Nucleus Software Exports Limited (BOM:531209)
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Q1 23/24

Aug 7, 2023

Operator

Good day, ladies and gentlemen. I'm Talshea, the moderator of this call. Thank you for standing by, and welcome to Nucleus Software Quarterly Earnings Conference Call. For the duration of presentation, all participants' lines will be in listen-only mode. We will have a question and answer session after the presentation. I would now like to hand over the conference to Swati Ahuja. Over to you, Swati.

Swati Ahuja
Head of Investor Relations, Nucleus Software Exports

Thanks, Talshea. Good afternoon, everyone. This is Swati from Investor Relations team at Nucleus Software. A very warm welcome to all of you for this Nucleus Software Earnings Conference Call for the quarter ended on June 30, 2023. For discussion, we have here from the management team, Mr. Vishnu R. Deshpande , our Managing Director; Mr. Parag Bhise, CEO and Executive Director; Mr. Anurag Mantri, CFO and Executive Director; Dr. Ritika Dusad, Executive Director and Chief Innovation Officer; Mr. Pardeep Pahal, Chief Human Resources Officer; and Mr. Tapan Jayaswal, Financial Controller. As you all are aware, Nucleus Software does not provide any specific revenue earnings guidance. Anything which is said during this call, which may reflect our outlook for the future or which may be considered as a forward-looking statement, must be reviewed in conjunction with the risk the company faces.

An audio and transcript of this call would be shortly available on investor section of our website, www.nucleussoftware.com. With this, we are now ready to begin with the opening comments on the performance of the company, and post that, we would be available for question and answer session. With this, I now pass it over to Vishnu, sir. Over to you, sir.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Good afternoon, and a warm welcome to all of you for this Q1 ending investor call. We at Nucleus Software continue to do a tough balancing between all our stakeholders, our customers, our USPs and our suppliers. The quarter that we are talking about is been a satisfying one, and we continue to look forward to delivering on a sustained basis, more and more value to all our customers. With those words, I would now hand over to Parag.

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

Thank you so much, Vishnu, sir. This is Parag here. Good afternoon, everyone, I welcome you all to this investor call for quarter one of this financial year. As regards this quarter, it has gone as per our expectations, both in terms of financials as well as in terms of attrition, that we have been watching very closely and also been reporting. We- I had mentioned in the last quarter, that in the q- last quarter financial, there was a one-time impact on the revenue, that's why this quarter, you would see that the revenue growth tends to be flat.

Otherwise, we continue to work on various improvements that we've been talking about, including improvements on the engineering side, on the project management side, so that we are able to conclude more and more of our implementation in shorter times going forward. That's it from me. Thank you very much.

Swati Ahuja
Head of Investor Relations, Nucleus Software Exports

I request, Tapan, sir, please put some light on financial numbers.

Tapan Jayaswal
Financial Controller, Nucleus Software Exports

Hello, Swati?

Swati Ahuja
Head of Investor Relations, Nucleus Software Exports

Yes, sir. You're audible. Please, please go ahead.

Tapan Jayaswal
Financial Controller, Nucleus Software Exports

Am I audible?

Swati Ahuja
Head of Investor Relations, Nucleus Software Exports

Yes, sir. Please go ahead.

Tapan Jayaswal
Financial Controller, Nucleus Software Exports

Key highlights from financials are, as for revenue, our consolidated revenue for the quarter is at INR 206.8 crore against INR 206.2 crore quarter-over-quarter, and INR 128.8 crore year-over-year. Overall revenue in foreign currency, including India rupee revenue, is $25.3 million, against $25.2 million quarter-over-quarter, and $17 million year-over-year. Direct revenue for the quarter is at INR 182.6 crore against INR 179.6 crore quarter-over-quarter, and INR 108 crore year-over-year. Revenue from projects and services for the quarter is at INR 24.2 crore, against INR 26.6 crore quarter-over-quarter, INR 3.8 crore year-over-year.

