Ladies and gentlemen, good day and welcome to the IRIS Business Services Limited Q2 FY 2025 earnings conference call. As a reminder, all participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. S. Swaminathan. Thank you, and over to you, sir.
Thank you Sahil, and happy to welcome everyone who's joined the call. And to those who have not joined the call, of course, they don't know this. So thank you very much for joining. Yeah, I guess you could say that the last six months have been fairly decent for the company. I think the numbers are reasonable. We've also been able to attract some good investors. And so when we were looking at the numbers, I was reminded of a famous statement made by the CEO of Changi Airport when it was opened. And he said, "It's the best airport in the world. So what's next?" He said, "The next is to try and maintain it. How do you compete with people in other parts of the world and maintain it?" So I think the challenge for us is exactly similar.
So we have to figure out whether we can maintain it, how we will go forward, how will we, what will we do going forward? What we have done over the last six months is to lay the foundation for growth for the company going forward. You would have seen from the numbers, and Balu will delve into it in much more detail. You would have seen from the numbers that there's not been very significant growth on the carbon side, on the electric side. Now, what we have done in the last few months is to get the staffing in place, get the teams in place. We laid the foundation. Fortunately, the contract that we have from the South African Reserve Bank continues to literally help us grow. And again, Balu will talk about it and give some color to it.
The foundation that we have laid is more in terms of getting the people in place, whether it be the marketing team, the sales team. And the benefits of that are there to see, and will be there to see in the months going forward. So we have several of my colleagues on the call who can take individual questions, who can take individual questions on different segments of the business if such questions arise. But before we get to that, we've already uploaded the presentation to the websites of the stock exchange. It's also on our website. We will basically take you through the highlights of the presentation. If you don't have it, you can always please go to the exchange website and download it. But I want to invite you to give the color before we get started with questions.
Thank you so much, Swaminathan. Good evening, and it's great to once again interact with all of you and thank you for turning up in good numbers, even though it is the eve of Diwali. I'll quickly run through some of the highlights of our financial performance for the first half of the current financial year. As Swami mentioned, we also uploaded an investor presentation on our websites as well as the exchange website a few hours ago. This time around, in our presentation, one change we have made is that we have reclassified our reporting segments so that these are in line with the nomenclature which is used globally and Swaminathan did mention this intention in our annual report, his letter to the shareholders, where he said we would be doing that going forward, and that's what we have done for the first half of this financial year.
Now, coming to the performance per se, you will see that we continue to grow at a good pace. Overall, for the first six months, total income has grown at about 33% compared to the corresponding three years. On a quarterly basis, the second quarter's growth over the corresponding quarter is at about 30%, which is a tad lower than that of the first quarter's year-over-year growth. But still, on the whole, we grew at 33% for the first half. So this solid top-line growth has been the key reason for the corresponding stellar growth in profits. You'll see that EBITDA has moved up by about 78% for the first six months, while the profit after tax has nearly tripled.
But I would be the first person to say that high growth rates on a lower base maybe should not be the right set of parameters to an ongoing fund analysis. Having said that, top-line growth typically results in more than proportionate growth in profitability numbers for our kind of business, where there exists a degree of operating leverage, which we have seen again and again. For example, in the first half, total expenses have grown at about 27%, while the top-line grew at about 23%. So I should again say that our SaaS businesses need further investment, especially in sales and marketing. And that is an element we need to calibrate as we endeavor to scale this part of the business. So there is a balancing act that we are following and that you could see going forward as well.
So coming to some of the key financial indicators, I'm happy to report that our return on net worth has moved up from 21% to 32% despite an increase in equity capital due to infusion of money through the preferential route, which came somewhere in June end. Our balance sheet has obviously strengthened with capital infusion and good collections, etc., and as of September 30th, we are quite comfortable in terms of cash assets. It is about 31.5% growth. It has further grown up well into the month as collections improved as well. The SupTech business, which is a supervisory technology business, as well as what we should term as the RegTech business, has again turned in a solid performance with top-line growth of 48%, and that has driven, which Swami also mentioned in his opening remarks, that has driven the top-line for the first half.
The tech segment, which now includes the IRIS Carbon and IRIS iDEAL, which is an automation reporting software for the BFSI segment business line, together recorded a growth of about 20%. The newly minted tax tech segment, which has now gone international with our entry into Malaysia, grew at about 15%. Revenues from Africa now account for more than 36% of our overall top line, a bulk of it coming from our SupTech implementations at the South African Reserve Bank, so that's where we are. That's a quick overview, and I think we can discuss more as we delve into questions. Thank you.
Before I hand over to Servo for the questions, a couple of things I do want to mention. So the reclassification that Balu talked about is not really a reclassification, but more a rechristening. It's a rechristening of the segments. The only significant change is actually the division of the RegTech business into what we used to call the create segment into RegTech and TaxTech. That's about the only significant thing in the reclassification. So the story is like this, that somebody one day asked me, he said, "Why do you want to give names like collect, create, and consume? Why can't you give it names that are accepted by industry so that we can go and Google it?" So if you go and Google SupTech, for example, or supervisory technology, you actually find a number of companies.
You can immediately find out who our global benchmark, global peer groups are, who our global competitors are. Similarly, in the case of RegTech, similarly in the case of TaxTech, the data tech business is still in a very, very infant stage. We have high hopes for it, which we will talk about separately whenever something happens. But the reclassification is more a rechristening, renaming, except for the division, as I mentioned to you, of these two. Two very important news items were stumbled upon this afternoon, which I think are significant and will shape how we do things going forward. Google CEO Sundar Pichai has actually made a statement yesterday saying that 25% of the Google software is now written using AI. And I think that's very, very significant.
