide new products, which are let's say non-SMS, WhatsApp or any other product, which WhatsApp, email, RCS if you can -- or Voice, if you can provide some perspective how that revenue pie is shaping up as far as in Enterprise business? And the last question is about the ILD price uptick, which happened last quarter. So how much of this revenue growth was contributed from that benefit?

Sure. Thanks, Dipesh. This is Aravind. Maybe I will take the first one, and I'll ask Uday to give light on the partnership and Deepak would kind of address the third and fourth question. We've been disclosing platform and enterprise revenue split for some time now, Dipesh, we started it in part of our Q4 results, right? Platform revenues are revenues that are originating, generated as a revenue share from our platform where there is no usage cost, right? There is no transactional costs associated with it. It is basically a revenue that we get, because the platforms are being deployed. A best example would be our SMSC or Trubloq, right? So that is the basis. The cost for platform business is just hosting -- cloud hosting channels, right? So that is the split, and that's the definition that we have given. I would now request Uday to give you a flavor on the partnerships because that's a big area for us.

Thanks, Aravind. Like in terms of the partnerships, as mentioned in my speech, they are definitely a significant partnership for us, mainly for Wisely platform. And both the partnerships are exclusive on Wisely. As we speak, both are under beta testing. And when I say beta testing, we are trying with a couple of our large customers and once we stabilize this beta testing with 2 of our large customers, we will definitely release to the market with the successful use case. And probably at that time, we will definitely talk about the opportunity size around these 2 opportunities, 2 partnerships. All I can say is I'm not in a position to quantify the size, but all I can say is they are pretty significant. There is no doubt about that. But -- so I would like to leave it at this point of time. I would like to leave it here and please allow us to come back in the next 2 months before we announce to the market on the partner's names as well as with the value associated with this partner. I will request Deepak to talk about ILD and mainly on the WhatsApp area.

Deepak here. So you asked for how are we doing on other channels other than SMS. So firstly, just to tell you, we have our omnichannel platform where we are channel agnostic, and we provide all our available channels in today to our customers as an option to communicate, whether be it Voice or it is e-mail or WhatsApp with RCS, SMS. And now e-mail is growing very well, okay? We have seen a good growth in e-mail. Voice is, I would say, it's not growing very big, because the kind of business we are in, Voice has a limited role to play. But if you look at WhatsApp, because we are focusing a lot on conversational messaging and building a lot of use cases around conversational. So we have seen a huge growth coming in WhatsApp. In fact, in Q2, we have seen our revenues going double compared to Q1 as far as WhatsApp is concerned. So we believe that, that momentum will continue, and we will add more channels as well other than WhatsApp for conversational. So we're not going to just stop at WhatsApp or RCS. So that you would hear soon from us. And your last question was around ILD price increase. Yes, there was an increase in ILD price, and we had a positive impact on our revenues in Q2. And if you compare to Q1 versus Q2, I would attribute about 50% growth coming from ILD price increase.

So just to kind of elaborate on that Dipesh, we grew sequentially about 34%. Roughly 50% of that can be attributed to the ILD business and the balance would be the rest of the business momentum.

Understand. I follow up on, I think, some of the answer. First, about it's a partnership. We say 2 -- whether it is client-specific partnership where we have engaged 2 large clients maybe in different industries or I don't know whether maybe in the same industry, who can become reference client for future growth? Or it is with some SI partner or some consulting partner, who can help us expand into multiple clients and multiple industries subsequently? Second follow-up on the same about non-SMS revenue, can you quantify, let's say, what percentage of our enterprise business coming from non-SMS at this point of time? And if you have any target in mind, where do you expect it to reach in maybe 2 years, 3 years, 5 years out kind of thing? And I think in the first question you about giving platform and enterprise. I just want to understand theoretically, let's say, if we have Karix client, now we charge them for, let's say, SMS, we also charge them through Trubloq. So then how revenue will be divided? Because I presume, let's say, in Trubloq, we charge roughly around INR 0.02, INR 0.025 additional to what Karix might be charging let's say INR 0.09 to INR 0.10. So if you can help us understand this on your answer.

