Tanla Platforms Limited (TANLA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Tanla Platforms Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Ritu Mehta. Thank you, and over to you.

Hello, everyone. I'm Ritu Mehta, and I lead the Investor Relations for Tanla Platforms. On behalf of everyone at Tanla, I would like you to welcome to our Q3 earnings call. Joining with us today are 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 perspectives on business imperatives and strategic progress made by Tanla. After his opening remarks, we will be happy to engage with participants and address their 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 fact could be deemed forward-looking in nature. Such statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. A detailed disclosure in this regard is mentioned in the results presentation that is uploaded on our website. Now over to Uday.

Yes, thanks, Ritu. Good afternoon, everyone, and a very warm welcome to our earnings call. We wish you all a very, very happy new year. I hope you had a chance to read our results and also read my letter. I would like to cover certain important takeaways before we get into Q&A today. The first area is around margin expansion. This is a metric that I personally track most closely. Our gross margins have increased from 19.3% in Q3 FY '20 to 29.5% in Q3 FY '22, and this is something commendable. Most of the platform companies typically operate at a more than 50% gross margin. Our platform business operates at a very high gross margins and contributes 23% of our total gross margins. Our aspiration is to shift our gross margin profile in line with global platform companies as we scale up our platform business, led by Wisely. The second update is on Trubloq, our blockchain platform, which handles 88 billion transactions in Q3 compared to 77 billion transactions in Q2, a growth of 15%. In December alone, we handled 31 billion transactions with a daily average of 1 billion transactions. I don't think any blockchain platform globally has handled this level of scale on a consistent basis. Going forward, we think content management will be the next big opportunity here. This will scale up in the next 6 months, and we are all well placed to capitalize on this opportunity. The third update is on Wisely. This has been a good quarter for Wisely. As you know, we signed an exclusive multiyear partnership with Vodafone Idea, and I think this is one of the largest deals in the CPaaS industry globally. We will go beta live in February, and our commercial launch will be on 1st of March. This is a moment of truth for Wisely. Within 60 days post go-live, we will come out with case studies on how Wisely have helped global enterprises and VIL. This will provide us an opportunity to showcase Wisely to global enterprises and global telcos and set us on our way for our global expansion. I had talked about 2 exclusive partnerships in Wisely last time. Our other exclusive partnership is in the beta phase and has taken a bit longer than expected as we are doing extensive testing. We are very excited by the potential of this partnership and expect to announce this in February. Partnerships is very integral to our strategy around Wisely. We will force multiply Wisely with a strong industry and partner ecosystem. The ecosystem is going to become more strategic and more powerful, and I'm personally driving this. Let me reiterate what I have told before. We are not here to acquire any companies for numbers or we are not here to raise any capital. We are here to build a strong sustainable business by investing in platforms and solutions. We are probably the only CPaaS players globally who have not made any acquisitions in the last 24 months. We are open to look at small bolt-on acquisitions which will complement our Wisely platform. We have not raised any capital post our public offering and build our business through our internal approvals. Our capital allocation will be focused on platforms and products, brand, talent and customer success. We'll be very disciplined on this. We have targeted approach with a focus on large opportunities, and our investments are directed towards building products to expand our total addressable market, the GTM investments around strategic customers, brand and investment in best-in-class talent. I'm very excited by the opportunity I see in front of me. We have such a high-powered team to maximize the opportunity in front of us. I firmly believe the coming year will be the year of Wisely. I'm excited about my team and the company, and I cannot wait to deliver on our dream for all of you. With this, I'm opening the floor for Q&A.

[Operator Instructions] The first question is from the line of Manish Poddar from Nippon India AIF.

So just 2 questions. One is, would you be able to help me what is your market share in Trubloq now?

Poddar, Uday here, I think it should be upwards of 63%.

And any idea when will DLT be rolled out for voice versus messages right now?

TRAI, I think my information -- if my information is right, they have yet to decide on the voice and -- but it will be in the near future.

So there is no time line on this?

Sorry?

There is no time line on this yet.

No, there are no time line to my knowledge, yes. But the platform is built for both SMS and voice. And the minute we get a sign-off from the regulators and operators, we switch on that component, that module.

Okay. And just one more. Can you explain the slide where you are saying EBITDA to CFO conversion is lower this quarter? Could you probably -- I have to understand what are the reasons for this.