Similarly, if you take a look at the other statement in the context of Samsung, Samsung has actually been beaten down by the markets for having missed the AI revolution in a very fundamental way. So I think we are actually beginning to look at how to leverage AI for our own internal work and where all we need to do it. So I mean, we have been very, very cognizant of that. But I want to draw your attention to this because as investors, I mean, these are two news items which you just want to be mindful of. Having said that, Sahil, over to you for questions that people may want to ask.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ankit Manicha from Aditya Ventures Family Office. Please go ahead.
Yeah. Hi. Good evening. Happy Diwali and congratulations for a great set of numbers. I mean, obviously, Collector now the new name SupTech is probably driving growth, and the South Africa contract is driving growth for you over the last couple of quarters. How does the visibility look like with regard to the South Africa contract for the next two quarters? And do we anticipate this similar level of 28%-30% revenue growth that you've seen on total revenues because of that?
Sir?
In fact. Hello. Can you hear me?
Yes, sir. I would request you to please repeat your answer because.
I was saying that the base is obviously going up because we started accruing the revenues from the South African contract maybe from late Q2 of previous year onwards. Having said that, I see there is enough work left in the implementation part. So the numbers in terms of overall accruals should not change much. In fact, it could go up a little higher as we go along. But the growth from the corresponding quarter to this particular quarter, say, for Q3, Q4 onwards, it might not be that high as it used to be in the past. So I would say only so much at this point of time because the base has gone.
Okay. And just in continuation of that, I mean, what in collect comes next after South Africa? Are you seeing some visibility, say, even for next year with regard to some larger orders, or does next year when the South Africa thing goes away, does that look slightly bleaker? Everything that goes away usually is followed by something that comes in, and there are still about 120, 130 countries, about 1,500 regulators across the world who need to adopt standard-based reporting, so I think there's a huge opportunity still there. Africa is still a virgin territory, and if you take a look at our number growth in the last one month, so obviously, South Africa has been the biggest growth driver in the last half year, and this is also why Africa becomes an important source of revenue for us.
We've also been doing extremely well in Nigeria, where several banks have actually come to us for solutions. We're also doing some reasonably good work in Mauritius with the bank reporting. So there's a lot of possibilities on the collect side because we also see a lot of regulators coming up with tenders. We win some, we lose some. These things are bound to happen. But there is certainly an acceleration and also a greater appreciation on the part of multilateral agencies. But this whole SupTech segment is like an elephant that starts moving very slowly, and the gestation time is huge. I mean, so from tender to award can be as much as 18 months-24 months. And even then, some decisions don't get taken. I can give you enough examples of regulators who may have called a tender two years ago, but are yet to make a decision.
One of the biggest fears that we have is if the multiple tenders that we have bid on, if they all come together at the same time, then we are in deep trouble. If you see what we won in the last year or so, PFRDA, the Pension Fund Authority thing is a huge victory for us. There is one more also, Balu.
Yeah, and it's the ESG tax on.
And the GRI thing in the context of the ESG reporting thing. So these are two big things that we won in the last six months or so. And the other thing to keep in mind is, for us, the important thing is not whether we win 10, 20 contracts, whether we have enough happening because we only have so much of a capacity in terms of delivery. So if we win two, three every year, or three or four every year, we're quite happy in terms of going forward. Three or four would be a stretch. Two, three is a reasonable number. But we're also looking at alternate business models where we move from a fixed price model to a SaaS model. These are all things and discussions with various regulators.
And in a way, it's good that many regulators don't have money, so they will need to look at a pay-per-use model. So we're also trying to pivot to a new model so that it increases not a one-time revenue, but actually a revenue stream over a 10-year period. And so the pivoting of the model is also something that we're working on. So when you look at smaller countries, you will actually see many of them looking at solutions like that. Balu wants to add something.
I just want to add that I would be greatly surprised if revenues from the South African business diminish over the next one year. I would just leave it at that.
Understood, and just in extension, the two new contracts that you talk about, are those already reflecting in your revenue stream in the last couple of quarters, or are they expected to come in later?
To a small extent, I would say.
Right. Thank you. And my second question is something that, I mean, we came across a SEBI violation which was reported. So I just wondered if you could just add some color onto that. Yeah, that was my question.
I have a quick question. January last year, Balu basically made an announcement that he will sell two lakh shares within a certain period of time. Now, I don't know of many companies which announce plans, many promoters who basically announce these things in advance in the manner in which Balu announced it, and since then, we've been in through ASM, GSM, ESM, all kinds of SMs, which basically has curtailed liquidity in the market and affected his ability to sell in the market, and as a consequence, he could not sell the full 2 lakh shares that he committed to sell, but could sell only about 95,000, 98,000, or 99,000 in the course of the year. As a consequence, that's seen as a violation, and therefore, it's part of the LOA, it's part of the insider trading rules.
Since he could not sell the full amount, he had to basically send a letter to SEBI saying that I could not sell it for these reasons. The company therefore had to issue him a letter saying, "Bad boy, why did you not sell? Why could you not sell?
Okay. Yeah. That's helpful. Thank you for the color. And yeah, good luck for the upcoming quarters. Thank you.
Thank you. So it's not really a violation. We've not violated any insider trading rules in the manner in which it's often portrayed. It's just his inability to sell because of lack of liquidity in the market.
Just say the SEBI rule allows incomplete trading plan. The details should be submitted to the audit committee for the audit committee to acknowledge. The audit committee has sent a letter on that.
So basically, the rules basically say that as long as a company condones it, you're okay with it. But this is not a deliberate act of whatever. It's beyond the fact that he could not sell it.
Thank you.
Thank you.
The next question is from the line of Mitesh Mehta from Long Term Investor Group. Please go ahead.
Good evening.
Good evening.
How are you?
Yeah, very good.