Dipesh, Uday here. In terms of partnerships, we are not talking about SI partners. All I can say at this point of time is this partnership will definitely increase. It will help us increase our revenues. So I would like to leave it there. Please allow us to come back with the next 2 months with successful use cases with both the partners. And definitely, let me repeat again. They are very, very significant partners of our Wisely platform. Aravind, do you want to talk about...

Okay. So let me cover quickly Dipesh on the platform definition, right? The platform revenue -- so we do not charge Karix for Trubloq, right? The business model is a little different. Maybe we can take it a little offline. But effectively the enterprise pays an integrated price to Karix, the telco gets the payment, which includes the cost of DLT, we get a revenue share from the telco. So in this example, we do not really take revenue on our Trubloq from Karix for the purpose of platform. It comes from the telco, hope that clarifies. I -- on the non -- on the new age OTT channel, we are not calling out a percentage right now, Dipesh. But all I can say is we are scaling that up significantly and once it reaches a certain size, we will definitely call it out. But at this point of time, we're not calling out a size as far as that is concerned.

We have next question from the line of Abhimanyu Kasliwal from Choice International.

Am I audible?

Yes.

Perfect. Anyway, Mr. Aravind, you might remember me, we have had a detailed conversation in the past. I had a few questions. Mr. Uday, Mr. Aravind and the rest of the management. I will ask them one by one. The first question, sir, is the old story above the cash on books. We do have INR 800 crores of cash, the business is a high-margin business. I do realize that we've kept the cash to keep it ready for acquisitions, because as Mr. Aravind said, 1 good acquisition can take up at least half of it in 1 shot. Do we have any acquisitions lined up? If not, then can we consider some kind of payout of dividend? Or do we plan to keep it on the books. That is my first question. If you could guide me on that, sir?

So Uday here, let me answer that about the cash side. Yes, we hold around INR 840 crores cash on the books as we speak. Definitely, we would like to use this cash for our global expansion plans. Number two is definitely, we're going to invest a lot of this money on our Wisely platform. That's number two. Number three, definitely in terms of acquisitions like we're not going to buy any company for numbers. We are very, very clear about that. We may acquire a company for -- we can call it the tuck-in acquisition or bolt-on acquisitions, which will enhance our capabilities on Wisely platform. But definitely, we are not here to buy any company for numbers. That is very, very clear about it. So...

Okay. Got it, sir. Sir follow-up question, if I may. So the enterprise business is doing very well, but the platform business is the real money spinner, the real cash cover to 80%, 90% margins. Would there be any way that we can project the growth for this segment? And also related to that, whilst we have tied up with most of the telecom providers, I know we have not tied up with Jio. And there is another telecom provider where we have 1 of the 2 providers of support. Sir, my worry is that what is there to stop the other telecom providers, who are doing the same? Where do we have our moats? And if so, can we be able to move into new geographies? When I asked Aravind sir this question 2 months ago, he had said that Tanla's strategy is to push entrench itself in its interested markets. But if you could throw more light on that, Uday sir, that -- I would be very grateful.

Okay. In terms of -- yes, we do work with all the mobile carriers in India, including Jio, okay? So we work with each and every telco in India. That's the first point, right? So second point is yes, some of the telcos have been in the CPaaS business for quite some time. And sometimes, we partner with them -- partnership with them, sometimes we compete with them. So in terms of global expansion, yes, Wisely -- as I told you earlier, through Wisely, we're going to expand the international market and once we see the traction in India with the successful use case, we will take -- we will launch Wisely platform in the global markets very soon.

Okay, sir. Last question sir, in that case, could we have any kind of indication in terms of what kind of -- for example, now I know we have 2 partnerships coming up and we cannot talk about specifics. But if we have some indication for the next quarter or 2, what kind of revenue growth or margin growth you can expect, because we've seen fantastic revenue growth and margin growth this quarter. Can we expect this trend to continue? Or can we expect it to flatten a bit? What would you say, sir?