For expenses, cost of delivery, including cost of product development for the quarter, is 0.5% of revenue, 31.8% of revenue quarter-over-quarter, 75.6% of revenue year-over-year. In terms, this is INR 125.1 crore, against INR 106.9 crore quarter-over-quarter, INR 97.4 crore year-over-year. As for marketing and sales expenses for the quarter, it is 3.4% of revenue, and 2% of revenue quarter-over-quarter, and 3.3% year-over-year. In terms, this is INR 7 crore, against INR 4.6 crore quarter-over-quarter, and INR 4.2 crore year-over-year.

Expenses for the quarter is 6% of the revenue, 5.9% of revenue quarter-on-quarter, 9.9% year-on-year. In terms, this is INR 12.3 crore against INR 12.2 crore quarter-on-quarter, INR 0.7 crore year-on-year. Data for the quarter is at INR 62.3 crore against INR 82.5 crore quarter-on-quarter, INR 14.5 crore year-on-year. Other income from investments and deposit is at INR 11.3 crore against INR 9.1 crore quarter-on-quarter, and INR 9 crore year-on-year. Total other income for the quarter is INR 12.8 crore, against INR 9.7 crore quarter-on-quarter, year-on-year. Total taxes are at INR 17.9 crore, against INR 20.9 crore quarter-on-quarter, and INR 4.7 crore year-on-year.

Profit is at INR 63.6 crore, against INR 67.6 crore quarter-on-quarter, and INR 10.8 crore year-on-year. Other comprehensive income is at INR 3 crores, against INR 2.8 crore quarter-on-quarter, and INR 0.18 crores year-on-year, which is comprehensive income, which includes net profit and other comprehensive income, is at INR 56.6 crore, against INR 70.4 crore quarter-on-quarter, INR 10.9 crore year-on-year. For the quarter is at INR 20, as against INR 25.27 in the quarter, and INR 4.02 in June 30, 2022 quarter. In terms of foreign currency hedges on June 30, 2023, we had $3.25 million over context at an average rate of 83.04.

There is a mark-to-market gain of INR 0.21 crore into hedging reserve in the balance sheet. Revenue contribution from the top five clients of the quarter is 27.7%, 24% in the previous quarter. Order book position is INR 758.6 crore, including crore of product business and INR 69.4 crore of project and services business. March 31, 2023, the order book position was INR 39.7 crore, including INR 585.8 crore of product business, INR 53.9 crore of projects and services business. Good cash and cash equivalent as on year 2023 are INR 701.5 crore, INR 595.3 crore as on March 31, 2023.

This includes balances in current account of INR 60 crore, various schemes of mutual funds, INR 548.9 crore, fixed deposits of INR 26.4 crore, investments in sovereign bonds, INR 61.1 crore, INR 5.1 crore in preference shares. With regards to receivables, we are at INR 200 crore against INR 174.6 crore in the previous quarter. In the quarter, there is a gross addition of fixed assets of INR 3.06 crore, consisting primarily of INR 2.62 crore on computers and INR 0.626 crore on software. Hand it over to Swati.

Operator

Thank you, sir. With this, we are now open for question and answer session. I will hand over to Pelcia. Over to you, Pelcia.

Thank you, ma'am. If you wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star and one again. I repeat, if you wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. The first question comes from Niteen S. Dharmavat from Aurum Capital. Please go ahead.

Niteen S. Dharmavat
Co-founder and Managing Partner, Aurum Capital

Yeah, thank you for the opportunity. Just a correction, my name is Nitin Dharmavat, not Jitin Dharmavat. Okay, thank you for the opportunity. Before I ask question, just one suggestion, if you do not mind. Since we give this number up to 2 decimal points, it will still be fine, instead of giving and reading all these numbers, if you give them as a press release and just highlight 3, 4 points. Just a suggestion, it will be helpful for everyone and it will be more relevant. Okay, my first question is, we have, you know, around 200 customers. I would like to know the percentage revenue contribution from the top 10 customers. Hello? Hello.