First of all, congratulations for a good set of numbers, and I have a few questions that is regarding to TaxTech, the GST module launched in Malaysia as well as other places, so basically, I want to understand how is the revenue model for this TaxTech business, and when can we expect break-even in that segment?
So when you look at the numbers there, it's because of the overhead that the company, the tax tech business, does not show profits at this point in time. But to answer the revenue model question and all that stuff, Gautam, over to you. Gautam, will you take the question, please?
Sure.
Gautam, head of the tax business.
Yeah. Hi. Good evening, so the tax tech revenue model is purely a SaaS-based revenue model, so in India, we offer a platform for GST e-invoicing and e-way bill compliance. Along with it, there are additional modules around accounts payable automation and litigation management, so it's completely dependent on the volume of transactions that a company conducts and the number of GSTNs and the number of PANs that they have, so it's a recurring subscription model, and there's a one-time onboarding fees that every company pays when they come onto the platform. A similar model is adopted in Malaysia also, which went live 1st of August with the first phase of e-invoicing for all companies over 100 million ringgit, where they subscribe to various e-invoicing packs depending on the number of sales and purchases that they have to make in a year.
Okay. And the second question related to it, are we planning to expand in other geographies for this GST module or TaxTech?
Yes.
Can you comment on that field?
Yes. So Malaysia was our first international foray. And now we are looking at two more geographies: Singapore, which has announced e-invoicing in the third or the fourth quarter of 2025, and UAE, which would be second half of 2026. So these are two countries which have announced their e-invoicing mandate, and IRIS would be offering the platform in these countries. We are actively looking at our primary focus right now is the GCC and the APAC market, where we feel e-invoicing and e-reporting is going to come up in a big way in the coming years.
Okay. Thank you. If I have other questions, I'll get into. Thank you.
Thank you.
Thank you. The next question is from the line of Rohit, who is an individual investor. Please go ahead.
Thank you for the opportunity. I just want to begin by congratulating everybody. I mean, I was looking in the four years back, 2020, I believe the market cap was around INR 30-35 crore, and if I analyze the half-year profit, it's about INR 16-17 crore today, so from that time, when it was a dislocation, of course, but from that time to this year, it's fantastic work, so congratulations to everybody, so my first question is on the direct tech business, so we mentioned that with this new sales head, we intend to convert the growth is driven by new mandate, but with the new sales head, we intend to convert other clients to our clients. Now, my question then becomes, what prevents others from doing that to us as well, so the beauty of the SaaS model is understood to be the fact that it's very sticky.
So, can stickiness be low in this space? Is one question I have?
First of all, Rohit, congratulations on your second baby, and we keep track of Rohit because Rohit keeps us on our toes, and he's the most prolific questioner of the company, so all the entire management spends two whole days. The reason we have two days between the results and today is because we're always trying to figure out what questions Rohit will ask. Rohit, that was a compliment there for you.
Thank you, sir. I mean, thank you. Thank you. That's very nice of you to say. Thank you.
So is there stickiness? I don't know. I don't think we have enough data to know whether they are sticky or not sticky. See, the thing is, if you look at the market in each country, there are basically two extreme sets of providers, two sets of providers of solutions. One in a class of their own in America, for example, is a company called Workiva, which is operating at the higher end. And we believe that their vulnerable points, if you want to look at it that way, is possibly price and nothing else. Maybe to some extent, some features here and there. Then there's the lower end of the market, which is completely price-sensitive, where there are hundreds of several dozen or a few dozen amounts of providers where the only thing that really matters is price.
So when you start adding price and quality, which is what we're trying to do, then the situation changes. Also, when it comes to stickiness in the regulatory space, people enter into a contract that's generally not longer than three to five years. So at the end of the period, they are open to looking at what others have to offer. It doesn't mean they switch. We've had some success with some people switching. We've also lost customers in the course of doing this. So is there stickiness? Yes. Is there no stickiness? Yes. The answer to both is yes. It's like a very confusing answer. I realize that. But we don't have enough data to say one thing in a very deterministic fashion as to what level of stickiness exists. Currently, most of our customers have stayed with us.
The only customer we've lost, Rohit, is because we have been working through one of the accounting firms to acquire customers in the U.K. And if you take a look at our customers in the U.K., the customers for our carbon product, we have lost customers in the U.K. because our customer who actually brought in all these filers has gradually started taking the work within their own company. And that's how we lost customers in the U.K. So when there's not been the lack of growth in the number of customers for U.K. market filings happened because of this. So the lack of stickiness there is because one customer decided that they're going to take most of the work in-house. I hope I've answered the question to the best of my ability. But Deepta, do you want to add to this about stickiness?
Sure. Yeah. Hi, Rohit. Congratulations. And just to add to what Swami said, so there are many factors, right, around stickiness. So one is, of course, the customer satisfaction, how satisfied they are with your solution. I think your question is, if we can steal others' customers, can they not steal ours, right? And the dimension of acquiring a customer, I mean, or the aspect of acquiring a customer and retaining a customer, it has many dimensions. So it's what you're selling to them. So for example, when we talk about XBRL, that's one module. So let's call it like that. When we talk about disclosure management, we are potentially going deeper into the organization. Or in the FT module, we're going in deeper.
There are also aspects about kind of the tenure or the term of the contracts that we enter into with the customers as to our competitors, right? So there are different dimensions to stickiness. Can someone steal customers at any point in time, including others? Yes, of course. I think therefore the idea is, or what we aim to do and try to do is try to make sure that we are constantly kind of innovating and being agile, right? Whether it is kind of on product, whether it is on our, what do I call it, customer wow or our customer excellence, whether it is on right pricing, whether it is on added modules and added functionality. As I'm sure Rohit and others might be kind of doing as well. We've just been successful.