A couple of things that we are not here to give you any -- make any forward-looking statements. Having said that, we are definitely growing much faster than industry. That's what Deepak has also covered in one of the questions like. So if the market is growing, we are also growing, right? So we are not in a position to qualify or quantify these partnerships. Please bear with us for a couple of more months before we announce to market.

We have next question from the line of Anil Sarin from Centrum Wealth.

First of all, accept my congratulations for the awesome performance, clearly, I mean you had mentioned earlier that the industry is growing at 20% now and against that industry growth, you seem to be growing much, much faster, so well done and more power to you. So my question was more of a -- just a technical question. In your leading slide, in your first slide in your presentation, you cover various revenue market share, volume market share. So I just wanted to know, DLT volume share is 63%. NLD volume share is 41%. So are these 2 things different? What I wanted to know was that is it that there are some on non-DLT messages also going out right now or they have been completely stopped? So what is the distinction between NLD market share and DLT market share?

Yes. So Anil, Uday here. When it comes to DLT platform, DLT platform is deployed with the mobile carriers. Our DLT platform is deployed with 5 out of these 7 mobile carriers in India. And if anybody wants to use the specific mobile carriers in India, they are supposed to use DLT platform to start it. That's number one. So number two is when it comes to our NLD business, we are predominantly talking about the Karix volumes here. So 100% of its Karix volume goes through our Trubloq, which is a DLT platform. In addition to that, our DLT platform is also used by Karix competitors, if I'm allowed to say that. So -- that's how our market share in DLT is around 63% as opposed to around 40% odd in NLD traffic.

Okay. Okay. And there was one more aspect as a follow-on. What I have come to know is that there is some firewall business and there is some regular business. If you can just explain what is this firewall business that you do? And what is the regular SMSC? What is the difference? And where are you doing firewall business? Where are you doing SMSC business amongst the telcos of India?

Yes. So when it comes to Firewall, we have -- we did -- we have firewalled one of the -- probably the largest telco in India. I'm afraid I cannot name it, but you know what they are. They are the largest telcos in India. So we have firewalled the third largest telco in India. So first and third largest telcos are firewalled by us, that's number one. Our SMSCs are with at least the 3 mobile -- 4 mobile carriers in India. So firewall, we have done with 2 networks. In term of SMSCs, we are working with 4 telcos, Anil.

Okay. One last question from my side. Uday, If you were to think about like revenue composition and revenue growth, is firewall a bigger business in terms of quantum vis-à-vis SMS? That is part one. And second is between the 2, which 1 is growing faster, between the 2 which is bigger, between the 2 which is growing faster?

So Anil, the firewall is predominantly for ILD business, okay? And SMSC or we call it as SMS hub, both for NLD and ILD okay? So if you ask me which is growing faster. In terms of volumes, our NLD -- in terms of volume, NLD volumes are growing much faster than ILD volumes. But having said that, there is an increase of price in ILD in the last quarter. So -- but in terms of volumes, it is NLD. In terms of value as we speak, ILD in the last quarter.

Okay. And this -- is there a chance of you doing firewall with other telcos of India as well?

I think my information is like all the telcos are firewalled. So I would like to leave it here. Probably we'll talk about in the near future about this business in the next 2 months.

[Operator Instructions] We have next question from the line of Sudhir Bheda from Right Time Consultancy Services.

And many congratulations for outstanding results, sir. Sir -- hello? Am I audible?

Yes, yes.

Yes. Sir, before asking the question, I just would like to mention the point and hope that authorities are listening. We have been under ASM since 1 year. And I think a lot of small investors are suffering because of that. Just I wanted to put this thing on the record. Sir, my question would be like what is the volume growth in Q2, sir, if we exclude the price increase, overall blended volume growth, if you can elaborate on that?

Aravind?

So we are not calling out volume separately Sudhir, right? We've not disclosed volume. All I can tell you is that both sequentially and Y-o-Y, our volume growth have been very, very strong. Uday mentioned in one of the previous questions in terms of NLD business growing much faster. So we've not called out volumes specifically, but we've had very good volume growth.