Sure. Manish, let me take that. This is Aravind. See, if you look at it, our free cash flow to net income conversion is lower in Q3. But if I take a YTD basis, we are still at about 95% of net income as free cash flow. What really happened, Manish, is that we had much stronger cash flow in Q2 because we had a price change in our ILD business. Now what happened is the higher price payouts to the telcos happened in Q3, but we are able to collect from many of the global enterprises in Q2 itself at the higher price. So what really happened was that we had a disproportionately high cash flow of INR 222 crores free cash flow on a net income of about INR 136 crores. And there has been a little bit of compensation of that -- normalization of that in Q3. So if you look at on a YTD basis, we are at 95% free cash flow as a conversion of PAT. And I think going forward, you will see that normalize. So this was more of an anomaly because of the price change which happened and the difference in payment terms with respect to customers vis-a-vis suppliers.

Okay. And just one last one. So what are the thoughts with the cash on books given that you're looking at the smaller bolt-on acquisitions? And you're generating cash flows every quarter, let's say, cash flow is 90%, 95% of quarterly run rate and you're doing INR 200 crores per quarter. What is the thought process with the cash on books?

Manish, as I mentioned in my speech, so we're going to spend the money on the production platforms and the brand building and the customer success, and also we're trying to build talent. So these are the 4 areas that we're going to build, that's number one. And we are also trying to -- I mean, we have been returning the cash to investors in the last 24 months, and it may continue in future also.

No, I'm just trying to understand from a relative quantum, per se, just to understand better because your buyback was roughly INR 65 crores, INR 70 crores last year. Why not do a larger amount? Just want to get your thought process. What sort of cash on books are you comfortable with is what I'm trying to understand.

No, we have not decided anything about buybacks in the Board meeting. As and when we discuss definitely we'll announce to the market, Manish. I would like to leave it here.

The next question is from the line of Abhimanyu Kasliwal from Choice International.

Well, the question on everyone's mind, was just asked before me, which was the return of cash. And you have reiterated that you do not plan to have a buyback as of now and may have dividend payments in the future but nothing concrete. So in that case, I wanted to get a better understanding of your growth plans as in India and internationally. Because you do not want to make an inorganic acquisitions. But at the same time, where will the next level of growth come from? Are we looking at something within the nation? Are we looking at international markets? Are we looking at new products besides Trubloq and Wisely and Gamooga and what we already know of? What is the new fuel, we can say, for the growth machine which is Tanla?

It's a good question, Abhimanyu. A couple of areas. One is, as you know, that we are the market leaders in India. And so -- and the India market is growing quite quickly, that's number one. One can expect a growth from -- a reasonable growth from India. That's number one, right? Number two, we can expect -- sorry, go ahead.

Could you give a number to the Indian growth. I mean, we had the rule of 60 going on right now, which we almost are getting to 58% this time. Do you have any numbers which you can give us for the next quarter and the next year for the growth you can expect in India?

No. We will not make any forward-looking statements here. All I can say is our growth is going to come from India. The growth is going to come from the new platforms. The growth is going to come from new solutions. The growth is going to come from the new customers globally. This is where we're going to focus now.

Okay, sir. And sir, international growth, just a follow-on question. What is the situation where we can understand that some kind of international growth is coming? I mean we're aware from a subsidiary, which is there outside India and heavy bank deposits that we have that we do have some kind of foreign payments coming in from foreign clients. But can we -- do we have any plans to move into different nations and see some kind of growth from there, growth in margins maybe or growth in revenues or something like that, sir?

Abhimanyu, a couple of things. One is most of our current revenues are coming from India. That's the first statement, right? The second one is the dollar revenue that you're talking about are all are India-bound revenues, okay? For example, someone like Facebook, someone like Google, someone like Amazon is paying to the Indian telcos or Indian platform providers like us. They're all India-bound business, okay? And for us to enter into a dollar revenue business and the telcos and the enterprises would like to enter into agreement with our company outside India, that's how we end up having the subsidiary, that's number two, right? Number 3 is, in terms of global expansion, we are pretty clear. Unless until we come out with a case study from the Indian enterprises and Indian telcos on Wisely, we are not in a great hurry to look at international expansion. But the good news is the platform is being deployed at VIL. So beta is going to be launched in February and commercial launch is on 1st of March. And one can expect a case study by end of May. That's what my intent is. Once we have the case study, and we have an opportunity to go to global telcos and global enterprises. That's what we plan. But I don't want to expand to the global market just for sake of it.