We hope to be able to replicate or see that in the newer offerings that we're rolling out in the marketplace as well.
Deepta, thank you. By the way, Rohit, Anu has just come back from Europe, where she's met many customers and tried to persuade some of them to switch. Anu, do you want to share your experience, some anecdotal experience? You don't need to mention any of the clients. But generally, when you speak to customers asking them to switch, what do they say?
I think there are different reasons why companies switch. I think one thing they see definitely in the product is when it comes to the carbon product, there's a lot of automation which is there, and also there is the ease of use is also very, very high, so that's why companies are willing to consider looking for alternative options. That's number one. Secondly, we are also trying to overall see how even our existing customer base, right, who don't have products for financial reporting, etc., disclosure management definitely we are seeing as a very good entry into an existing customer base. That way, we are able to solve a real problem, so in some opportunities, we are replacing another vendor with us, but there is also an opportunity with the disclosure management where most companies, even the large ones, do not have solutions/technology.
They're doing it in a very manual way, so that's where some of the new modules like disclosure management, we are able to kind of get a decent entry and acceptance of it.
In fact, Rohit, when Anu came back from Europe and Servo came back from Europe, I had some interesting things that I had to unlearn. I had to unlearn many things and relearn many things. And one of the things that actually happened is Servo has managed to change the way we sell, a more consultative approach, and that's leading to increased realization from customers. Servo, you want to talk about that?
Yeah. Yeah. Hi, everyone. So I think, as Swami mentioned, what we've been doing slowly and steadily is we've been understanding the real pain points that customers are trying to solve for. So when they're buying the software, they're not buying just because they like the product, but they're buying it because they're solving a problem that's either related to their top line or bottom line, right? So either helping them make more money or helping them save money. So they're trying to understand what problem they're trying to solve for, how are they doing that currently, if we solve it for them, what is the value add we are giving them? And on the basis of that value add, what is it that we can charge them?
So what this has led to is increased pricing across the board, eventually meaning more money for us and also stickiness because it's a consultative approach. We really feel that we understand what they're saying, and we're solving for the problem. That also includes giving that feedback to the product team. So we're very agile. We're giving this feedback to the product team, and they're very rapidly building the product based on what's happening on the ground. So all that collectively is helping us gain momentum in the sales cycle and increase our deals at the same time.
Servo, if I'm not wrong, because of improved marketing, the funnels have also become much bigger, hasn't it?
Correct, so we've increased, so we've had infinite focus on increasing the top of the funnel from a marketing perspective, so we've built structures and playbooks around it, so the marketing team is starting to fire like an engine where we are increasing. We're seeing week on week, month on month, increase in the volume coming in in terms of leads. Some of it, I will also say, is the tailwinds from the ESG mandate being rolled out, and as we get closer to the timelines for submission next year, there is traction over there, but a lot of it is the focus on a numbers-driven approach from the marketing perspective, leading into the sales funnel and then leading into the customer success and implementation funnel, so the marketing team definitely is playing a big role there.
And I think we are grateful that the stickiness here is not to be compared with the level of stickiness offered by Fevicol also. It's okay. So we are betting on the possibility that people will get unglued from their existing providers and move to us, which for which we have a lot more ground to cover. We have a lot more work to do, but we have laid the groundwork to get there. And we're very, very happy. So there's one market, Rohit, where we actually won a customer who's earlier worth about one-fourth what he's now willing to pay for the larger DM solution that we actually have. So by the realization going up like this, I think it augurs well for us.
I mean, that's a very, very comprehensive answer, and thank you to the whole team for that. A few things to pick on that answer, follow-up questions. One, I mean, we've been very excited about disclosure management. So if you could give more details on how that is shaping up in terms of seeding and realization as compared to the traditional carbon solution we have, that's the first question on that. Second, Servo's answer on pricing increase was very interesting. But where are we seeing this pricing increase? Because I assume the contract was signed for a year, and you can't increase pricing. So a little more detail on how the pricing so where is the pricing increase happening? And a broad understanding of the quantum of increase would be helpful. And the third question is, I mean, it's very clear from balance sheet that IRIS is becoming profitable.
In a capitalistic world, profitability attracts competition. Given this, do you see increasing competition in your core regions in either SupTech or RegTech in terms of not just new players coming in, but what you are doing or others doing in the sense if somebody's providing some sort of accounting software, are they trying to enter into this space? Are you seeing increased competitive intensity in the core regions? It's my third question. Thank you so much. I'll let others ask the questions. Thank you so much. I'll get back into the field.
So in terms of DM, Anu, you want to take the question?
Disclosure management, I think definitely last year was what we call testing the water. And with new reporting coming up like ESG, etc., in fact, whenever there is an increased regulatory which is kind of coming up clearly, which is in countries like Europe, definitely the need for solutions like disclosure management is only going to increase. And a large wave of companies who need to report in, for example, 2026, that's going to be one of the biggest waves in terms of year two reporting. So I think this year and the early next year is going to be very crucial. You can see a very good momentum of requests coming in from existing customers. And like Servo mentioned, there's also more inquiries coming in from external sources as well.
Rohit, to answer the question on pricing, it's not necessarily at the end of a contract cycle. When you add additional features to the product, when you say this product can do this much more and this much more, then automatically gives you justification to add on an additional pricing reason, additional reason for increasing the price. You don't look at it as increasing the price. You basically say that, "Well, you're paying me so much for this. Now I'm going to throw in this much more. And therefore, for that, you pay me much more. You pay me a little bit more." That's really how the whole thing is happening. Servo, do you want to answer the question on pricing?