And sir, my second question is what type of opportunities are there in the global market. Once we are -- we will be in the global market from FY '23. So what is the opportunity size, if you can give color -- some color to it?

Sudhir, Uday here. Like I think Wisely is there to address the complete CPaaS market. And so -- so we are investing a lot of money on the Wisely platform. And it is going to disrupt the entire CPaaS market. So the market in front of it is huge in terms of global market, but we're just waiting for a couple of successful use cases in India. Once we see them -- see the success in India, we will definitely launch in -- Wisely in a big way. And all I can say is there is a massive opportunity in front of us, that much I can tell you.

We have next question from the line of Milind Karmarkar from Dalal & Broacha.

Well, congratulations, gentlemen, on a great set of numbers. And so I had 2 questions. One was, of course, on the ILD price increase. Just wanted to understand that is it sustainable over a longer period of time or it keeps on fluctuating? That was my first question. And my second question was on cost of services. Over a period of time, we have seen cost of service is slowly coming down. Last 2 quarters, it has remained stable. So as we go ahead and go to the international market, just wanted to understand the cost of services, whether it is likely -- as a percentage of overall sales, whether it's likely to come down or remain at the current level?

Deepak here. So to answer to your question on ILD. So I'd like to tell you that ILD prices have been more in line with the international rates in the other countries, okay? So that was decided to increase the price to make it in line with other countries outside India. And I would say it is highly sustainable. The prices would be sustained. I don't see any issue there.

Okay. Okay.

And what your next question was?

Cost of services.

In different geographies.

So my question was that as we move to -- move internationally, the cost of services, which is one of the largest expenditure overall, whether it would -- in terms of -- as a percentage of the top line, would it remain same? Or is it possible that it could come down as well?

So Milind, we usually track our gross margin, okay? Our competitors in the global market their margins are on par with our margins. So we are not really worried about the cost of services, and we closely track our margins and cost of services.

We have next question from the line of Kushan Virani from InCred.

Congratulations, everyone, for the amazing results. My question was on the services that you all are running alongside the government. Obviously, I was after the successful application of Trubloq from the CoWIN platform. Are there any other such initiatives that you all are looking with the government?

Deepak here. So you see, our -- another replica of our platforms is deployed at National Informatics Center in Delhi. And all the central ministries, a lot of state governments also are connected with our platform. So CoWIN is 1 use case where you've seen that all the OTPs, which are coming from CoWIN app to register for vaccination or you get messages for confirmation of your vaccination from national health portal. Are you getting the message on your certificates. So they're all coming in through our platform. So there is couple of use cases, which are new use cases, which we participated with the government and we agreed on this flow. Similarly, there are -- yes, we keep talking to the government. And keep coming up with more and more such cases. I say, for example, in the past, I can tell you, Mann Ki Baat was 1 such thing, right, where we actually brought Mann Ki Baat on voice. And then we brought in on multiple languages. Today, as you see, whether any messages coming in about your GSTN -- GSTIN or your income tax-related messages or anything to do with health or agriculture. So there's a lot of use cases which we have -- what we have worked upon along with government and this continues. So yes, you would hear we will be bringing more cases to increase our number of transactions and messages on our platform.

We have next question from the line of Amit Chandra from HDFC Securities.

So my first question is on the customer concentration. So our top 20 customers roughly contribute 65% to revenues and revenue from top 7 is around 43%, 44%. So how do you see it? Is it a risk because the concentration is on the higher side? And are we expecting the concentration to be the same or with growth, we can see some moderation in this? So this is the first question. And second question is on the contracts that we have with enterprises. So the contracts that we have, is it a yearly contract or it's a long-term contract? And how do we decide on the pricing? And is there a pricing change, because we have quite a healthy relationship with the customers and we -- from like 1 enterprise, we get a bulk of revenues? So is there any case of pricing discount or that is being asked from the enterprise side, whenever the contracts [indiscernible]?