Okay, sir. Sir, one follow-up question, VIL, because it is one of the larger telcos, but at the same time, it's not doing so well. Can we expect some kind of numbers in terms of what VIL business we're looking at? And what we have -- telco business, we can see, we can hope to target in the coming quarters? I mean, if it's something very token or is it something which high growth prospect in terms of revenue, in terms of margins? If you could just throw some light, sir?

I cannot really comment on VIL, per se. But all I can say is it's a pretty large deal for Tanla, it's a pretty large deal for Wisely. And it is testing bed for Wisely, and I'm sure we will generate at least some revenues and the margins on this Wisely platform with the VIL deployment. So let's -- why don't we wait until end of May so we will come up with the case study.

The next question is from the line of Tejas Shah from Unique Stock Brokers.

Can you update us on the Dubai thing? Is it deployed or is it still pending?

It is like the DLT platform, which we call it as Trubloq in India, right? That's been kind of deployed, but all the models have not gone live in the Middle East as yet. But as we mentioned last time also, it is a license deal. It is not on a revenue share basis. So that's not going to really move our revenues or margins going forward, okay? But it's good to have an international reference for our blockchain platform but one cannot expect beyond that.

The next question is from the line of Amit Chandra from HDFC Securities.

My first question is on the performance of the top 20 customers. So earlier, the growth was largely driven by the volume growth in the top 20 customers. But in this quarter, we are seeing 5% to 6% decline there. So is it because of sort of wallet share, on a wallet share loss in some of the top customers? Or is it because of exit or like churn we are seeing in top 20 customers? Because as we mentioned earlier that we have very high stickiness in our top 10, top 20 customers. So what is affecting that? And how do we ensure that the top 20 customers that will be there contributing in terms of the volume, right? Also second, on the Trubloq, we have seen 25% growth in the volumes but the revenue has not grown in accordance to that. So is there any change in pricing or change in mix that you're seeing in Trubloq? And the third question is on the enterprise. What is driving the enterprise margins, gross margins? And is there any impact of ILD price increase to like revenue growth in this quarter?

Yes. So Amit, maybe I will take the first question, right, and then hand it over to Deepak, right? So first point is our top 20 has not declined, Amit. Our top 20 as a contribution has declined, but the top 20 customers have still grown 28% Y-o-Y, right? So it's not that they've declined. See the good part, and we've been talking about this consistently from the time we presented this data for the first time in our Analyst Day, where we said last year, our top 20 kind of contributed 70%, right? Our objective is twofold: one, reduce concentration but not by necessarily making these customers degrow but kind of expanding our base, right? And that's kind of playing out very well because on one hand, you have top 20 customers and the largest set of customers, which are still growing 28% Y-o-Y. But since we are growing faster as a company, their contribution and our dependence on that is coming down, right? So that is really what is happening. It is part of our -- it is by design, that we wanted to and we've been consistently saying that. And we're kind of approaching it where we are growing, at the same time, reducing the concentration also, right? So I'll ask Deepak to add on in terms of what he is seeing in terms of pending from top -- from our top clients. But definitely, we are managing to do both where we are growing them, but also reducing the dependency.

Okay. So sir, how frequent is the change in the top 20 client profile? So has there any been exit of a large client in top 20 or some like kind of like wallet share loss in some of the top 20 clients to competition?

Deepak, you may want to take that.

Yes. See, we haven't lost any customer, I would say, top 50 or even top 100 for the last 10 years, okay. So I would like to make that statement. So our customers are very much intact and they are giving us a consistent business. Yes, it happens sometimes that maybe 1 or 2 customers here and there, the wallet share may swing, okay? And that's part of the business. But as far as customers are very much intact and our top 20 customers are growing very well.

And on the second question on the Trubloq, the market share is coming down and the volume growth is not reflecting in revenue growth.

So I don't think that will be a fair comment because you are looking at the overall platform business and concluding that, right? I think there are multiple components to this, right? There are different price points for different categories of enterprises from a Trubloq perspective. I think you still see the -- Trubloq is still probably only 50% of our platform business, right, in that sense. So there is still a lot of growth in Trubloq and it is in line with the volume in many ways from a revenue perspective, right? So that is the answer as far as that is concerned.

I would also like to add one more thing here that if you see -- as we said, we -- Trubloq is deployed at BSNL, at VIL, we have a major part of Airtel. But -- so it also depends on what these operators are receiving the volumes. So let's say, if the volume is higher on these operators vis-a-vis other operators where Trubloq is not there, so you would see higher number of transaction here, right? So that would also change the numbers a little bit.

Okay. And on the market share, is it -- just a follow-up on the market share. It has been coming down. So is it because of some competition that you're seeing in this space? Because who are the other players who are in this space and what kind of competitive scenario you're seeing here?

So to be honest, we have not seen market share drop, Amit. We were 62% -- he's talking generally?

No, he's talking about Trubloq.

Trubloq, okay. I know that we have talked about 70% in 1 quarter, but that was the first quarter where they have included such number.

Where there was a good internal traffic which subsequently was stopped from a scrubbing perspective. So that was more of an anomaly in Q3 of last year, where we showed 70%. Because one of the telcos kind of used an internal transactions which kind of stopped. But after that, we've been upwards of 60 or in fact, if anything, we increased from 62% to 63% over the past 9 months is what I would say from a Trubloq perspective, Amit.

Okay. And like who are the other like 40% traffic who is handling?

I think IBM is deployed with Airtel and the Tech Mahindra is deployed with Jio. At least between 2 of them, they had -- they are around 35% something like that, yes.

Okay, sir. And sir, my last question on the enterprise side. So what is driving the enterprise margins? And also, is there any element of ILD price increase this quarter?

So maybe I will take that, right, Amit. So the big driver on enterprise margins is in terms of shifting business mix and the fact that we had a lot of festival-driven campaigns in both ILD and NLD which is always more profitable, right? So that has really helped us. From a price increase perspective, I don't think there was anything delta between Q2 and Q3, more or less, we covered -- the price increase happened in the beginning of Q2. So there was not a big delta as far as price increase is concerned from a margin lever perspective. But I would say, it was more due to a change in business mix, coupled with the fact that we had a lot of festive promotional campaign volumes, which helped us.

Okay, sir. And sir, lastly, on the cash flow generation, so obviously, it has come down. But as you have explained in the presentation also, that is because of the ILD price increase. But what is the sustainable OCF to EBITDA levels that you are aiming at? Because if I see last 2 years, it has been above 100%. So is it fair to assume that it will remain in that range? And in terms of our working capital management, is it going to be at the same level? Or we are seeing some improvement there?

I would say, FCF to PAT, we would like to be as close to 100% as possible, would always be the intent. EBITDA to operating cash flow may be difficult to be 100% because there is a tax outflow, which we have to account for. So I would say that is how we are looking at them.

[Operator Instructions] The next question is from the line of Anil Sarin from Centrum Wealth.

Please accept my congratulations on once again coming out with such outstanding numbers. So that's a job very well done. I want to draw your attention to Uday's letter, where there is a mention of how India is adopting digital modes of communication and how that is good for Tanla. So could you just help me out by drawing a linkage between like as India becomes more and more digital, how does it help Tanla either through Trubloq, Wisely? I have one more question after this, but I would wait for the answer for this one before asking the next question.

Sure. So I'll request Deepak to give you a view on the trend in terms of what's happening with the enterprises as they adopt digitalization.

Yes. So if you see the trends are very encouraging. And now the -- I mean, if you look at it, all the large customers of ours, they have already adopted digital ways to communicate with their customers. Now they're adding more channels to it. Earlier, it used to be SMS and then email and voice, and now WhatsApp is also penetrating into this. And the e-channel -- and the beauty of this is that e-channel is complementary to each other. So they are not eating into each other's revenues or values. I mean, if you look at it now, WhatsApp, and WhatsApp is basically positioned for conversational messaging, wherein -- which was not that -- I mean, which was not I would say, that easily doable with the SMS or even the voice, which can happen with WhatsApp, wherein simple conversation, you can eliminate a seat in the call center. So basically, that's going to impact the call center business and it's going to save huge revenues or a huge cost for the enterprises. And the whole thing would move to, let's say, WhatsApp or any other such conversational messaging platforms. So that is one trend I can tell you, which is doing very well. And if you see, I mean, India is one country where kind of start-ups we have. And every month, we are seeing there's a lot of start-ups are coming in. And I mean, they are -- on the very first day itself, they are adopting these digital channels to communicate with their end customers.

Okay. Great. My next question was there was also a mention and there were some screenshots of scrubbing and content. So could you enlighten us about what does it mean for revenue, what does it mean for customer stickiness, this scrubbing and content?

So Amit, scrubbing is basically what our DLT platform does, right? So it looks at every message and kind of sees whether it is aligned to the template and the header. And that really what kind of went live in September of last year, September of 2020, and that's really what our Trubloq platform does, right? Content registration is a very new model that just kind of took off in September. And like Uday mentioned in his opening remarks, we think content management is a very big opportunity. I think that it will kind of crystallize over the next 6 months. And we are closely tracking it and looking forward to capitalizing on that. So that is what I would say as far as that is concerned.

Okay. My last question is on Trubloq. So you mentioned that Trubloq is not -- I'm not talking about market share. I'm talking Trubloq of your revenue is a certain portion. However, there is also this T-R-A-I, TRAI regulation, which says that all messages have to be encrypted. So how is it that Trubloq is not 100% of your messages? Are there some non-encrypted messages also that are going on, on the networks?

Anil, no way that TRAI states that all of the messages have to be encrypted, okay? What they have mentioned is each and every message in India have to go through blockchain platform, okay? And having said that, they have given exemptions to the government of India. But otherwise, each and every message has to be scrubbed. So nowhere they mentioned about scrubbing -- sorry encryption.

Okay. So as the government organizations gradually come online, then greater and greater percentage of your messaging revenue would come from Trubloq? Is that the right way of looking at it?

No. The more -- no, the more that you see the traffic growing in India, the more traffic comes to Trubloq.

Okay. Sure. And an allied question to that is Deepak mentioned that, look, we are with a few networks and we are not on a few other networks such as Jio. So if Jio increases its market share sharply higher from where it is now, that would affect the market share that Trubloq has. Is that fair comment?

No, it's not really true, Anil. It has nothing to do with subscribers, right? It all depends on the telco's concentration on the CPaaS business. So for example, BSNL where the subscriber base is miniscule, but they're doing massive volumes in India right now. So the subscriber base that's nothing to do with the business opportunity.

[Operator Instructions] The next question is from the line of Balaji Subramanian from IIFL.

Congrats on a good set of numbers. I have a couple of questions. The first one is, what has changed the widely international rollout strategy? Because last time you had mentioned that you are engaging a top consulting firm to advise on the international GTM? But now you just mentioned that the Vodafone Idea case study would be fixed and that would be used to kind of build out the international rollout of Wisely over time. So what time frame are we looking before you roll out Wisely internationally? My second question is more on what is the typical gross margin that you make on non-SMS channels, especially WhatsApp messages. So you did mention that you are aspiring to reach 50% plus gross margin that many global platform players report. So how will something like WhatsApp enable you to kind of make that journey? So that's largely from my side.

Thanks, Balaji. The first point is, yes, we have appointed the consulting firm to advise us on Wisely GTM, which does include both India and outset in the global expansion. So we got the GTM plan from them last week. And so they have given us a complete GTM plan, including proposition and pricing. So -- and in fact, they are the ones who are helping us to even roll out with VIL as we speak. So it's a part of the strategy. So we have not changed any strategy. It is in line with our strategy. So -- but we don't want to go to global markets without having at least one successful case study in India, right? So that's where we are waiting for that. But meanwhile, we are already engaged with global tech telcos and very large enterprises. We're just eagerly waiting for these customers such as -- I mean, case study from VIL, which is going to come from by end of May. That's number one, right? Number two, for us to push the margins -- the gross margins from where we are right now to 50% over a period of time, it takes a bit of time. I'm not saying it will happen in the next 1 year or so. But if you look at our gross margins on our platforms, are upwards of 80%, Balaji, okay? So the more revenues, more margins we earn on platforms, automatically the -- we will have, our margins -- our blended margins will move towards that to our aspiration level. So that Wisely definitely will help us generate good margins, gross margins for us. And once we start adding the Wisely gross margins to our blended -- our total gross margins, I'm sure the blended margins will change.

The next question is from the line of Niral Gangar from Neev Investment and Management Advisors.