Sure. Sure. So I think with pricing, the way we see it is a function of what value we are able to deliver to the customer, whether it's an existing customer or it's a new prospect we are talking to. For customers that we are already in existing contracts with, for the same service that we are doing, definitely we cannot change anything because we are contractually bound. However, when we do go back for renewal, there may be some marginal increase in pricing for the same set of services. But like Swami mentioned, we are trying to position an additional upsell or cross-sell with the same set of customers for which we are doing a value-based pricing. As far as prospects are concerned, from day one, we are doing a very deep discovery, a very consultative approach.
So think about it like someone going to a doctor and doctor understanding the true problem and prescribing accordingly as opposed to say, "Take a green pill, take a red pill, a yellow pill, and go for it." So our approach is very consultative. I don't know what the competitors are doing or not doing. What I will say is we are doing it, and we are doing a reasonable job because the prospects and customers are both appreciative of us understanding their problem and trying to work with them to solve for it. This year has been an extended arm of their organization helping solve their problems. So they're willing to pay a little more for that.
Rohit, a question on competition. I want to say one thing very interesting here. We recently lost a contract in Sri Lanka. The company which won the bid bid 5% of what we had bid. I just cannot understand how that's possible. I also cannot understand how the regulator accepted a bid like that, which is completely unviable, so is there competition? Meaningful competition? Not really. Instead, what's happening is there's a certain consolidation happening in the industry. This company called Regnology has acquired a few companies, and you will see more such consolidation happening going forward. I don't see too many companies coming up as competitors in response to the increased business opportunity because I think, again, regulators at the end of the day want to work with tried and tested people, with tried and tested providers of software as opposed to new players.
The biggest competition comes from a regulator's preference for a bespoke solution for which they may go to a typical software developer and get it done. But the value of the contract is so small that the big guys will not do it, and the small guys are too risky to trust things to unless, as I said, the case of Sri Lanka where the contract was awarded at an abysmally low price, which is completely meaningless. So are we having sleepless nights because of competition? No. But to add one more thing to what Servo said a little while ago, when the price actually goes up, when we can charge more, we can also attract better quality channel partners in those countries for whom we can leave more money on the table for them to work with us to make it more attractive for them.
We currently still follow a hybrid model with some direct approaches along with partners, but that's another little benefit that's actually come on account of the increase in price. I hope I've answered all the questions, Rohit.
Yes, I thank you. Thank you so much. Looking forward to the future journey. Thank you so much.
Thank you.
Thank you. The next question is from the line of Vineet from KRIIS PMS. Please go ahead.
Hello sir. Congratulations first of all for the good set of numbers. My question is with respect to the market size. Can you please tell me in numbers what is the total addressable market size and at what rate is it going?
Sir, I have one request for you. One of the reasons we provided the reclassification or rechristening of our different business segments is that you can actually Google them. If I tell you the numbers, you would fall off your chair. So let me not tell you the numbers. Why don't you Google SupTech? Why don't you Google RegTech? Why don't you Google TaxTech and Google DataTech? You will find estimates of market size on your own. And you will find it on your own. And when you find it on your own, you will find it much more acceptable than if I give you any numbers. So I'm not going to give you numbers on market size and how fast it's growing. Take a look at it. Do a search and get the numbers for yourself.
Please forgive me if I don't give it to you because I really believe the reason why we actually done the reclassification is to help answer such questions and help investors find answers on their own for the market size.
Okay. I will do that then. Thank you.
Thank you. The next question is from the line of Deepak, who is an individual investor. Please go ahead.
Hi. Good evening, everyone. Congratulations on a wonderful set of numbers, and I also wish you all a happy Diwali. My question is related to the SupTech segment. We also see from the presentation that we do provide part-time and related services, both in development as well as ongoing modifications. And I presume this is for the ESG reporting side of things, which is a very large focus area for regulators. We have also seen a lot of social media presence by IRIS on taxonomy-related webinars and so on. So this is wonderful, very informative, and I think that deserves a lot of congratulations as well. My questions are actually twofold, right? So the regulators have this focus on ESG, which they're supporting institutions and regulators.
But given the expanding regulatory focus on, let's say, financial crime, digital assets, or newer emerging risk, there's a need to understand if IRIS has any sort of broader plans to support regulators in these areas, which have possibly started or may come up in the future, right? And the second question is related to the workflow tool, which is a sort of new product that we are working on the SupTech segment. I mean, will these tools help us establish more sort of key ongoing business, more tighter relationships, working relationships with the regulators on an ongoing basis?
Mr. Bhatta, you made me very, very happy by pointing out that you've noticed the heightened social media presence. When people like you give such independent feedback, it makes us very, very happy. I just hope our clients also notice it because clients also need to notice it for us to get business out of it. So thank you very much for noticing it. Now, as far as the product development question that you asked is concerned, we develop products where there's a requirement, where there's a need, where there's a possibility using existing components. We have fairly well-defined contours within the company in terms of what we will do and what we will not do. So for example, wherever there's reporting in a structured data format, we are very much there. Now, there are situations like in the case of banks, where there's large amounts of data being submitted.
Then there are corporate filings with regulators, with ROCs, business registries, capital market regulators, where the data is presented very, very differently. Now, you talked about money laundering, anti-money laundering, and all this stuff. Now, or something along those lines, maybe I can recall what you mentioned.
Fraud.
Fraud. Fraud detection. We have done pilots in the past with the Government of India in terms of using XBRL data and using business rules to be able to detect fraud. Some of the work that we have done with RBI, with the business rules that we actually built for them, equips them to detect frauds better. Do we have a product for it? No. Do we have a plan for a product at this point in time? I don't think so. Is that a priority for us? Not really, because there's enough on our plate right now that we need to focus on and grow the business in. On ESG, I did not understand your question, but you got the question on ESG.
It was not fully, but I would just like to say that ESG reporting also is very much on regulators' minds these days. So since we are working with a couple of standard setters, global standard setters who work on ESG reporting, we expect to engage some of the regulators on what they should be doing to digitize ESG reporting going forward. So we are engaging some of our existing customers, and I see that also picking up in the coming months, coming quarters.