So let me answer the first question, Amit, on the customer concentration, right? If you look at our customer concentration has kind of been coming down, it used to be like 70% 1 year back, it has kind of come to 66% now, right? Although if you really look at it, the -- it's not that the customer market degrew, top 20 customers grew 35% Y-o-Y. So it's a little bit of a great thing that we are able to grow our customers. We are also adding to the base where the overall company is growing faster. So we do see a lot of traction in terms of how we work with existing customers, how we expand our wallet share in those, right, both in terms of A2P as well as offering all the other channels. So we are a holistic partner to our clients. You've seen this reflect in all customer metrics, our customers giving us greater than INR 50 crores annualized revenue has gone up from INR 10 crores to INR 19 crores over the last 12 months. So I think it's a good situation for us where we have tremendous depth of relationship with our customers. We have tremendous customer retention. We are able to scale existing customers, while at the same time, continuously broadening our base, because so we also added about 160 new customers in the H1 of this year. So we're doing a bit of both, and that's been good. And many of these customers are long-standing, Amit. So it is -- these are decade-long relationships, 2 decade long relationship.

So just to add what Aravind said if we have any risk with these customers. So just to tell you, we have not lost a single customer in last more than I would say 15 years. So I mean if you look at it, I mean ICICI Bank is there with us for 18 years. HDFC Bank is there with us for more than 16 years now. State Bank of India is there with us for 16 years. Kotak Bank is there with us for more than 12 years now. Axis Bank is there with us for more than 13 or 14 years now. Government of India, the first time they came up with the company like this, that was about 9 years back and 9 years, we are there with them. So these are very old relationships, very strong relationships and deep integrations are there. So that is one. Number two, about when you talk about the contract duration, yes, the usual duration is about 3 years. And most of these contracts are on auto renewable basis. We do have price discussion, definitely. And yes, but -- let me tell you the kind of relationships that we have with our customers, the kind of comfort they find with us. We are able to sustain the prices more or less and our margins. So that is more important, right? So you see our margins are quite steady. And we are able to increase our volume share as well.

So in terms of the -- as you said, we have deep relationship and long-standing relationship with the top customers. So I assume there has been no churn or very less churn there in the top 10, top 20, right?

As I said, there is no churn.

No churn. Okay. And in terms of the pricing, is there a discussion relating to discounts whenever the contracts come for renewal or is it based on the kind of services that you're offering? And is it because how I see it is it has become more of a commoditized kind of a service or like maybe I'm wrong or we are providing such services, which cannot be replicated by others? So is that the reason for the premium or the pricing to sustain? Or is it because of the relationship?

So let me tell you, okay. This is not a commoditized service, first of all. And if you really see the same SMS, you would find a different prices for different industries. And also if it is commoditized, then the price should be more or less the same for everybody. But the kind of market we operate in, we -- there -- this is a very, very critical services what we are providing. Yes, we are building that customers on per transaction basis, but it doesn't mean that it becomes commoditized, because there's a lot of -- on the back end, a lot of solutions are gone into that. A lot of -- let's say for example, I've shared in the previous calls also, the kind of use cases we have built for let's say BFSI sector. And we are the thought leaders in this market. We spent a lot of time with our customers, understand their pain points, how we can actually create a wow factor for their customers. So basically, here, it is a lot about for let's say, HDFC bank, which just kind of communications to the customer, it is about if they are sending OTP, then how it reaches, let's say, maybe less than 2 seconds, less than 3 seconds, how we can actually increase the conversion of our OTP. How -- that's what the customers are looking at. I mean -- and this is where we excel all the time, and we help our customers to acquire new customers. So we provide a lot of -- we get involved, we provide a lot of analytics. We provide what kind of campaign should be run to acquire more customers. So it is more about ROI, what customer is looking at on a campaign. So maybe my price could be higher than whatever maybe our other vendor on the street, okay? But still customer would like to remain with us, because we are able to provide better ROI. So that's what matters.

Okay. And sir, in terms of the -- in terms of our relationship with the government, is government is there in the top 10 customers. And in terms of pricing, do we have the same pricing for the government that we have for enterprises? And is there any different collection in terms of collection terms with the government, is it on the higher side versus the enterprise?