Tapan Jayaswal
Financial Controller, Nucleus Software Exports

Hello, yeah. The, the top 10 number may not be available readily, but, top 5 number, we have shared with you. We'll certainly share the top 10 number next time.

Niteen S. Dharmavat
Co-founder and Managing Partner, Aurum Capital

Thank you for the for the clarification. Now, my next question is, since we have taken a price hike, is there any partial or complete loss of clients since then? If so, what is the impact? If you can highlight that.

Tapan Jayaswal
Financial Controller, Nucleus Software Exports

No, there is no loss of client whatsoever. We, we, we continue to service all our customers as we have been servicing before the price hike.

Niteen S. Dharmavat
Co-founder and Managing Partner, Aurum Capital

Okay. My next question is, we have done buybacks in the past, but we still have significant amount of cash on the books. Any plans to do more buybacks, sir?

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

... certainly, we, you know, we will let the board know about this, and, you know, they, they do take these decisions at an appropriate point of time.

Niteen S. Dharmavat
Co-founder and Managing Partner, Aurum Capital

Perfect, sir. Any plans to do M&A in this space, sir?

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

No, as far as that is concerned, we are clear. You know, as of now, we'll continue to focus on organic growth. In immediate future, there is no plan to acquire any company.

Niteen S. Dharmavat
Co-founder and Managing Partner, Aurum Capital

Okay. What are the top three challenges that we are facing currently, when we have more, you know, changed our pricing strategy, including that, so any, any, any specific challenges that you see or top three challenges that you can highlight?

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

Not really a big challenge, but we had talked in the past about the mass resignation, which had hit us. We had also talked about that we had hired two times candidates from the campus. While these are already as part of our workforce, but as a product company, we do take a lot more time to train our people on the products and their contributions and implementation. That is something I won't say the big challenge, but that's something which we are working on with focus. That, that's a focus area for us.

Niteen S. Dharmavat
Co-founder and Managing Partner, Aurum Capital

That mass resignation that you are talking about is now gone, right? It is past. It is no more impacting us.

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

Absolutely. Absolutely.

Niteen S. Dharmavat
Co-founder and Managing Partner, Aurum Capital

Okay. My further-

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

What I'm saying is that, since we are into this product business, which is far more complex, than the services business, here, we do take a lot more time, to get our people back to the level where they were, before the mass resignation.

Niteen S. Dharmavat
Co-founder and Managing Partner, Aurum Capital

Yeah, yeah, absolutely. Who are our top three competitors in India, and how are we different from them?

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

Sorry?

Vaibhav Badjatya
Founder and CIO, Honesty and Integrity Investments

Top three competitors.

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

No, we do not like to mention about our competitors on our investor call, call. Yes, you will be able to find out from the market.

Niteen S. Dharmavat
Co-founder and Managing Partner, Aurum Capital

Okay.

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

We are, reasonably ahead of, our competitors.

Niteen S. Dharmavat
Co-founder and Managing Partner, Aurum Capital

Perfect, sir. Thank you so much, and best wishes to you.

Operator

Thank you. Next question comes from Deepan Shankar, from Trustline PMS. Please go ahead.

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

Good afternoon, everyone, and thanks a lot for the opportunity. Firstly, from my side, what is the status on the annual contracts renewal, and do we expect this renewal of customers contracts continuing in this year also?

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

Yes, that is... I think we've been talking about it, that, we have a large customer base, right? The process continues. That's, I think a very short answer to it. The process continues.

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

Okay. Can you throw us some light on what proportion of these customers contracts has already been renewed and already and what proportion of customers is still under progress?

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

you know, as we've been saying, you know, those numbers you would not want to share specifically. There's, of course, the reflection that you saw in the past quarters, and I, I would limit my answer to that.

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

Okay. Does this Q1 also include new customers, renewal?

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

Yeah, as I said, the process continues. Every quarter, we would convert some of the customers, take them to the next level.