One of the things we actually see going forward is the fact that we have a huge presence in the Middle East. We are in six countries, and as you know, it's an energy-rich area. We're trying to see whether there's a possibility of selling our products there for ESG reporting.
Thank you very much. Thank you.
Thank you. The next question is from the line of Siddharth Shah, who is an individual investor. Please go ahead.
Hi. Thanks for taking my question. I think we are talking about sales where, of course, you've built out a team, and you're doing this direct sales approach, but you've also partnered with Prophix, where I think IRIS Carbon is being sold as part of a bundled solution to various customers. Can you talk about which segment is driving more growth, and do you see kind of one outpacing the other maybe?
I think it's too early to draw a definitive conclusion as to what will actually happen. I think for Prophix to start doing customers starting customer calls and getting ready for it, it still took a fair amount of time because it's a fairly complicated product. We actually spent time with the Prophix team, training them. We participate in Prophix conferences. Now, ultimately, while we will also do direct sales, we also do channel sales through partners. Which one will take over what? I don't have an answer right now. I don't think we have enough data at this point in time. The challenge here is actually to avoid channel conflict to ensure that the two channels don't conflict each other, that where we go and sell directly, the partner doesn't show up and say, "No, it's my customer." That's one thing you need to be mindful of.
But I think that's a good situation to be in if ever it happens. But right now, we don't have enough data to give you a definitive view in terms of which one will do what, which one will do more, and which one will do less.
Got it. Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask a question. The next question is from the line of Sunil, who is an individual investor. Please go ahead.
Yeah. Hi all. I'm a happy shareholder, and I have a few questions about your deal with the Telangana State Government. You are enabling the MSMEs in Telangana. So what will be IRIS's role? How will it make money from this arrangement? And there are something like 26 lakh MSMEs in the state. Has XBRL been mandated for them? How will you do this? What is the revenue model based on one state of Telangana? And do you expect to strike deals with other states? Thanks. That's my question.
Thank you, Sunil. Many of you may not be aware of this, but I think, and I don't know if it's a coincidence, but I think StockPlay started moving from the day Sunil published his report on the company almost a year and a half ago, so thank you for your continued follow-up on the company. I see your tweets, and I think having somebody like you follow the company also keeps us on our toes. Next to Rohit, I think you won with your tweets who keeps us on our toes. Secondly, to answer your question about Telangana, when companies make their GST filings, it throws up a lot of data.
We believe that the data that's thrown up in the course of company filings, whether it be GST or MCA or whatever, allows the possibility of it being leveraged to enhance credit, allows the possibility of many other things that are many other things based on that data. So we're actually building data-led applications to help the MSME ecosystem, starting with enabling credit. Will we ever lend? No, that's not the business that we are in. We already have a relationship with several fintechs. Gautam, how many fintechs are currently using our data APIs? Gautam? Gautam?
Yeah. We have about five fintechs using our data APIs.
So we have five fintechs using our data APIs to lend money to various MSMEs in the country. So we will be basically our objective is to leverage the data in a consent-based framework, take the consent of the MSMEs, and share the data with lenders who can possibly lend to them. We see no reason why RBI currently is talking about something called frictionless lending. They're asking a very fundamental question as to why there should even be a delay between the time the company submits data and the sanction. It should happen instantaneously, quite literally, if all the data streams are in place. So we're actually working in that direction.
We believe that with all the data that's being thrown up, with all the footprints that companies are leaving behind through their economic activity, if we bring all of those footprints together, it's possible to speed up lending. It's also possible to help MSMEs lower their cost of borrowing from various lenders. Our first objective, our only objective, is to try and see how to leverage the data that's coming out of MSMEs to help them either make it easy for them to borrow, make it easier for them to handle the receivables, and so on and so forth. That's the basic model that we're going to have, where we take a little bit from the lender for origination and monitoring. With 28 lakh MSMEs there, I think it's a big possibility.
You see, the existing system is still chasing the people who are at the high end, so micro, small, and medium, that's what MSME stands for, enterprises, so micro is below 5 crores, small is below 50 crores, and medium is below 250 crores, so now, it's very important to see so while everybody's chasing IRIS and to lend money to IRIS, there are companies who are smaller who people don't lend money to because of the transaction cost of lending, so we are hoping that with the platform that we are trying to create, it will become easier for MSMEs in Telangana to be able to borrow from these existing lenders and improve either their operations or reduce their cost of operations or so on and so forth. These are all possibilities. It's still early days to talk about how it's shaping up.
We did a lot of pilot initially in a few places to take it forward. Our early feedback from MSMEs is that they're thrilled at the possibility of being able to borrow and at a lower cost and borrow speedily, so the feedback is very, very good. We are hopeful of signing up other states going forward. As I said, none of them have signed up yet, but we are in discussions with several states at this point in time.
Okay. Thanks for this. Just one more question. In your cash flow statement, there's a capital expenditure item of INR 3.78 crores. May I know whether this is a business that has been acquired?
I think I will take the question.
It's essentially capital expenditure, which we have capitalized. We have built software products, one for the Malaysian invoice platform, and the other one we are revamping our SupTech platform. So as soon as we spend it, it gets capitalized because it is software that is built for revenues which are going to come across many years. So most of the money is from there. Some of it is we have bought computers. So maybe about INR 3,000,000 would be from computer purchases.
Okay. Thanks for all the answers, and I'm signing off. I appreciate all your contributions. Thanks.
Thank you.
Thank you. The next question is from the line of Ankit from Adiza Ventures Family Office. Please go ahead.