Okay. See, yes, definitely, government is part of our top 20 customers, right? As far as pricing are concerned, so there are -- there is a separate price line for the government, okay? So these are called noncommercial messages. And for the noncommercial messages, the price is much, much lower than the -- for, let's say, for example, for a bank or a e-commerce company. So there is a different kind of pipeline, which is -- as mandated by TRAI, our regulator. In terms of payment terms and collections, yes, the collection period is a little higher compared to our other customers. But as you see, overall, our collections are pretty good. Our collection days are quite great, less than [indiscernible] days in fact.

Okay. And sir, on the platform business, so we are -- based on the numbers that we have disclosed this quarter, we are at 90%, 95% kind of gross margin levels. So do you see that these kind of margin levels to sustain because these are very high number? So can it come down to 80%, 85%? Or is there any investment that you're gunning there? Or what is driving this kind of higher -- high gross margins there? So -- because that is -- we are not seeing any business or a platform business globally also operating at this such high gross margin. So is there a risk of that coming down?

It's a good question, Uday here. The platforms are normally entered -- the agreements are entered for long term. That's number one, right? Number two is platforms, our revenues are generated on revenue share basis, wherein there is no cost of services involved here. So in other words like on the telcos generate the revenues for themselves and whenever they generate revenues, they partner with -- they revenue share with us. So from our revenue share, we don't need to book anything towards the cost of services. That's the number one, right? Number two, from the net revenues, we end up deducting only the cloud charges, which are around 5% to 7% depending on the platform, right? So it all depends how we're going to book your gross margin, right? But as we speak, we are directing only the cloud charges. But if you end up taking out the direct cost, which is like your sales and marketing cost or the L1 and L2 our team cost, we may probably end up around 70%, 75% or probably around 70%, which is in line with the SaaS players globally. So SaaS players, they normally have around 70% of gross margin globally, that is the real phenomena. And I don't see any challenge with our margins when it comes to platform business. And they're all long-term contracts with mobile carriers.

[Operator Instructions] We have next question from the line of Tejas Shah from Unique Stock Broking.

I missed the earlier part of 10, 15 minutes. Just wanted to know what is happening on the Dubai side where we are supposed to tie up with 2 telcos. Any update on that?

Can you repeat?

On the Dubai side, we are going to tie up with 2 telcos and start rolling our services. Any update on that?

That's a good question. So we have the DLT platform, which is a blockchain platform under the deployment with both the mobile carriers in Middle East for more than a year. Since it is a blockchain platform it's a long-run process. Same thing happened in India also, it took almost 1.5 year before we went live. And so we have delivered the deployment from our side. And the both of telcos are in talks with their regulators TRAI to get the sign of before the launch their services. In fact, some of the services on our platform has already gone live. But for them to sign up all the use cases, I think it is taking much longer than what they expected. So we hope to close the final sign off in the next -- probably in the next quarter or so.

So I think by next quarter, it should be live.

Yes, yes, yes.

Okay. And any growth plans apart from this?

Sorry, come again?

I mean growth plans on the international side, apart from Dubai. Because it seems it takes a lot of time to deploy. And once it is deployed, normally, it is not easily replaceable.

Sorry, once it is deployed. Sorry, can you please come again?

Once your services are deployed, normally it is very difficult for any other competition to come and take over that business.

Absolutely. This blockchain platform is under development -- under deployment for more than 1 year. And -- yes, it is not probably -- I don't want to use the word impossible, but more or less like it's nearly impossible to replace these platforms. That's number one. But mind you, like these platforms, which are being on deployment with more mobile carriers in Middle East, they are not on revenue-share basis, they are on the license basis. So -- but 100% of the traffic in Middle East go through this platform. And when it comes to expansion plan, we are waiting for -- I mean, one of the largest consulting firms in the world is advising on Wisely GTM, and once it is ready and meanwhile, we are expecting a couple of use cases -- successful use cases from India on Wisely platform. And once we have the GTM and the successful use cases in India, we would like to take Wisely to the global market.

And one last question. How do we differentiate with the Route Mobile in terms of the businesses?

So I don't want to really comment on our competitors. So I would like to leave it there.

We have next question from the line of Deepak [ Chokhani ] from [indiscernible] Capital.

Excellent numbers, really excellent. A quick question, more on EBITDA margin. Gradually, the intention is to move to Wisely platform. And my question is, would we see a better margin once we move to Wisely -- once our clients move to Wisely?

Deepak, like as mentioned in my earlier speech, like our margins tend to be very, very high on platform. And Wisely being the platform and our margin profile is supposed to better off going forward. Yes, to answer your question, yes, whenever we see the revenues increasing on our platform, our margins will be better off, yes.

We have next question from the line of Sharad Kohli, an investor.

Firstly, I'd like to start off by saying that the disclosures that were made this quarter were phenomenal. And the kind of free cash flow generation that was shown this quarter is symbolic of a market leader that is growing significantly above the industry and taking share from other marketplaces. So congrats on that. The 2 questions that I have are both on financials. The first one is on the gross margin. So if I look at your gross margin profile over the last 6 quarters, it's gone from 23.1% in the first quarter of '21 and it peaked last quarter at 27.7%. This quarter, it's slightly down at 27.4%. My question specifically is given that we did have basically, the ILD rate doubled, right? And ILDs, maybe I think it's about 30% of your business in terms of revenue contribution. So there has to be some place where price gave broke, right? Because if you have 30% of your business that doubled in pricing and yet your gross margins went down, albeit not by a lot, by 30 basis points, there has been price compression somewhere, right? So that's my first question. If you can just shed light on that. Maybe just a quarterly thing, or onetime thing, but if you can just shed some light on that. And my second question had to do with just understanding what other financial liabilities on the balance sheet is, because that took up almost INR 126 crores of cash flow. So I just want to understand what is in that line item on the balance sheet.

So let me answer the first question, Sharad. See, I think what people don't realize is that it's not a price increase in ILD to start off with. It's a cost increase on ILD, right? The telcos have increased the price. The reality is we've been able to go and get price increase from our clients, right, on the back of -- in fact, it gives tremendous review to our business model that we have that elasticity in terms of our relationship with customers that even if telco costs go up, our ability to kind of maintain our profitability and maintain the pricing is a very, very big thing, right? So it's not that price has doubled from customer by cost remaining same. If anything, we've been able to maintain our margin percentage by going back to our customers, renegotiating the rate and defending it. So to think through a price increase as a big increase may not be a right way of looking at it, saying that it should reflect in profitability. Sir, could you repeat your second question?

Yes, there's a line item on the balance sheet. So if I look at a cash flow statement, right, INR 126-odd crores was because of an increase in financial and nonfinancial assets. And if I just go to the corresponding entry on the balance sheet, it's basically under the category other financial assets, which was INR 335 crores as opposed to INR 256 crores, the corresponding March 31 number. So what is in that line item, other financial assets, because that don't significantly...

It's unbilled revenues. So what happens, Sharad, is that like in the entire telco industry, the billing for the quarter happened at the -- in the subsequent month after the reconciliation. Now when we have growth like we had growth, obviously, our closing revenues are higher. And therefore, the unbilled is a high number, which tends to increase.

Okay. So let me just repeat that. So -- you all...

Let me just clarify that. Are you talking about liabilities or assets?

I'm talking about assets, financial assets. So basically, you're saying the service was provided, let's say, in the last 10 to 15 days, let's say, quarter ends March 31. You provided a service, let's say, between March 15 to March 30. That service has been provided, but you haven't sent the billing for whatever reason, because telcos don't want to show on their side that it's an unpaid bill.

It's not about telcos. So we bill at the end compaction. So if I deliver work for our customers from 1st March to 31st March, that invoicing will get raised sometime in April. And therefore, from a financial perspective, the revenue is recognized through an unbilled. Typically by about -- by this time, right? We would have billed more than 90%, 95% of whatever remains as unbilled in the books. So it's more a substitution of debtors just from an accounting perspective.