Congratulations on excellent set of numbers and for a very good presentation, which has been going on for the past 3, 4 months -- 3, 4 quarters. My most of the questions are answered. Now only one question is left. So what I am seeing that trade payables are approximately equal to cost of service for the last 3, 4 quarters, which was not the case until September 20? So what is the reason behind this? So for example, trade payables in the current quarter is INR 662 crores. Our cost of service is also INR 620 crores. So is there any change in this particular portion?

So there is no change in portion, right? I don't think you will -- in a growth engine, right, you will always find that your trade payables will go in line with business, right? And there is some amount of correlation to cost of sales. But there are also different mix, right? Because when you look at an integrated thing, when platform business is growing, your cost of service does not go in line with platform business in that sense. So it will be difficult to correlate along those lines, Niral.

The next question is from the line of Milind Karmarkar from Dalal and Broacha.

Congratulations on great set of numbers. Actually, I had a very basic question. Basically, what I wanted to know was that with the implementation of Wisely and Trubloq on some of the telcos, what I wanted to know was because I keep getting -- I understand many of us keep getting these SMSs which look like that they are from, say, Bank of India saying that your account will be frozen, you just need to send us your PAN number or Aadhaar card number and the problem will be solved. Now obviously, these are phishing messages. So just wanted to understand that whether Wisely and Trubloq together will help stop these messages. So that's what my question was. All other questions have been answered.

Milind, Uday here. It's not basic question. It's a good question. So the messages that we are receiving, I also receive on my handset more or less every day. As you rightly said, these are all most of phishing messages. They're not using application to peer messaging route, which -- that means they're not going through our routes, okay? What they do is they're using SIM cards, okay. They go to market and they buy the SIM cards from the store, and they start sending the messages from that SIM card, which doesn't go through Trubloq or any of the DLT platform in India because that comes under peer-to-peer messages. They are supposed to use those SIM cards for a personal purpose, but they're misusing for these kind of messages. So -- but the regulators are looking at these messages very, very closely, and they are clamping these numbers on a daily basis. And in fact, we are developing a platform which is likely to kind of control these kind of messages going forward. So -- but including the regulators, Government of India and even enterprises are very serious about such messages, and we are working towards that. But it doesn't go through our platform as you say.

The next question is from the line of Rikshit Naredi from Naredi Investments.

Sir, my first question is regarding domestic and international segment. So can you please tell us the expected market size and expected growth as per your best estimate?

My best estimate, so we are at what, $1 billion -- a little more than $1 billion TAM in India. And probably Deepak is the right person to comment on the growth. Deepak, you want to comment on that?

Yes, Uday. So yes, so what we are seeing is there's a growth of about 18% to 20% year-on-year growth is what we are witnessing right now.

Right. Okay. And my second question is regarding -- so please give me more color on co-selling agreement with Microsoft.

Yes. This -- we have the co-selling agreement with Microsoft. And wherever we go, including India, we sell along with the Microsoft and our Wisely is on Azure stack. So in fact, the platform that we're deploying with VIL, it is on Microsoft Azure cloud. So it's a joint effort, yes.

Okay. And my last small question is, what will be the revenue mix between platform and enterprise business in the next 2 to 3 years?

I don't want to give any forward-looking statements. But as we speak, it's around 23% of our gross margin comes from platforms as we speak. And I think our aspiration is to push it as much as possible in the next 2 years. That's what we're working. That's where we are investing for the last 2 years. If you look at last 2 years, we have really covered a lot of ground in terms of the platforms business. And I personally believe that it will cover a lot of ground in the next 2 years.

The next question is from the line of Nirmal Bari from Sameeksha Capital.

I have a couple of questions. So the first one is, I'm not very conversant with the technology aspect of this. So in between you said that this CPaaS has nothing to do with the number of subscribers of that telecom operator and that BSNL is doing a lot of CPaaS. So for this DLT platform, at what point does the message needs to be scrubbed? I think -- is it the receiver, as in the receiving telecom operator that needs to scrub the message before it goes to the customers' handset? Or does it happen at the point of where it is being sent?

That's a good question, Mr. Nirmal. You're talking about origination and termination, okay? The scrub -- so what TRAI says is whoever is originating the message is responsible to scrub through DLT. And for example, BSNL is scrubbing, BSNL is originating message and terminating to Airtel, okay? It is the responsibility of BSNL to ensure that it is scrubbed in the DLT platform before they hand out the message to Airtel through interconnects. So it is originating operator who is responsible to scrub.

Okay. And then in this, what would be the rough market share of -- in terms of origination of messages, what would be the market share between the 4 key players in India? If you can give some data on that.

I'm not allowed to do that. We have some NDA here. But I'm afraid I cannot give you on behalf of the telcos.

Okay. And then second question that I had was on the gross margin. This year, our enterprise business gross margin grew by 73%. So would it be fair to assume that it was largely on account of the price hike that happened in Q2? Because that is where the bump up in enterprise gross margin came in.

So Nirmal that -- I don't think that will be the right conclusion because that is more of a cost increase and a price increase, right? It's not just a price increase because your -- what has really happened there is the telco costs have gone up, right? And we've kind of gone ahead with our customers and got our price increase to ensure that we have maintained our margins, right? So the price increase would have definitely given us incremental absolute margins, but not impacting the margin percentage, right? I think we've improved our margins due to mix of business. Obviously, the improvement in terms of our platform as a contribution. So those are the big levers from a margin perspective. Price increase is not -- does not help in terms of margin percentages level.

Yes. But that platform-related gross margin part should have been reflected in the platform business, right? Or...

On an integrated basis, if you are talking only enterprise then you're right. The price increase would not have an impact on the margin percentage per se.

Okay. And so going forward, enterprise -- unless there's another price hike or anything, the enterprise business should -- the gross margin should largely grow in line with the volumes and then the platform business will be the incremental driver for gross margin. Would that be a correct way to look at it?

Yes. If you hear what Uday has said in terms of our longer-term aspirations, clearly, the bigger trust from a gross margin expansion perspective will come on the back of increasing the platform business share contribution. So you are absolutely right on that.

The next question is from the line of [ Deepak Chokhani from Trade Capital ].

Great performance on all fronts. Just one question I have. Just trying to understand the VIL partnership. Is it only for messages terminating in India or within India? Or is it like a global partnership wherein it covers all the countries where we are operating?

No. Deepak, since it is VIL, it operates only in India, I think my information says that Vodafone has nothing to do with VIL other than holding their shares. So they operate only in India. This partnership is mainly for India. It is mainly for India.

Okay. And just related question. So since it's going to be launched on 1st of March, probably Q4 will account for some of the revenues from this partnership?

Yes. For the month of March, I think we should able to book the revenues. That's what our plan, yes.

The next question is from the line of [ Sharad Kohli ], an investor.

My questions, most of them have been answered. I was just trying to understand the total addressable market post this announcement with VIL, right? So I don't want to take names here, but obviously, the -- one of your competitors had an exclusive agreement with Idea, right? So I'm just trying to figure out that with this new partnership that you have with VIL, is it fair to assume that -- and I don't know the duration of this contract, but is it fair to assume that all the business, whether it's for Vodafone or Idea now flows through Wisely? Or does VIL still have the ability to sign separate deals with other players in the market?

Good question. So VIL, I mean, once we -- once Wisely goes, it goes live on 1st of March, 100% of the traffic will go through Wisely, so meaning to say it is an exclusive partnership, that's number one. Number two, it is a multiyear deal. So I would like to leave it there.

Okay. Just one question just so that I can plug into my model here. What is the split roughly between -- and I don't know if you know this, but what is the split roughly between Vodafone and Idea in terms of the traffic?

I think it's kind of probably 55-45, 55 is Vodafone and 45 is Idea. That's what the information says, probably 50-50, but it's -- yes, it's kind of 50-50.

Okay. So if I understand this math correctly, that means that incrementally, once you go fully live starting March, that 45% and maybe there's a little bit give-and-take here, but for the bulk, that 45%, which one of your competitors or a few of the competitors had with Idea, that 45% now totally comes to Tanla, meaning that your total addressable market has basically doubled. Is that fair to assume?

[ Sharad ], all I'm saying is 100% of the SMS ILD traffic, both which does include 100% of Vodafone and 100% of Idea traffic goes through Wisely platform. Yes, your assumption is right.

Okay, that's what I wanted to know. Because just to understand what is the incremental growth that we can calculate because of VIL.

The next question is from the line of Kushagra Bhattar from Old Bridge Capital.

Congrats for good numbers. A couple of questions. First, to start with on revenue breakup. So in your press release, you have mentioned something called BFSI, wholesale and government, right? So if you can provide some breakup between those. And a related question is, when you say contribution from the newer channels, and there was some festive impact for the enterprise business, could you share some breakup from -- on revenues from these new OTT channels? And how sustainable are the enterprises margins which you recorded in 3Q?

So maybe let me take that question. So we've not broken down in terms of exact quantification of each of the segments. But what we can tell you is just from the industry sector, which has driven growth, clearly, BFSI has been very, very strong, right, led by the banks. So that's been a big driver for growth. And the other segments that we kind of talk about, right? When you look at other channels, they are very small but they are growing substantially, right? They're growing substantially. And definitely, they are, in today's terms, more profitable. Although they are a little subscale, they are profitable today, right? And therefore, that is helping us from our focus. So I don't know if you remember maybe 2 quarters back, right, we have made this statement saying that we're going to focus significantly on OTT channels. And I think we've been doing that for the past 6 months, right? So I can give you a lot of color in terms of what we are doing in that space, but we still not call those specific numbers as far as those are concerned. Probably we'll do it after it reaches a certain amount of scale. But if you want to know anything specific, I can ask Deepak to give you a view in terms of how enterprises are kind of looking at OTT channels and where there is opportunity as far as we are seeing it there. Deepak? Deepak, are you there?

Sir, Deepak sir's line just dropped. I'll call him again. Yes, we have Mr. Goyal online now.

Yes. So Deepak, I'm not sure if you heard me. But the idea or Kushagra was asking in terms of some of the OTT channels, how sustainable they are and what is the contribution. So I thought maybe you can give us color in terms of how enterprises are seeing the OTT channels and the use cases that we are seeing there.

Absolutely. So as I mentioned earlier about -- let's say, if you take an example of WhatsApp, so we are building very deep -- we are doing deep penetration and deep integrations with the enterprise customers, wherein all the revenues are based on the conversations between the enterprise and the customer over, let's say, for example, WhatsApp. So here, what happens is, once the integration is done, we have built the use cases. They're highly sustainable because, as I mentioned earlier, it is like always on channel for the enterprise and as well as for the customer. Because customer can anytime can do a query, ask whatever question they want to ask, they want to request anything, they want to do any commerce, they want to place an order, all that can happen over a conversation. So -- and we are building more and more such use cases for a particular customer. I mean that's what we keep doing. And when you are into that kind of business, definitely, you command a premium, you -- and the margins are high.

Okay. So the sense is all these channels are expected to grow, so the margins are more or less sustainable?

Yes, absolutely. I mean, who would not want that instead of somebody making a call to the call center and keep waiting there and enterprise, on one side, the customer is inconvenienced. On the other side, enterprise customer, they are paying INR 20 or INR 30, maybe INR 40 per call rather than the whole thing is just getting done over a conversation over WhatsApp or any other OTT channel.

Sure. Second question is on in your remarks -- opening remarks, you mentioned investments on brand building and customer success, right? So can you elaborate a bit more on when you say brand building, what kind of investments you are making. And when you say customer success, what sort of investments goes from your side on that part? And how -- if you can give some quantification as well versus your current investments today in both these areas. So yes.

Yes. So these investments are not going to be very large. It's going to be very, very small. In fact, we have created a customer success department last year, and we are recruiting a lot of people in the customer success department where they don't chase any revenues. They always work for customer success. That is an investment for us. But again, in terms of the brand also, we need to build a brand with customers, partners, regulators and employees. That's where we are going to focus on going forward. And we are looking at various possibilities of building the brand within this ecosystem. And so we are more -- we'll be more visible going forward with all the good work that we have been doing in India to our partners and customers and so on and so forth. That's what I'm going to say. It's not going to be a lot of money. It's very small money, but our focus is going to be on the 4 areas, as I told you earlier.

Okay. Sir, last one from my side. When you say working capital will normalize, what sort of levels you are indicating towards both in terms of debtors and creditors? And also a question on if you can call out how much was the volume growth in 9 months -- last 9 months, would be helpful.

Yes. So I'll answer the first one, see, what we are talking about is we try and be close to free cash flow at close to 100% of PAT, right? That will always be the kind of goalpost that we go towards, right? So that is really the normalization one is talking about, give or take. Volume growth, I think largely will be -- we're not calling out specifically volume growth, Kushagra, we've not called out volumes. But it's been strong. It's largely been in line with revenue growth in terms of the domestic business.

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Ritu Mehta for closing comments.

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

Thank you very much. Ladies and gentlemen, on behalf of Tanla Platforms Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.