Yeah. Hi. Thanks for taking my question again. I see on the slide that IRIS Carbon has won a lot of awards starting, I think, mostly in fall 2024. So is this a function of some changes in product, or are we kind of just getting into these places to be visible to the award people a lot more?
I think we will be very happy. Anu, that's your question.
Thank you. So I think these awards are specifically to reputed organizations like G2, Gartner, etc. So these are awards which actually are given or accolades which are given to us. So it's a function of customer reviews, customer satisfaction. So they also contact customers who are giving reviews on the product independently to have conversations, etc. So it is definitely a combination of the product overall and overall the product experience and the customer experience as well. I think this is one way where we are very unique, where from a product perspective, we keep bringing a lot of updates based on customer feedback. So that actually really helps in making sure the customers have a great experience. It's a combination of both the product experience and the overall experience the customer gets end to end. So these are badges, accolades, etc.
It's not that we've applied for them, and these are something that is being given to us by G2, Gartner, etc.
Has it changed? Has it been because of any changes in the product, or it's just probably more customers using it, and hence they're getting more feedback?
No. Overall, if you see, the product definitely, like I said, we have regular product updates. So overall, if you see from a customer's perspective as well, we have a very systematic what we call a customer satisfaction survey that goes to customers every quarter. So we actively seek input and feedback for the product and for the overall, let's say, customer engagement, support, and various aspects of the offering. The feedback is something which keeps coming in, whether it's customers who are new, who have moved from other products, or even existing customers. So that's how we are able to plan things like the product roadmap, product releases, etc. So definitely, the product goes through changes by every release, and by every release, the product actually gets better. And thanks to our customers, we take feedback from them very seriously.
We take, of course, not just the customer feedback, but also market feedback. When we show demos, etc., also we get very good input from people. So we introduce all of that, take all of the feedback, introduce it into the product, and that way we are able to make sure that the customers are really happy. So the short answer is yes. The product definitely goes through changes and improvements by every release.
Okay. Thank you, and secondly, I mean, we hit a great milestone of 100 crores in revenue last year. What about the next 100? I mean, are we looking at certain trajectories for us that when do we kind of think about 200 crores?
I do not play guessing games as far as these things are concerned. We also don't do any future predictions. We don't talk about. We don't provide forward numbers. Obviously, when you're 100, you want to go to 200. When you go to 200, you want to go to 2,000. When you go to 2,000, you want to go to 20,000. When will it happen? I have no clue. Do we have plans in place to try and grow to reasonable size within a reasonable period of time? Yes, we do, but as I said, to put a precise time frame on this and say how fast will it happen, I am not going to hazard this.
Right. Thank you. Happy Diwali to the team again, and very happy shareholders as well. So thank you very much.
Thank you, so before we close, I'm going to get one of my colleagues into this call to talk about some of the technology changes we've brought in since he joined. Thomas, can you talk about the technology changes we've brought into the company in recent times?
Sure, Sonny. Actually, my.
I'm the CTO of the company, by the way. Thomas.
Yeah. Good afternoon, and happy Diwali to everybody. Yeah, there are a lot of changes actually we bring in for the technology. The bigger one actually are the processes. We standardize a lot on the processes. We refine a lot of processes and let us ensure that the development happens with the product in the mindset and that's how the whole thing happens. So we call it productization of the product. So we use all the standard productization methodologies actually to actually improve upon the product. Like I've heard many asking about how product is improved, etc., the kind of how the feedbacks are taken and how it is prioritized and what are the feedbacks which we put it back into the product. That happens through that process. That is one. Second is actually expanding the team.
We expanded the team in Sweden, and we are further expanding the team because actually we want to have the best of the resources who are available wherever in the country, so we are more open to actually having more development centers and things of that sort so that actually people can receive work. But we encourage people to come and work within the organization like a work-from-office environment. We are pushing forward for that, even though we have a lot of people who are actually doing a hybrid kind of work environment, and we added newer technology and technology tools like I heard someone talk about the BPMN, that business process workflows, so those are all at least we are using standardized business workflows like BPMN, etc., to actually implement like the work the business people or the regulator can actually change the workflows of various systems.
So those things are actually getting ready, and it's all here to actually ready for production. I think the last one, not the least, but the last one is actually on the AI side. We are doing a lot of AI technologies which are really embedding it into our product, wherever it is actually looking at it from. And that also is improving our technology stack. Thank you.
Thank you, Thomas. And one last thing. A question did not come up about AI, but Gautam, if you can just take my question about use of AI in the LMS in the context of GST.
Sure, so if you look at AI, I think there are two ways to look at the benefits that AI can give, so one is improving internal productivity, which our developers are doing. The other is using AI to enhance the value that can be offered to customers, and we have a product called Litigation Management System, where we are looking at using AI extensively, so a couple of use cases, if I can just give an example of. One is with GST. There are a lot of notices which companies are receiving because this is all automated, so we are using AI technology to actually read the notice and not just read the notice, but classify the notice and create a case in the system, create a summary.
So this eases the whole work of any tax person in the organization to manage and replace the box case system which they're currently using. And our next goal is to start looking at auto-drafting replies based on the various case laws in the repositories which are available, and also putting a layer of understanding the notice and giving a reference to a similar case or a case law based on the repository which is available. So these are some of the work that we are doing using AI, especially in the legal tax space.
Gautam, you already have customers for the product, right?
Yes, we already have customers of the product. So we have some large marquee, some of the big groups in the country who have really appreciated and liked this thing and have started signing up. So this is something which we feel is going to be a big driver for us in the coming years.
So the point I want to leave you with is we are leveraging AI internally for both internal productivity as well as improving our products. Second thing I want to second message I want to convey from what Gautam said to you right now is we work on a number of adjacencies to our core products to try to serve those customers. And that also goes back to what Rohit asked about how you increase the price. You want to increase share of wallet from a customer by offering them additional stuff over and above what you're currently doing. And that's what we've tried to do in this context. So thank you very much. Over to you, Sejal.