Got it. So this is purely a bulk of this is saying that. And so it's fair to understand, just like receivables, as the business accelerates, there could be -- I should expect this other financial number because of the -- where the billing cycle works, that this number should technically continue growing, and hence, should be -- depending on when we see when the results are reported, there should be a drag on cash flow from this, but this is purely an unbilled item as opposed to anything else.

Yes, yes. But typically, you would also find that there will be an increase in nonfinancial liabilities, which is the telco part, which is also not billed. So theatrically, it should affect the cash flows only to the extent of the margin.

Right. Fair enough. That's a good enough explanation for me. One question actually, I do have for Deepak, right? And maybe this is just me being stupid and not knowing the industry well enough. But if I look at the customer distribution, right? So we had kind of 9 customers move from the INR 10 crore to INR 50 crore bracket to above the INR 50 crore bracket, right? That's how you have the extension. And so that means that 9 customers move from the INR 10 crore bracket to the INR 10 crore to INR 50 crore bracket, and that number has stayed flat. And to me, what is striking was that the growth in that bracket of customers was only 5%. Now I don't know is 5% versus 14% wallet share growth in the high-end segment is a good or bad thing. I don't know if you guys have any perspective on that? I would think that 5%, maybe I shouldn't think anything, but is 5% a good number for that 10% to 50% -- INR 10 crores to INR 50 crores bracket versus when 14% growth in the higher numbers?

Yes. So Sharad, I will explain. So one, if you look at on the consolidated basis, so we've grown 46%. And here, we are talking about customers, who are giving us the revenues more than INR 1 crore. So we are only considering them, right? So it is 46%. Now if you look at above INR 50 crores bracket, the growth is 73%, because from 10, the customer become 19. So we moved a lot of customers from INR 10 crore to INR 50 crore bucket to above INR 50-crore bucket, correct? And -- and when we talk about -- and if you look at the number of customers in the other slide, it remains flat in the INR 10 crores to INR 50 crores. That means -- what this mean is that from this bucket, we moved the 9 customers to above INR 50 crores. And we also moved 9 from less than INR 10 crores to this bucket, right? So it is actually -- if you really see it's a good news overall. I mean, there are a certain amount of customers moved from INR 10 crores to INR 50 crores to above INR 50 crores. And a similar number of customers who moved from INR 1 crore -- INR 10 crores bucket to INR 10 crores to INR 50 crores bucket. So this is how it is. But if you look at on a consolidated basis, we have our overall 46% growth. And one more thing...

That I understood. I was just saying that there's a slide where you also said that the revenue growth of each of those buckets. The revenue growth for the customers that belong in that INR 10 crores to INR 50 crores bracket was 5%, right? But the revenue growth for the customer...

Sharad, let me answer that. I see what happens in each of these buckets, and that's important to kind of understand why it is important to look at the total segment. My best highest contributing customers kind of move out to the higher bucket. And effectively, that gets replaced by the lowest contributing person, right? So it's more a math issue. So customer, who is INR 45 crores goes out and customer, who is INR 11 crores comes in, right? So if you will proportionately push our customers up, you do get a situation where the middle bucket kind of tends to be a little slower in absolute revenue growth. But from our perspective, I think what is important is the overall segmentation is looking good. The fact that we are able to replace those customers and scale those customers and add customers in all buckets is important. But the middle bucket does get a little bit of impact because you end up substituting from a numbers perspective, customers that are closer to INR 40 crores, INR 50 crores by customers, who are in the INR 10 crores to INR 20 crores because you can't make an entry directly at that level. So therefore, the revenue growth optically tends to be weaker. So the way we look at it is better the shift goes right. So if you look at the average size of customers, that has gone up, right? So that's the way I would suggest you read that slide.

Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Ritu Mehta from Tanla Platforms Limited for closing comments. Over to you, Ms. Mehta.

Thank you, everyone. That was the last question for today. In case we couldn't take your questions due to time constraints, please feel free to reach out to Investor Relations team. Have a good day. Thank you.

Thank you. On behalf of Tanla Platforms Limited, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.