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

Okay. Does that mean that retrospective amount is equivalent to the new customer renewals during this Q1, that's why Q1, Q over revenues were flat?

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

I'm sorry, not really understood your question. Could you please repeat?

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

See, you've already. During last calls, you have told us that the retrospective amounts will not be repeated. Q1, our revenue numbers were flat. You are saying already that new customer renewal contract has also happened during Q1. That means the retrospective amount is equivalent to the new customer renewal contract happened during this Q1. Is it fair to assume that?

Parag Bhise
CEO and Executive Director, Nucleus Software Exports

While that, those specific details will be difficult to share, but, I would request, my colleague, Anurag, if, Anurag, if you want to share, throw some light on this.

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

Thanks, Parag. Just to answer to your question, we have the last quarter's revenue had taken into account of many of the AMC rebase signing and increase, and the same process continues. Some of the revenue for the previous quarter had come from this and the trends continues like this. We will not be able to, as Parag mentioned, we will not be able to re- give you details about the split or this particular trend. For next many quarters, this particular process will be on, and we will be definitely taking those particular.

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

Okay. Okay.

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

On through and with our-

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

... Okay. What is the reason for sharp improvement in Australia revenue?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

One of our large engagement in Australia, there is a particular milestone which got achieved, and the related revenue was recognized for that particular engagement. That describes the increase in Australia revenue.

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

Okay, okay. So far, this renewal contract has been done only in the India region, right, and not in other regions outside India?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

This is happening across all the geographies where we are serving our customers.

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

Okay, okay, okay. Lastly, from my side, so what is the reason for sharp increase in employee cost? If this current run rate will continue in the coming quarters as well?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

So, um-

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

Yeah, go ahead, Anurag.

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

Our annual performance assessment, exercise for, for a particular level, and that particular reason has led to the increase in the personal cost.

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

Increase-

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

I just further wanted to add that for us, as we are in the intellectual property business, for us, our teams are most important resource. To ensure that, you know, we have dedicated and satisfied workforce, we have taken a proactive measure of increasing the compensation.

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

This run rate will continue, right, sir?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Yes, it will continue. It will continue.

Deepan Shankar
Senior Equity Research Analyst, Trustline PMS

Okay. Thanks a lot and all done.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Thank you.

Operator

Thank you. Next question comes from Jiten Parmar, from Aurum Capital. Please go ahead.

Jiten Parmar
Co-founder and Partner, Aurum Capital

Yeah, good afternoon. The name is Jiten Parmar, not Jitin Parmar. Anyway, see, my question is more on, you know, the trajectory of the margins, since the last two quarters. Because of the price hike, we have moved to, like, 30% +. My question is, is this sustainable? I mean, will you be able to maintain that?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Yeah, as we have mentioned in the past, we do not give any guidance, but our effort would always be to maintain the positive margin that we have maintained in last couple of quarters.

Jiten Parmar
Co-founder and Partner, Aurum Capital

Okay. Can you give a breakup of revenues, what is it from India and what is abroad? Is it possible for you to keep that?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Tapani, you have the India revenue?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

Uh-

Jiten Parmar
Co-founder and Partner, Aurum Capital

Hello.

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

In fact, our India revenue cons is 48% of our total revenue.

Jiten Parmar
Co-founder and Partner, Aurum Capital

Sorry, we missed your, I think, the line. Can you please repeat?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

India revenue is, total 48% of our total revenue.

Jiten Parmar
Co-founder and Partner, Aurum Capital

Okay. Okay. Any plan to increase the revenue from international clients, or what is the, what is the plan for the company about the international market?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Certainly, the plans from the international markets are for us to increase the revenue from international markets substantially. At, at some point of time, our domestic revenues used to be less than 25%, and that's where we will go back to.

Jiten Parmar
Co-founder and Partner, Aurum Capital

Okay, okay. My final question is basically, if you can throw some light on what are the growth plans of the company? How... I mean, are we adding any new products or any, you know, verticals?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

As far as that is concerned, we will continue to focus on our existing lines of businesses, which is lending and transaction banking. We see huge opportunities for both these lines of businesses, both in Indian market as well as globally. We will continue to focus on Australia, Europe and US in near future. These are our the three target geographies that we have- we are working on.

Jiten Parmar
Co-founder and Partner, Aurum Capital

Great. Thank you so much, and once again, congratulations for a very good set of numbers. Thank you.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Thank you.

Operator

Thank you. Next question comes from Yogesh Patia from Sequence Investments. Please go ahead.

Yogesh Patil
CIO, Sequence Investments

sir, I missed out, in the beginning commentary, you said what is the total order book? Also you mentioned that, this INR 120 crore run rate of salary will continue. Is it because you have taken only hikes or the employee base has also increased?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

No, it's a combination of increasing employee base as well as hike.

Yogesh Patil
CIO, Sequence Investments

Okay. What is the order book, sir, at the end of this quarter?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Tapani, if you could repeat that number, please?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

... the total order book position is INR 758.6 crore.

Anuj Sharma
Founder and Managing Director, M3 Investments Private Limited

What was the last quarter, sir?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

Last quarter was INR 39.7 crore.

Anuj Sharma
Founder and Managing Director, M3 Investments Private Limited

Sorry, INR 39.7 crore was last quarter?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

Sundry, INR 39.7 crore.

Anuj Sharma
Founder and Managing Director, M3 Investments Private Limited

Tapan, Tapan, line is actually has a lot of disturbance. We can't hear.

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

INR 39.7 crore.

Anuj Sharma
Founder and Managing Director, M3 Investments Private Limited

Okay. Okay. Thank you, sir. That is all.

Operator

Thank you. Next question comes from Vaibhav Badj, from Honesty and Integrity Investments. Please go ahead.

Vaibhav Badjatya
Founder and CIO, Honesty and Integrity Investments

Yes, sir. Thanks for providing the opportunity. What's the employee, number of employees at the end of June 2023? Number of employees.

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

It is 1,832. 1,832 employees.

Vaibhav Badjatya
Founder and CIO, Honesty and Integrity Investments

Okay. Okay, sir. That's it from my side. Thank you.

Operator

Thank you. If you wish to ask a question, please press star and one, and wait for your name to be announced. I repeat, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. Next question comes from Ankur Kumar, from Alpha Capital. Please go ahead.

Ankur Kumar
Equity Research Analyst, Alpha Capital

Hello, sir. Congrats for a good set of numbers. Thank you for my... taking my question. Sir, question is on revenue breakup. As in, you said in Australia, there was some project completion. Was it similar case in Middle East also? There is Middle East also, there is a big jump.

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

That is also linked with some of the project milestones that we completed in the Middle East.

Ankur Kumar
Equity Research Analyst, Alpha Capital

In terms of Middle East and Australia, is that like a one-off? Some of this is like, say, Middle East, there is an INR 8 crore jump, and in Australia also there is around some INR 13-14 crore jump. Is that like a one-off?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

This Australia one is definitely, one of the milestones which was, which was, which was pending for some time, and which milestone is not expected in the, in the immediate months. For Middle East, we are driving the projects, they are the ongoing projects, and we will be seeing, a similar type of, similar type of project milestone being achieved there as well. From revenue perspective, we will not be able to share any, any insights about that.

Ankur Kumar
Equity Research Analyst, Alpha Capital

Got it, sir. Also on India side, there is a degrowth, so could... versus the last quarter. Is it like because the Q4 had extra previous AP, previous impacts, is that the reason or there is something more to that?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

Related to AMC, there were, there were many AMCs which got, whose the discussion got concluded in Q4, leading to, the, the corresponding revenue coming in. Of course, few of the AMCs have been closed in this quarter also. In Q4, number of AMCs which got closed were much, much higher.

Ankur Kumar
Equity Research Analyst, Alpha Capital

Got it, sir. Sir, on employee benefit, you said, as is the hike, our hike whether it is annual or is it like we, we do every 3 or 6 months?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

Annual.

Ankur Kumar
Equity Research Analyst, Alpha Capital

Was it largely done in, in, say, April month only, or was it done later?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

Across multiple grades, up to a particular grade, this has been done, and for the remaining grades, which are the higher grades, it will be done in the coming months.

Ankur Kumar
Equity Research Analyst, Alpha Capital

Sure, sir. Thank you, and all the best.

Operator

Thank you. Next question comes from Anuj Sharma, from M3 Investment Private Limited. Please go ahead.

Anuj Sharma
Founder and Managing Director, M3 Investments Private Limited

Yeah, thank you, and congratulations for continued good numbers. My question is an attempt to understand the current revenues. I would understand there will be three parts to this revenues. One is flow-through of revenues through of earlier renewals, newer renewals, and the regular business. Can we, can we say that the flow-through of revenues from earlier renewals is largely done, or that also has a significant component? I, I understand your hesitancy to give detailed numbers, but some sense as to which part is dominant will be helpful.

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

As Faraz mentioned, that it's a continuous process, and that remains the, the, the way. Beyond this, we will not be able to share any further details on this.

Anuj Sharma
Founder and Managing Director, M3 Investments Private Limited

All right. All right. Thank you.

Operator

Thank you. We have a follow-up question from Vaibhav Bajaja, from Honesty and Integrity Investments. Please go ahead.

Vaibhav Badjatya
Founder and CIO, Honesty and Integrity Investments

Yeah. Thanks for providing the opportunity again.

Vaibhav Badjatya
Founder and CIO, Honesty and Integrity Investment

For AMC contracts, would it be correct to say that most of our AMC contract is contracts are annual? Is it like that, or there are three, four-year AMC contracts as well?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

AMC contracts are always annual. They are signed-

Vaibhav Badjatya
Founder and CIO, Honesty and Integrity Investment

Okay.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

for longer duration, but.

Vaibhav Badjatya
Founder and CIO, Honesty and Integrity Investment

Okay. In terms of order book, so I just wanted to understand that, so any particular quarter and the order book number provided will have the AMC revenue for the next 1 year, right? That is the correct understanding or, or you have in order book, the components are something else?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Typically, the order book, has, AMC for 1 year.

Vaibhav Badjatya
Founder and CIO, Honesty and Integrity Investment

Okay. For all the clients, whatever is the AMC for next one year, it will be in the order book.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

That's right.

Vaibhav Badjatya
Founder and CIO, Honesty and Integrity Investment

Okay. I've got it. Understand, sir. That's it from my side. Thank you.

Operator

Thank you. If you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. I repeat, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. Next question comes from Rahul Jain, from Dolat Capital. Please go ahead.

Rahul Jain
VP of Research, Dolat Capital

Yeah, thanks for the opportunity. Just wanted to understand your traction on a new business front. We have stopped sharing data in terms of new deal wins, so any color on that aspect, would be of great help. Also, if you could please repeat the order book number?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Yeah, the order book number, as we mentioned, is INR 758 crores. As far as the new orders are concerned, we are working with a number of our customers, both domestic as well as prospective customers, both domestic as well as international. We are very hopeful that we'll be able to announce a few of them in the coming quarter.

Rahul Jain
VP of Research, Dolat Capital

Okay. During the quarter, we have seen a significant jump in the revenue from Australian region. Is it an outcome of this AMC revision in that market, or this is led by new licensing?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

No, as explained by my colleague, Anurag, this is on completion of a specific milestone of an existing customer, and that's how there is a significant jump in the Australian revenue.

Rahul Jain
VP of Research, Dolat Capital

Sure, sure. In terms of the cost increase in the quarter, this is entirely attributed to hike and what was the range on it?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Sorry, could you repeat the question? The, the hike is entirely attributed to?

Rahul Jain
VP of Research, Dolat Capital

to, to wage hike, or there are more aspect to it? I mean, what led to the employee cost jump?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

essentially wage hike.

Rahul Jain
VP of Research, Dolat Capital

Is it effective for the entire workforce, and what was the range for the quarter?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Yeah, it is for the entire workforce.

Rahul Jain
VP of Research, Dolat Capital

Any range we could share in terms of domestic versus overseas headcount?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

We won't be able to share more details on, on that.

Rahul Jain
VP of Research, Dolat Capital

Right. Right. I understand, you know, there are many ways people have asked on this aspect, but let me try one shot again. Just on the AMC renewal plan, based on your past comments, just from a logic perspective, since all this initiative, in your revenues were reflected more from Q3 of last fiscal, is it safe to assume all your customers who you are engaging with, would be done with Q2, or could there be anything more beyond that as well?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

You know, we are talking to all our customers to explain them the value that our intellectual property delivers to their business. Some of the customers take longer than others to appreciate that point of view. They, they would have other compulsions. We would not be able to say that by Q2, this process would be over.

Rahul Jain
VP of Research, Dolat Capital

Right. Right. In such cases, they are continuing with the old, old way, and at some point of time, they may agree or disagree, accordingly, things would shape up.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Absolutely.

Rahul Jain
VP of Research, Dolat Capital

Yeah. What is the, you know, what is the ratio where people have, instead, decided to, forgo, or any attrition because of this aspect, which you might have witnessed so far?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Very pleased to let you know that, none of our customers, have felt that way. They, they continue to see the value, and they continue to engage with us. In these, you know, in these AMC-related discussions.

Rahul Jain
VP of Research, Dolat Capital

Excellent, excellent. Sir, I would really appreciate if you could, you would give me any thoughts on FinnAxia as a product. We usually talk less about this product. What is the current base of install base, and have you been able to win new customers on it, or is it existing one buying some more module? Any color on that would be of great help.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Certainly we have 18 customers who are using FinnAxia as a product, or the previous version of it. You know, we would be announcing at least one win on that product in near future. We'll be very happy to let you know that all our customers are very happy to continue using. Some of them are considering buying more modules of that product also.

Rahul Jain
VP of Research, Dolat Capital

Okay. Would it be fair to understand that given that this AMC renewal value proposition, which you are talking to your customer, is taking a significant amount of your bandwidth as an organization, while new wins, of course, is an important aspect, but maybe this is the KRA for you as an organization at this point?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Both, both, I would say. You know, we, we continue to focus on winning new customers as well, while we are making sure that our existing customers are satisfied and, and, you know, that they are able to see the value that... Appreciate the value that is being delivered to, to them.

Rahul Jain
VP of Research, Dolat Capital

Right. Sir, I mean, the salespeople or account managers who are able to get this value proposition passed on to customer where they are agreeing and converting, is there a differentiated incentivization for that?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Okay, now, now we are getting into too many details. Yes, you know, every, every, every, every new PI, we try and make sure that she or he gets compensated as per the efforts, and, and there is a reasonable incentive plan to make sure that they are happy with that effort and the compensation.

Rahul Jain
VP of Research, Dolat Capital

Right. Right. Sorry, sir, you said INR 758 crore was the total order book. I would appreciate if we could get the break of that.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Tapan, could you please specify those numbers?

Tapan Jayaswal
Financial Controller, Nucleus Software Exports

Yes, sir. total order book position is INR 758.6 crore, sir. Should I give the breakup also, sir?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Yeah, yeah, yeah.

Tapan Jayaswal
Financial Controller, Nucleus Software Exports

Of INR 689.1 crore is the product business, and INR 69.4 crore is the project and services business. As for 31st March, year-ended, total order book position was INR 639.7 crore, which includes INR 585.8 crore towards product business and INR 53.9 crore towards project and services business.

Rahul Jain
VP of Research, Dolat Capital

Perfect, sir. Thanks for that. Just last bit, Vishnuji, if you could tell about this, credit on UPI, which is a big force that is that we are seeing everywhere in India, and all the regulators are talking about it. Do you think this kind of an initiative would change the NBFC landscape in the market? Any successes that we are seeing on this path?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Very extremely relevant question. I think this will certainly change a country's landscape. How it will pan out between banks and non-bank finance companies is remains to be seen. Today, we, we continue to talk about extremely high interest rates. Some of the micro-enterprises, they have to pay 365% and at times going up to as high as 3,650% interest rate in an informal sector. That, that is what will undergo change with, with, you know, with this digital capture of small transactions that is happening thanks to UPI.

Yes, we over, over next 3 to 5 years, we should look forward to changes in credit space, similar to changes that we have seen in micro-payment space in last 5 years. It is an, you know, very exciting development and milestone for India as an economy. I think, you know, whole lot of countries would be able to benefit from what we have been able to achieve in, in last 5 years and what we are going to achieve in next 5 years.

Rahul Jain
VP of Research, Dolat Capital

Right. As you know, this data as a collateral opportunity that these people talk about with now even some score of FLDG also approved for distributors. Do you think, because this most of it would go away from banks to maybe smaller entities and fintechs, your target market currently, which is, you know, relatively sizable entities, would you see that the participation for your business would become lesser in this? Or you think because eventually these companies would partner many, many distributor, they would require more of our services to enable that?

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

The way we are looking at it is, you know, for us, the business is going to increase and increase substantially because while we do make use of the transaction data to achieve borrowing capability of the entity, there, there is a process of lending also, which will continue and which will get further fine-tuned using products like FinnOne.

Rahul Jain
VP of Research, Dolat Capital

Got it. I'll get back into the queue. Thanks so much for the answer.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Thank you.

Operator

Thank you. We have a follow-up question from Vaibhav Bajaja, from Honesty and Integrity Investments. Please go ahead.

Vaibhav Badjatya
Founder and CIO, Honesty and Integrity Investment

Sir, I just wanted to understand. Whenever... we will have, you know, three, four revenue stream type, which is like, you know, license revenue, implementation revenue, AMC revenue, and, you know, some other revenue stream. When you give order book, which revenue stream is included in which, so product order book is a specific number, service order book is a specific number. Out of these revenue stream, if you can help us understand which order, which type of revenue stream goes into which order book, that would be helpful.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Okay. We, we do have a, you know, strictly services line of business where, we offer services which are not around our product, and that is what is mentioned, when we talk about services revenue. The balance is all products revenue, which includes licenses, which includes implementation, and which includes AMC also, and change request fee planning.

Vaibhav Badjatya
Founder and CIO, Honesty and Integrity Investment

Okay, got it. So if you can give us example of services which are not around your product, maybe 1 or 2 example, that would help us understand better that why you are doing this services business.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Anurag, you want to take that?

Anurag Mantri
CFO and Executive Director, Nucleus Software Exports

Sure. This is Anurag. The services offerings in the space of digitalization. For example, data analytics type of services, robotic process automation related services, cloud or the related things which we do for our... There's a, there's a whole gamut of services, but these are the typical services which we offer to our customers.

Vaibhav Badjatya
Founder and CIO, Honesty and Integrity Investment

Mm-hmm. Got it. Okay. Okay, that's it from my side. Thank you.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

Thank you. Thank you.

Operator

Thank you. That would be the last question for the day. Now, I'd like to hand over the floor to Swati Ahuja for closing comments.

Swati Ahuja
Head of Investor Relations, Nucleus Software Exports

Thanks, Pelcia. We would like to thank all our investors today for joining us today on this call. I would now pass it over to Vishnu, sir, for his closing comments.

Vishnu R. Dusad
Managing Director, Nucleus Software Exports

I would like to take this opportunity to thank all of you for your continued interest in Nucleus Software, and would like to reiterate our commitment to long-term value addition to all our stakeholders. Thank you.

Operator

Thank you. That concludes our conference for today. Thank you for participating. You may all disconnect now.

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