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. S. Swaminathan for closing comments.
I think I'll defer to Balu in terms of closing comments because I've spoken enough. Over to you, Balu.
Thanks, everyone, for coming in for this conference call. Really appreciate your time that you spend with the company and asking questions.
Good question. Good question.
Yeah. There's one question from Pradeep Choudhury. Yeah. I think we can take that.
Okay, sir. The next question is from the line of Pradeep Choudhury from Samarthya Capital. Please go ahead.
Yeah. Thanks a lot, sir. I had been pressing the button a number of times, but for some reason, it was not going through. So thanks for taking the question. For this, I had just a few questions. One on the Telangana order that we have got. So first, we'll be building that platform or product for the Telangana government. And then thereafter, post-building, we might, as operator of that platform, we may charge a certain fee to whoever is using that, whatever is coming, whatever data is coming out of that platform. Is that how it will work in terms of the lifecycle of the product and what we may earn out of it?
We will develop the platform, and we will charge on the outcome, on the benefits to the lender in terms of a percentage of the loan that the lender provides to the borrower.
Okay, and when you're building this platform for the government, what is the cost for that?
We're not building it for the government. It's a PPP model. It's a public-private partnership model where we incur investment. We do the investments. The government has a say in terms of how to on the specs of the whole thing. But ultimately, it's owned, managed, and operated by us. Many of the components are already there. It's a question of bringing the components together. I will have a more accurate information in terms of how much it costs once we reach a certain stage. We're right now in a discovery phase, and we will be able to come up with a better cost estimation only in a few months' time.
Would this be you said you'll charge a percentage fee of the loan being disbursed?
Correct.
Okay. Can this be upwards of 10 basis points, or would it be lower than that?
It depends on how desperate the borrowers are to get a loan and how desperate the lenders are to acquire a customer. We don't know. Price discovery has not happened. Currently, when you look at the market, I've heard anything from 20 basis points to 1 percentage point from on the origination side. Nobody's charging on the monitoring side. So as I said, we have to do price discovery before we come to the conclusions. All that I know is the volumes are big. The numbers are big. The need for credit is high. So we are optimistic that whatever we do will pay for itself in a reasonably short time.
That's right. And what would be the typical development cycle, roughly, for this product? And when could we see this commercializing? Can it happen in six months?
Maybe a year.
You said there are a number of states who are planning to do something like this.
I did not say that. I said we are talking to a number of states with similar ideas. I don't know who will accept, who will not bite. So far, we only have Telangana shown.
Okay. And there are a couple of other companies and websites also which give out such data. So how will this be different from the other players that are already servicing such use cases?
The market is huge, and there is a place for many different kinds of providers of solutions like this. Where we come in is the fact that we are a GSP. There are only a handful of GSPs in the country who are well-positioned to take advantage of this. We're also an IRP. There are only four IRPs in the country that gives us a competitive edge. And that's what we will basically leverage to try and create a moat for ourselves in those markets.
Okay. And what you had roughly mentioned, the 0.2%-1% on the origination side, this will be solely given to you, or you would have to share this with the government?
At this point in time, based on the discussions we've had, it's for us. But it's quite possible that the government will ask for a share tomorrow as it's legitimate, and they have a legitimate right to that. We will cross the bridge when we come to it.
Okay. As a last question, out of our current quarter's revenue, approximately what percentage came in from the South African contract?
We don't provide customer-wise breakup. I'm sorry about that. And Africa is mentioned as an aggregate, but that includes multiple countries. Africa is 36%, right? Africa is 36%. That includes Nigeria. That includes Mauritius, and that includes South Africa. But we don't provide customer-specific because South Africa also includes the ROC filings apart from the central bank work that we actually do. So I'm sorry, but that's not the level of granularity we provide at this point in time.
No worries. And so if you could tell the percentage of the contract that is still remaining to be the value of the contract that is still remaining to be executed over the next two quarters?
Yeah. I think the last May call, we mentioned about 30%-35% completed. I would maybe add another 10% to that.
Roughly 50%-55% is still to be completed.
That's a reasonable assumption from an IRP point of view. Yeah.
Okay. Thank you, sir. Thanks, Gautam, and all the best.
I think Mitesh Mehta has still got a question.
Thank you. The next question is from the line of Mitesh Mehta from Long Term Investor Group. Please go ahead.
Thanks again for taking my question. I have a few small questions. One is regarding the team size of the company, and especially how much people are involved in sales part and how much are in admin and implementation parts. And the third question is regarding revenue distribution geographically. You can provide anything regarding geographically which are the parts and what is the percentage of revenue in each geography.
Sir, as far as geographic distribution is concerned, that's already there in the presentation. If I'm not mistaken, you can actually see it there. As far as employees are concerned, we are 550 people, and sales is about 13. Sales is about 10 people or 20 people?
Pardon?
Yeah. So sales, what is Balu's number?
So we got a little less than 550 people at this point of time. And the sales and marketing together, I would say, would be about between 30 to 40 people or 30-odd people.
30 to 40 people. And what is our expansion plan for sales people?
Yeah. The sales, we are giving a lot of focus, especially for the SaaS business, so there is a plan which is getting executed to further strengthen the sales and marketing team, so the execution is underway, so I think you can see that expanded as we go forward.
Okay. Okay. Thank you. All the best.
Thank you.
Thanks.
Thank you very much for being on the call, Seijal. I think we can wrap up.
Okay, sir. Also, is there any closing comments?
Not really. I think we've done more than closing comments.
Okay, sir.
It's time for people to go home too.
Okay. On behalf of IRIS Business Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect.