Ladies and gentlemen, good day and welcome to IRIS Business Services Limited Q4 and FY25 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Siddhesh Chaman from EY LLP. Thank you, and over to you, sir.
Good evening to all of you. Welcome to Q4 FY2025 Earnings Call of IRIS Business Services Limited. The results and presentations have already been made to you, and you can also view it on the company's website. In case anyone does not have the copy of the press release or presentation, or you are not marked in the mail, please do write to us, and we will be happy to send you the same. To take us through the results today and to answer your questions, we have the top management of IRIS Business Services Limited, represented by Mr. K. Balachandran, Co-founder, Full-time Director and CFO; Ms. Deepta Rangarajan, Co-founder and Full-time Director; and Mr. P K X Thomas, Full-time Director and CTO. We will start the call with a brief overview of the quarter and year gone past, and then it will be followed by the Q&A session.
Before we proceed with the call, I would like to remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors. It must be viewed in conjunction with our business risks that could cause future results, performance, or assumptions to differ significantly from what we express or imply by such forward-looking statements. Having said that, I will now hand over the call to Mr. K. Balachandran. Over to you, sir.
Thanks, Siddhesh. I hope all of you can hear me. Good evening and welcome to the earnings call of IRIS Business Services. We are grateful for the time you are spending with us. From IRIS, we have, as Siddhesh mentioned, Deepta Rangarajan, and I attending the call, apart from all our senior business leaders. We have loaded the investor presentation on the exchange website, and some of you would have seen this, I'm pretty sure. You also can direct us, please, to the shareholders. Now, let me just step back and set a bit of background before we go into details. As all of you are aware, over the years, since its IPO in 2017, IRIS Business Services has steadily built its business across its verticals. We have added marquee clients, expanded our offerings, and grown deeper into existing accounts.
In fact, over the past two years, we have seen growth accelerating compared to the first four years since the IPO. On an average, you can see that our top line has grown at about 27%-28% in the past three years, compared with about 18% growth in the previous four years. Obviously, all of you know that the SupTech segment has given a big boost to our revenues in the recent past. While in the RegTech segment, we have made a significant move, which we have talked about in the previous calls as well, by expanding our offerings deeply into the reporting supply chain enterprises for both financial and now non-financial reporting as well. In fact, in the previous financial year that just closed, we have started seeing vindication of our pivot into this area. This is a business where we are gearing up to scale substantially going forward.
There's a lot of action on the sales, marketing, and product front as we prepare to move on to the next level. We are confident of making solid progress over the next few years to capture market share in this market, which is at an early stage of growth. At the same time, I want to state that we will spend money in a measured and well-thought-out, calibrated manner. From our point of view, this is not a sprint, but it's not a marathon either. I think it is somewhere in between. We are definitely ramping up. We are ramping up in a deliberate, well-thought-out manner. Now, let me come back to the current year where we are going to talk about our results and, of course, answer your questions. In the current year, of course, we have done quite well on the key business and financial parameters.
As we have mentioned in the past, our businesses—we recommend our businesses examine or analyze from an annual basis rather than looking at quarterly movements because that is the nature of the business. Of course, we can talk about quarterly numbers, but to understand the business trajectory, it is always recommended that we look at it from an annual basis. Now, to delve into some of these financial details, I will request Vineet Kandoi to come in. Now, Vineet handles our financial accounts along with me, and he has been with us for so many years, right from the IPO days. We have been working together, and he works closely with me and Deepta as well. Over to you, Vineet.
Good evening, everyone, and thank you, Balu. I will now quickly run through some of the highlights of our financial performance. I am pleased to report that FY2025 has been a year of good financial performance, which positioned us well for sustained growth in the years ahead. For the full year, our total income grew by 25% year over year to INR 128.51 crore, EBITDA increased by 36% year over year to INR 21.54 crore, PAT rose by 51% year-over -year to INR 13.25 crore. This growth was driven by continued expansion of our recurring revenue stream, strong traction in the international markets, and careful cost management despite increased investment in technology and talent. In terms of quarterly performance, revenue came in at INR 35.4 crore, a 6% increase over Q3, and 16% year over year growth. EBITDA was INR 5.85 crore, improving 3% quarter on quarter, maintaining a healthy margin profile.
PAT stood at INR 2.88 crore, lower sequentially, reflecting higher operating expenses. While Q-on-Q growth was more moderate, it follows a high base from Q3 and reflects investments in product development and team expansion, both of which are crucial for our long-term trajectory. In terms of segment performance, SupTech led the growth with a 34% year-on-year increase, driven by new wins and ongoing implementations across regulators. TaxTech grew by 20%, aided by traction in the Indian tax compliance ecosystem and early work on the Malaysian e-invoicing mandate. RegTech posted a 12% growth with new customers onboarded in Europe and U.S. under IRIS Carbon. In terms of geographic mix, Africa contributed 35% of the top line for full year, led by our work with the South African Reserve Bank under the SupTech segment. The U.S. and Europe remained strong markets for our RegTech product with decent ARR growth.
Our Indian business remained stable, primarily under the TaxTech platform. In summary, FY25 was a year of steady top line growth, strong EBITDA performance, and focused investment that aligned with our long-term strategy. We also ended the year with a healthy cash position backed by a decent cash flow from operations. That was a quick overview of the overall results, and now I hand it over to Balu so that we can start the Q&A session.
Thanks, Vineet. That is a quick rundown of what we have done in the last quarter and last one year. Perhaps, Siddhesh, do you want to get people to ask questions?
Sure, sir. Yeah.
Yes, sir. Should we begin the Q&A session?
Yeah, we could. We are all ready.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset 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 Rahil from MAPL. Please go ahead.
Yeah, hi. Am I audible?
Yes, sir.
Yeah, good evening and thank you for the opportunity. I'm here with a business who has some basic questions starting with the RegTech segment. So we have been speaking about a lot of mandates, for example, FERC, ESG, Europe ESG, U.K. ESG, Australian ARPA. How many of these are done with or fully implemented, and how much is left? How much opportunity is left in the rest? And what are the timelines that we can provide individually?
Maybe I can ask Anu to talk about this. Anu handles the business for IRIS Carbon, and she's scrolling to what's happening across different geographies. Anu, would you like to answer the question?
Hello. Can you hear me?
Yeah.
Okay. Thanks for the question. I think you are trying to understand mandates such as FERC, ESG, etc. These are regulatory reporting requirements which have been there for a couple of years now. From an overall product perspective, we are fully 100% ready because customers have been using this product and the mandate for a couple of years now. We are fully ready, and since it is a compliance reporting product, there's no case that we are not partially ready. It's a fully ready product and being used by customers already.
Thanks.
Thanks, this is Servo. I am leading the sales at IRIS Carbon. Very good question. I'll just add to what Anu mentioned. Since you're new to the business, I'll give you a little bit of context of how it is. At a broad level, think of it as three broad buckets. The first is what you can call the XBRL mandates. The second is what we would call disclosure management reporting in general. Then the third is ESG. The first part that we talk about, the XBRL mandate, is where the mandate you called out falls. SEC in the U.S., FERC in the U.S., you've got the ESEF in Europe, so on and so forth. These are under the first category. All these mandates have been around over a period of time. For example, the SEC had rolled it out way long back, probably somewhere around 2014.
The ESEF or the European mandates for reporting in XBRL have been rolled out somewhere around 2021. The FERC is also somewhere around 2021. These are mandates that have been out where the regulator is asking for information to be submitted in the XBRL or IXBRL format. That is one product line or one business. Now comes the second one, which is disclosure management or reporting. That is moving one step back in the value chain where we are helping author the overall quarterly, yearly, monthly reports, not just financial reports. The product also helps companies prepare internal non-financial reports. That is a very broad category, which is not necessarily applicable to people who have to report in a mandate only. For example, we have a multi-billion dollar customer based out of the U.S., which is not listed.
However, they have still chosen to use our product for disclosure management for their internal monthly and quarterly reports. This is the second category. This is a large playing field that we are going after for global companies. The third one is what you called out, the ESG or sustainability mandate. This is playing out as we speak in a phased-out manner globally. Different countries are rolling out their mandates at different times. There is a lot of legislative approval required, and in some cases, it is taking time for the mandate to be rolled out. Having said that, because a lot of our customers and prospects feel that this would help drive more visibility within their organizations and to their investors, they are voluntarily reporting information on sustainability.
This kind of helps us position ourselves, especially to those companies who need to do sustainability reporting, one in authoring the report and two in collecting the data and preparing the report, and finally, of course, authoring. That is where we have another opportunity. As we speak, it is an ongoing thing that is going to go country by country, regulator by regulator, and it is a long-term play. I'll pause. I hope I answered your question, Rahil, that gave you clarity on the business.
Yeah, it helps. Basically, where I was coming from is I wanted to understand the opportunity, and I know these mandates were applied a long time, but I believe there were some updates along the way. For example, first, FERC phase one was launched, but I could not find out if phase two was implemented. Similarly, ESG, we were expecting that this year the mandate would come in and that would be used for us. I just wanted more thoughts on that.
First of all, Rahil, I think you're not new to the business. You know a lot more than most people will. Congratulations there. I think you're spot on. FERC, it's a phased rollout. The first phase has been rolled out. You are absolutely right. The second phase is up in discussion. Like I said, it is being run through the legislative procedure within the energy companies in the US. That is happening. Timelines, I don't want to comment. I don't want to get ahead of myself. There is a lot of, I would say, external factors, political factors that are playing out as we speak globally. I will not comment on when that will happen. However, we do expect that there will be some regulation that can come in. Let us see how that plays out. The same thing applies to ESG.
Like I said, each country has their own, even within the EU, if there is a mandate that is being rolled out, that is a set of guidelines that the EU is rolling out for all the countries within the EU. However, each country needs to roll out their own specifications of what needs to be reported. This is, like I said, a long-term game. We'll have to wait and see which country positions how and when they roll it out. The good news is, if you go out and do a little more, I'm sure you've done your research, there are a lot of companies that are doing voluntary reporting. For example, Apple, if you see, they've been doing it for many years. They're moving towards a sustainable product and sustainable a lot of things, right?
In the same way, there are many such companies, not just one. That gives us an opportunity to grow while the mandate is not yet out.
Thanks, Servo. Okay. So my next question is, funding has been planned to.
Mr. Rahil, could you please come back? Thank you.
Sure, sure.
Thank you. The next question is from the line of Shabaz from Value Investments. Please go ahead.
Hello. Are you able to hear me?
Yeah, we can hear you.
Okay. I just had the question on the operating. I mean, I know that compared to Q3 or, I mean, compared to year-on-year growth, right? The operating margin is down. I mean, what is included in the other expenses that went up? Could you please explain that? Also, what is the sustainable pattern, the EBITDA margin going forward?
I think the EBITDA margin on a year-to-year basis, I think there is a small increase. I think it's about 17% versus 15% or 16.8% versus 17%. In other expenses, of course, outside of salaries, we have partner payments, we have SG expenses, and we have other general expenses which come in. Of course, we have been spending more in terms of both sales and marketing. In the SupTech area, there is also higher partner expenses that we incur because we are getting more revenues. That would have explained the increase in other expenses, which is going up from a year-to-year basis, is going up by about 25% from INR 35.78 crores to INR 44.89 crores.
These expenses, I would say, would not go out of control, but they will grow at a steady pace because we need to definitely spend money on sales and marketing. That's for sure. Also, there is expense in certain markets related to partner payments, not all markets, certain markets. That depends on the nature of the mandates we get, for example. If you look at the Indian market, for example, if you look at some of the business we do in the SupTech space, we recently did something with PFRDA where we went and implemented a platform at the growth speed. There is no partner payments we make because we do not have any partners down the line. We could wait, but in some cases, we do have. That is also one of the factors, I would think. I would say, yeah.
Okay. Thank you. I mean, it was partly audible. I mean, one suggestion is there is some disturbance like every few seconds when you speak on the call. Even on the previous call that you had set up, right, people were complaining about a lot of disturbance. Even in this call, we can clear it. If you could clear that for the next call, that would be definitely helpful with a good microphone or something. I will definitely go through the call log. I mean, I can read the call twice.
Once again, if you can hear me now, maybe today, once again, because now I'm.
Yeah, briefly, okay.
So maybe it could be better for you, more audible?
Yeah, yeah. It's audible.
Yeah. I was saying that other expenses have gone up by 25% if you look at it from an annual perspective, from INR 35.78 crores to INR 44.89 crores. Overall, our EBITDA also has gone up. Actually, our EBITDA margin has moved up to 15.8% from 15.4%. The other expenses include one key part, which is partner payments. We do have certain partners in our businesses, especially on the SupTech side. As the revenues go up based on the market we operate, there are partner payments, and that moves up. Outside that, there are expenses related to sales and marketing where we have traveling expenses, and we have some of the event expenses all get added into the other expenses area. In a way, it is linked to both business development and execution, especially on the SupTech side. That is how I would explain this.
Is it going to grow out of sync? No. It will grow at pretty much maybe as we grow into a higher revenue number, it will grow at a lower level. Initially, we would need to spend, especially on the sales and marketing area. Okay?
Yes. Sorry. Thank you. Yeah. I mean, when we compare year-on-year, it looks dull because last year, your operating margin was like 21% in the Q4. In all other quarters, I can say it is between 13%- 16%. Maybe last year, if there was any scenario variation in expenses, that could be the reason why you said 21%.
That's a good point. Actually, there's one more factor there in the last Q4. We did get some license payments. License payments suddenly give a boost to the top line without having a commensurate hit on the expenses. There are certain variations quarter to quarter based on the timing of some of the software license revenues that we get, not license expenses, license revenues that we get. We had a couple of streams for license revenues coming in Q4, FY2024.
Okay. Got it. Thank you. My second question is, so from four years, almost from last four years, we have grown close to 20% CAGR. What would be the guidance for the next year, that is FY 2026 and going forward, and which segment is contributing more growth in the company?
We do not give specific guidance, which we have been saying in the past as well. Of course, if you look at the current pie, the SupTech is maybe contributing up to 49%. I did mention in my opening remarks that for the last three years, we are doing it about 28% on an average year-on-year growth. I would hope that this is the new normal for the company or in that range. This is what we strive to achieve going forward. If you look at the medium to long term, we certainly see our SaaS business doing really well, and the share of the pie of the SaaS business proportionately increasing as we go forward. That is what I would like to say at this point of time.
Got it. Yeah. The only reason why I asked the question is because when I compared a few years, right, or the competitors like NTSC and others, they are growing at a very fast pace. Since you are also coming into a RegTech, SupTech now, I was expecting if you could provide any at least range guidance, like in %, like you do not have to mention exact numbers, but that would be helpful for our projections for next year.
Yeah. We have been doing that, but we hear you. We will discuss internally. Okay. We have not been doing that because our business has a couple of verticals as well. It is a mix of both regulators who are offering or who are where the business is more RFP-driven, and of course, the SaaS business. To make an overall company guidance, etc., is difficult. As a policy, we have not been doing that. We have been saying that the trajectory is visible to you, and this is our demand driver. One has to make an estimate. Okay. I will say.
Okay. Then we'll look forward to it.
We hear you. Yeah.
Yeah. We'll look forward to it. Okay. So NTSC is your direct competitor, you were saying, right? In a few segments at least.
Tell me again, which company?
NTSC.
Not in the segment we operate. Of course, there are other segments which include anti-money laundering and fraud detection, where we don't operate. In the reporting area, which is more to do with financial and risk reporting, we haven't come across them.
Okay. Thank you so much for all the answers. I'll call back in a few to have a look.
Thank you. The next question is from the line of Manan Poladia from MKP Securities. Please go ahead.
Hello, sir. Am I audible?
Yes, you are. Please go ahead, Manan.
My first question is, since at the start of the call, you mentioned something about us doing investments in order to grow our new line of business. Would you be able to perhaps give an absolute number of thoughts about how much money we are investing where it's not linked to a particular line of revenue yet and we're trying to grow the business? If you could just explain the delta and maybe employee benefit expenses or other expenses in that specific sales push that we're doing.
You mean the state-related initiative that we are doing? Is that the question that you have?
Yes.
Okay. The state initiative that we have embarked upon is still at a pre-revenue stage. Right now, we are getting the basic pieces in place in terms of our offerings so that we can start working with the states and make this platform available to the MSME community. Here, my sense is it's a little too premature to talk about the spend. Of course, there will be some spends that we'll do in the current year. I would say that some of it will get capitalized because we are building the software. The community building will be, of course, expensed out. My guess is it won't be that substantial that one needs to start getting pinpointed out in your projections.
Yes. My second question is more for bookkeeping end. It's two parts. One, we have a cash balance, I believe, of about INR 30-INR 35 crores or something of that sort. One, how do we intend to use that? What is the, I guess, strategic, is it strategic investments, or do we intend to do other acquisitions or something of that sort? My second question on the bookkeeping side again is, how do we treat our software while we are developing it? How do we think about capitalizing software costs versus expensing out through the P&L?
Okay. So maybe do you want to take the second question first on the capitalization part?
Yeah. Whenever we build new products from which we expect to generate revenue, there is a policy to capitalize those products. Also, if we are going for an existing product, but there is a new revenue stream or a mandate which is kicking in, and we are developing some modules in that, we go on capitalizing those expenses. Otherwise, all the expenses, all the product development expenses are expensed out in the same year. Just to give you an example, like Malaysian invoicing, which came in earlier this year, we capitalized some of the product development expenses which went to develop the module for invoicing mandate in Malaysia.
The first question is to talk about our cash balance. In fact, if you add the mutual fund investment that we have made, it's still above INR 50 crore. It is not INR 38 crore. It's above INR 50 crore. We want to, as I mentioned in my first set of remarks, we want to make sure that we are very frugal and we calibrate our expenses. We want to do our expense mostly related to our SaaS business, where we want to scale it up over the next three to five years in a substantial way. Towards that, we'll be spending money. At the same time, if you look at this particular business, our sales marketing spend to the revenue, that ratio is still quite low. We want to bring it up. We'll be spending.
Overall, from a company's perspective, since we are getting revenues from the SupTech side, and we will continue to get good revenues, robust revenue growth from that business, we should not see any significant drawdown in terms of our overall margins. That is what we would say. The money that we have, we raised about INR 20 crore through prior placement, plus we have generated enough cash through accruals during the last one to two years. Both together, that cash balance reflects about INR 53 crore or so. We spend that in a very thoughtful manner. We would spend, and we are in the process of, of course, we have plans, and we are fine-tuning these plans. We would do this in an iterative manner as we go along this path. That is what I would say.
Yes. Thank you. I wish you the very best, sir.
Thank you so much, Manan.
The next question is from the line of Rohit, an individual investor. Please go ahead.
Thank you for the opportunity. My first question is on the Qatar deal. Could you give us an understanding of the size of the deal in comparison to South Africa, or is it more along the lines of our other SupTech deals that we used to win in the past?
This is more along the lines of the central bank deals that we have won with, I mean, in other geographies, not with the blockbuster South African Reserve Bank deal. I would say it would be definitely on the lower side by a fair margin as far as the Qatar Central Bank deal is concerned. Of course, we'll implement it much faster as well. The South African deal, the South African deposit insurance platform that we are building, the implementation will go on for three plus years, which is not the case here.
How far along are we on the South African deal? Given the large size and that segment being a treadmill segment, will we be able to sort of maintain our growth rate once that deal tapers off?
This is again a very good question. It's a question we have been asking ourselves as well. Our strength is the South African business, we still need to execute a fair bit there. I would say maybe about 35% is still left to be executed. We are working on a number of other deals which are in the pipeline as well. If you look at from one to two-year perspective, we don't see that we're getting out growth in this segment. What should I say? Anyway, if you look at the IRR of the company, that has already gone up. We are at about INR 25 crores of IRR roughly. As a percentage, that kind of revenues will also go up as we move forward. There are other deals in the SupTech segment which we are chasing.
Of course, these are those kind of deals will take time, and there is a decision period involved. That should make up as we go along. Even in the South African business, this whole deposit insurance platform has many, many levels of requirements. It is not that it is we hope that it is just not an open-and-shut case once the current deliverables are done. Let me stop at this point.
Yeah. That was helpful. My last question is on the initial commentary you made. Historically, we've always been informed that mandate will drive our ARR growth in the RegTech segment. We saw jumps when the FERC and the ESEF mandate had come. Now, it seems like we are going to be mandate independent from the commentary, I think. It will be helpful to understand more details on the confidence in terms of the three buckets that Servo was talking about. I also was wondering, I mean, again, this is taking off from the answer you gave, Balu sir, do we expect a meaningful maintenance component from the South African deal which will add to the ARR of the company?
There will be an AMC component to the South African platform that we are building. Of course, that will be there. That will come once the whole thing goes live. Of course, that component from a proportionate point of view will be less than the overall deal size for obvious reasons. Any typical platform that we build has an AMC component which kicks in. For example, the PFRDA which went live, it has an AMC component which has kicked in. That kind of mechanics will continue to serve us in good stead. Coming back to the question on our ARR getting being driven not only by mandate. Maybe I'll ask Deepta to keep it.
Hi, Rohit. Thank you so much for the question. Yeah, you're right. I think in the past, when we have spoken, especially from the RegTech segment, we have always said, and it's true, that when there is a mandate, there is normally a tailwind of growth. When Servo was explaining that we've got three, let's say, sub-products or modules or call it what you will, there is an XBRL, there is a disclosure management, and a sustainability set of solutions. Clearly, when there is a mandate, what happens is there is a pressure, a driving imperative for enterprises to immediately kind of, there is an external deadline of pressure. We've historically seen tailwinds.
What we were looking at, even in the ESG spaces, there was to be an ESG reporting mandate rolling out from this year, and that was going to provide us tailwinds of growth as well. Because, like Servo said, kind of, I think, slowdown, kind of U.S. elections, a little bit of stalling on the ESG side, it certainly does not give us those tailwinds. Now, when we go to the other two segments on the positive side, what I would say, when you take a look at the non-mandate, which is the disclosure management and the general sustainability of what companies are anyway kind of doing, and there, while it does not have to do with the mandate and our sales, what do I call it? Our sales engine or our sales machinery has to work differently. That is the issue.
Remember from the conference calls or these earnings calls of a couple of six months ago or so, I think we talked about the fact that we are consciously rewiring ourselves also to go after deeper into the CFO's organization, more value add, therefore kind of up the value to a higher price, but the sales rhythm of the sales mechanism works differently. While we might not see those kinds of tailwinds, we believe that the value of the deals in these non-mandate ones will certainly be richer. They will go deeper. We are also seeing early signs of that. For example, in the early disclosure management deal, we are seeing kind of customers are willing to pay more, are seeing kind of greater value in the solution, are leveraging it.
We start with, let's say, one report type or one company, and it expands to other report types, other subsidiaries, etc. It is unlike the place where there is a mandate which will give us a tailwind. We keep ourselves prepared for both. When there is a mandate, whenever, let's say, the ESG mandate or any other kind of mandate, we definitely keep ourselves prepared. Nonetheless, I think this was a part of the conscious plan as well to anyhow deeper and also go outside of mandates into a deeper value-added space. Not sure if I answered well enough, Rohit?
Yeah. Thank you. That was helpful. Can I ask a follow-up? I think I'll get back in a little bit. Thank you for the time.
Sure. Thank you. The next question is from the line of Sakshi Garg from Nivesh Securities. Please go ahead.
Hello. Am I audible?
[audio distortion]
Yeah. My question is, what are the five-year plans of the company? Are we joining? Are we jumping into any new segment? Do you have any CapEx, any acquisitions we are planning to do in the next coming five years?
If you look at the next five years, I won't be able to answer that question. What kind of options will be on the table, including acquisitions? This is something definitely not baked into our current operating plan. That's what I would say. Does it answer your question, Sakshi?
I think companies as well as the companies from the last five years, I think the company's track record, companies are doing greater, coming with new numbers, jumping to new segments like new type of technologies, data technology, tech technology. I think companies should jump into a new segment and should find opportunities in new sectors and new technologies as well.
Yeah. So you're saying that we should actively go and look for new segments and maybe try on new technologies so that we can drive our revenues. That's what you are recommending. Okay. We hear you. Very good point. In fact, I should just point out that state initiative that we are doing is a fresh segment where we feel there can be a significant opportunity for us as we develop the whole ecosystem. That is definitely there. Of course, we hear you in terms of in the RegTech space itself, whether we should start looking out for new segments. Within the management, we feel the runway with the existing business is still quite substantial, and we should run after that.
Thank you.
Thank you.
Yes. Sakshi, does that answer your question?
Yeah. Thank you.
Okay. Thank you. The next question is from the line of Vikas Kasturi from Focus Capital. Please go ahead.
Good evening, sir. Am I audible?
Yes, you are, Vikas.
Yes. Yeah. Thank you, sir. Sir, could you just speak about some of the investments that we are making towards the future growth of the company? For example, I remember about three, four years ago, Mr. Swaminathan used to say that we did not have funds to add more people in America and so on. Where are we on some of those initiatives with respect to adding people, especially salespeople in some of the key geographies? That is number one. Number two is, sir, on the tax space, and especially on IRIS GST, what is the business model there, sir? I think it is to give the e-filing free and then make money on other value-added services. Could you just speak about where we are in that journey on the tax space? These are my two questions.
Maybe on the tax space, I will answer that first. I will request Gautam Mahanti, who handles the business, to hear from that.
Hi. Good evening. The TaxTech e-invoicing that you mentioned, we actually are running the e-invoicing platform for GSTN. That is the government e-invoicing platform, which is a compliance requirement, and that is offered for free. Value-added services can be offered on top. That is not the core offering of the TaxTech business. That is one which has anyway been mandated by the government. The core offering of the TaxTech segment is a suite of SaaS platform being sold to enterprises and taxpayers to enable their entire GST compliance, GST filings, returns filing, doing the monthly reconciliation, e-waybill, and e-invoicing, which is charged on a subscription-based model depending on the number of tax IDs and the volume of transactions that these companies perform on a monthly basis. That is the core GST tax compliance.
Last year, we also expanded into a newer territory geography, which is the Malaysia e-invoice mandate. We launched that platform and are working with end companies to partners. Within India, we're looking at expanding beyond compliance, going beyond the mandate, reaching out to the CFO with accounts payable automation and downstream litigation management and insights and reporting solutions. Yeah, your point is partially right that the IRT system, which we offer on behalf of the government, we can't charge for it because it's on behalf of the government. Yeah. Our core offering is for taxpayers, companies across all sizes, to whom we charge the fees.
Great. Just a follow-up question on that. Why do we have EBITDA margin is negative? Are we doing some investments in that line of business?
Yes. Last year, we did some heavy investments in terms of building out some new products. Two products which I would like to call out is one is an accounts payable automation product. We would like to now start cross-selling to our existing customers to go upstream and automate their entire accounts payable cycle, which then connects to the core compliance. This year, we hope that we will start, and these will be slightly outside of the mandate products. We wanted to build in greater stickiness with this customer. Investments in building products is what has led to the negative margins for this year. Also, there is another product on CFO dashboards, which we have invested to build insights for the tax and the CFO of a company to take decisions.
Got it. Thank you, sir.
Sorry, Rohit, you want to answer? Because you had a first question on our sales and marketing ramp-up, especially for.
Sorry, sir.
Let me quickly answer that. Of course, our liquidity position improved substantially from the middle of FY 2025 onwards, somewhere say July onwards. We have been, of course, cognizant of spending more on sales and marketing. We have started doing that. We are doing that initially by focusing on getting the engine right in terms of marketing and the sales engine, which is initially operating out of India in terms of contacts and getting the discovery calls going and taking the customer through the journey towards a brochure. Some of the points which you talked about, I think will definitely kick in. This is something which the team is actively working on at this point of time, how to put the key pieces in play, which has some of the resources assets on ground as well.
Got it. Thank you very much.
Servo, can we supplement a little bit?
Yeah. Thanks. Because I'll just add to what Balu said. I think we have been in the phase of recruitment now more actively than ever before in the geographies in North America and, more importantly, Europe. I think, like you said, the foundation is the most important part, getting the process and playbook in place. Because when you bring in a person who's sitting remote or further away, you want to make sure that you're giving them enough tools and ammunition to go out and be able to sell for you. Hence, we need to first get our act together over here and then bring those people on board. Important thing is, to answer your question, we are doing that more actively now than ever.
Thank you. Thank you very much for answering the question.
Thanks.
Thank you. Ladies and gentlemen, please limit your questions to two per participant. The next question is from the line of Siddhartha, an individual investor. Please go ahead.
Hi. Thanks for taking my question. Maybe to follow up on Rohit's earlier question, given there may be less mandate-driven growth, are we seeing disclosure management as kind of the key product that would drive growth forward, given it's more high-touch? It could be private or public companies. It's kind of, as you mentioned, a single source of truth, so maybe connected to a lot of the underlying ERP systems at a company and aggregating data. Is that how you all are looking at this product going forward?
Correct, Siddharth. We still see also runway for XBRL modules as and when mandates kick in, for example, ESG reporting mandates, etc. We see disclosure management certainly as a high-touch, more value-add, deeper driver of growth. You probably know this, Siddharth. I think many times in the past, we've talked about Workiva, which is kind of a very well-known name in the space of disclosure management, US-based company, $700 million in revenue, and still growing. This entire space of disclosure management, if you just take a look at kind of research reports, for example, Gartner or G2, etc., the space itself is growing because it solves for a problem which is ubiquitous in large enterprises, mid-market, across the world. More complexity, more reporting, single source of truth, deeper connections with the ERP system. We see this as kind of like a key driver.
Within that, there are flavors and add-on models. For example, sustainability reporting is another form of reporting as well. It's just that over there, there's an overlay or a jump-off point for Chief Sustainability Officers, for example, to be able to drive their reporting journey and, like Servo mentioned, their data collection, etc., etc. Yeah, we see this as a pretty significant deep dive. Having said that, I think we always have maintained the path, both on the tech side and on the RegTech side. We certainly see mandate-led opportunities as and when they come to also give us savings in new markets and new opportunities, and that's growth.
Definitely. Thank you. Just a quick follow-up was, I think, from what I understand, our R&D has been very efficient, especially on XBRL, because we use kind of Windows as the underlying product and built on that versus Workiva that did it from scratch. Is that same kind of cost efficiency being used for the disclosure management product as well?
Not bad. Thanks, Siddharth. One is, by the way, Windows is the disclosure management product. The XBRL module. Sometimes, I believe we invite you and all of you to come and take a look at our products as well. It would be wonderful to take a look at this in detail and see what it is that we do. We are really, really happy to walk you through it too. Our disclosure management product is Microsoft Office-based. That kind of gives a greater degree of comfort or a greater edge in the sense of it is the tools that CFOs are most comfortable with and most familiar with. We are using that as a bit of a competitive edge or a competitive advantage when we are talking to or when we are pitching our solution over others.
Understood. Thanks so much for answering that.
Sorry, just one more thing. The R&D and the cost efficiency for us is also in part because we are India-centric. We are headquartered here. As opposed to, if it were Workiva, a bulk of everything. We naturally already have kind of a cost advantage on the R&D side.
Yep. Got that. Thank you so much.
The next question is from the line of Hireendkar, an Individual Investor. Please go ahead.
Hi, am I audible?
Yes, sir, you are.
First question is, is AI expected to ease regulation compliance for mid and small companies? If so, then how will this impact our business?
Maybe I can just start off, and then I can also comment in. See, I think this question on AI is like a recurring question on how we see it either benefiting us or being a threat. We actually see AI helping us on two fronts. One is just greater efficiency within our own firm. The second is something that we can leverage in our solutions for faster or better or smoother customer experience. Hireend, when you're saying that it can help the smaller and mid-sized firms, I'll actually pass this on to Thomas who will talk about one of the solutions that we are just in the process of rolling out, which will exactly help the small and mid-sized firms leveraging AI.
Actually, with AI, we recently launched a product which actually can do auto tagging. Your regular way of actually filing returns, like a signed or a signed PDF file, we can actually pick up those PDF files, slice and dice it, and actually find out the right set of taxonomies and map it to the right set of taxonomies and can file an XBRL or XBRM also. We started with a test drive where actually we are using this tool. We are giving it to a set of people who actually can do upload a PDF file, get it auto tagged, validate it, and then do the filing there. That is actually tested out. We will be actually commercially launching it later, but we are using it. Also, we use a lot of AI in our development process also, whether we use it for documentation purpose, we use it for creating automation testing, etc. We use outpace training for a lot of our software. We do that.
Hireend, just to add to what Thomas said, because we spoke about the mid-market segment. On our specific side of the business, some of the markets where we go into, these are called business registries, like how we have MCA in India. Business registry mandates normally apply for big companies to very, very small companies. We believe that automated XBRLization of reports would be very useful for the small companies in the business registry market. Once we are able to successfully establish that this is working, we can actually take the first and build this out to purpose. Every marketplace has a business registry mandate. We also have a couple of other examples to use with AI, like for example, I think we have spoken in the past as well on the GST side for mitigation management.
Ma'am, sorry to interrupt. Can you please come closer to the mic and speak?
Oh, I'm so sorry. Can you hear me now?
Yes, ma'am. Clear.
I'm so sorry. Yeah, I'll speak a little slower also. We have also talked in the past of the use of AI in a couple of other instances, like for example, in our GST business where we used it to support our mitigation management system. Where you can automatically read the litigation or the GSTN notice, craft an appropriate first response. We have spoken about this. While there are a couple of these examples, what we also are looking at doing is creating a small cell or identifying a first pool of resources so we can have a sharper team within the company to drive AI initiatives across the firm. I hope that answers your question.
Yeah. My second question is, what kind of monetization have we done with Karnataka, Goa, and Telangana government? Can we get any major contracts ending because of the—any major contracts are ending this year? Can we disclose to the shareholder or contract-aging to the shareholder?
Hireend, I'll take the first question first, which is on Karnataka, Telangana, and Goa. We have signed these three MOUs with the three state governments. Like Balu already mentioned at the beginning, this business of ours, which is the MSME or the data tech business, is a pre-revenue business. At this point in time, we do not see these as, from a kind of a revenue perspective, contributing to revenues in the coming year in any significant or meaningful way. However, we believe it has large potential in the long run. Therefore, at this point, it is more about creating the right set of products, ensuring that there is kind of the value proposition established for the different stakeholders.
In fact, over the next couple of months, we will actually be rolling out some of the products in the market with some of the state governments. You will be seeing that, basically. We do not expect these to contribute in a significant way at this point. We see this as our in the longer term, really kind of kicking in and adding more value. I'll just pass this to Balu to add a little more.
I just said that we might be able to give you a better update or more useful update in this next conference call, which will happen after six months, where some of these products will have been launched in the market. We will know the use case for MSMEs. And once you have a sufficiently large use base, you have a critical mass, then the monetization will start happening from there on. We'll get a much better idea. The basic thrust is to work with the states in partnership, offer platforms which bring in substantial value to the MSMEs operating in those states, get them on board, build a community, and using that community, then start offering, then enable products such as lending products on the platform so that we start the monetization of whatever we are doing at this point of time. This is something work in process. We should be able to give you maybe a better update in the second call after the first half is over.
Sir, I just also ask because first point we said we are getting 35% of the revenue in some particular segment from South Africa. I just wanted to know, is there any major contracts ending this year that are not renewing for next year?
We did not say 35%. We said overall our revenue from South Africa is about 35%, of which, of course, the South Africa component is very, very significant in that. The contracts, we announced one contract this year so far, which is Qatar Central Bank. A few are being, we are chasing a few other subcontracts as we speak. That is part of the business process itself. That is what I would like to say at this point of time.
Okay. I just quickly add one more thing. The nature of these contracts in this business is, as regulators complete one part, they then understand what else is coming up and what needs to be done. That is when they might re-engage in a new contract. It is an ongoing process. Even if one comes to an end, there is a good chance or possibility that they might have more work that needs to be done. Let's not stop that if there is a contract, that then it's the end of the world. No. With the same regulator, things continue to move on. It is a long-term engagement to solve their problems at large.
[audio distortion]
Thanks alot.
Thank you. The next question is a follow-up question. It's from the line of Rahil Risani from MAPL. Please go ahead.
Yeah, thank you for the opportunity. Again, I have actually several questions, but to quickly take over a few. In SY24 for the South Africa order, we were very bullish on the SupTech segment and said that we are built for multiple RFPs and even said that next quarter we will have an announcement. In terms of the order wins, there is only one guy who recently from the Qatar Central Bank. If you can explain what happened here because historically, I believe, our very great segment has been 55%-60%.
The RFPs have been postponed. That is what I would say. A few decisions have not been taken. We did win PFRDA the previous year. By end of the financial year, we won Qatar Central Bank as well. It is not that the previous year was a washout. We did win two substantial RFPs. A few are all in the pipeline as well. There is a certain decision field involved. We do not have too much control over when the decisions are made. For example, we are bid with one of the Middle East regulators. I think the RFP, the bid had gone in maybe in September. Even now, it has not moved even into the evaluation process. There are institutions like that which happen.
Understood. Sir, if you can maybe share how many RFPs are ongoing right now where we are participating?
We can't give a number at this point of time. I would say a good handful of RFPs we are in place. Let me put it like that.
Understood. Okay. Next, coming to the cross-selling opportunity, I wanted to understand. We have 6,000+ customers. What issues are we facing to push more of our products to these customers? For example, the disclosure management module or the TaxTech products, particularly the value-added products in the TaxTech segment. We launched all these products a while back, and it seems that they have not scaled up as much. If you can explain what issues are we facing here.
I think great question, Rahil. There is ample opportunity for us to go and cross-sell. We are already in motion and play. In fact, we've already cross-sold disclosure management to multiple existing customers along with new logos. That is in place. What is important to understand, because there is no mandate, the urgency is not always going to be there. Is it a large enough problem for them to go after and solve? That is something that we need to sit down and discuss with the client. We need to understand what is their buying process, what is the urgency, and how big of a problem it is. There are conversations that are going on with multiple existing customers. We have to slice and dice because 6,000 is a large number. We need to prioritize whom do we go after first, based on geography, based on revenue, based on multiple factors. It is already in play. Good question.
Understood. Maybe on the urgency part, I was under the assumption that particularly for the DM module, the current potential customers were doing it more manually. This service would have been of great help to them. While I understand there is no mandate around it yet, maybe to better understand the urgency if you can talk about it.
I think very, very good question again, Rahil. I think the way companies buy software is something they need to understand. Typically, what happens is they need to allocate budget for a software as a part of their financial year planning. In many cases, they might be able to get an approval out of turn if the amount is not too large. In some cases, they need to go, especially larger, bigger organizations. They may have to go through certain approval processes, get it added to that budget, and they will eventually buy. That urgency will be filled in once they have the budget approved as well. They have a problem. They're staying. They're solving for it, but it may take time. That is what I mean when I say they may not see so much of an urgency at that point in time.
Part of our sales cycle is understanding how big of a pain it is, what value we can add and deliver, and then see if there is already an urgency or if there is some form we can create some urgency. In some cases, for example, giving an incentive for them to sign up sooner is a possible way of creating urgency. In some cases, they may be using another vendor, and the contract is up for renewal, and they may want to look at us and choose us as an alternate option. It's another case of creating an urgency. There are multiple scenarios we need to understand and the software buying process within the organizations. Definitely a good place. Definitely a big enough opportunity for us. We need to continue focusing and go case by case over it.
Understood. Just in continuation of this question, in Q4, SY24, you also explained that a leading indicator of a non-mandate business growing would be the growth in the pipeline of customers as we find more pain points. Maybe if you can explain what more pain points you have found compared to last time and how has this pipeline grown?
I think in the interest of time, I don't want to get into too many pain points right now. What I can say is the pipeline has been growing, growing significantly, both with the existing customers to cross-sell. Along with that, we've run a marketing motion where we are reaching out to creating more awareness, having those conversations with new prospects, and identifying where we can sell more. I'd love to maybe take it offline if you're interested just to know pain points and how to solve for them, Rahil. I think for the audience we have today and the time limit, I'll skip the pain points for now.
Of course, sir. We can connect offline. Just on the track that we had the.
Right. Sir, I would request you to please come back in the queue. The next question is from the line of Rohit, an individual investor. Please go ahead.
Thank you. Just to follow up on my previous question. I mean, in the three buckets that we talked about in terms of XBRL and the ESG and then the disclosure management, could you help us understand the sales cycle for each and the, I mean, not the exact pricing, but the difference in the quantum of pricing for each of the products when we sell? If, let's say, it goes as a solution, then what happens in terms of pricing?
It's always a pleasure hearing your questions, very interesting questions. You're going to ask me to tell my secret sauce out here in the public domain. I'm not going to do that right now. What I can say is there is a significant difference between what we have traditionally priced towards what we are doing for disclosure management. We see there is traction and a lot of demand for the disclosure management as a product, as well as we are able to demonstrate value and hence charge more compared to what we have traditionally done. I'm not going to give any more details than that. Maybe you and I can catch up for a cup of coffee, and then we can talk a little bit.
Thank you. I mean, that gives me a sense of what you're trying to say. So this is very helpful. Thank you so much for the call.
Sure, Rohit. In summary, for everyone, the disclosure management solves certainly a pain point in the CFO's office. The XBRL is a compliance requirement. Both need to be met. This one actually definitely comes at a multiple value of the XBRL module. Any other questions?
Rohit, does that answer your question?
No, no. That's it. Yeah, that's it from me. Thank you so much.
Thank you. The next question is from the line of Mitesh Mehta from Long-Term Investment Group. Please go ahead.
Hello. Am I audible? .
Please go ahead.
Yeah. Yeah. Thank you for taking my question. Most of my questions are being answered. One question I have regarding tech stack. Like what is the when are we expecting the tech stack segment to turn around? What are the further planning for things?
I think last year we have put in the hard work of building the products, and that's why we went into red. I'm extremely positive and confident about turning around tech stack this year because those products will now be out in the market and should be driving our top line.
Okay. Are we planning to expand to other geographies as well in TaxTech segment?
Yes. So India.
India and Malaysia?
Yes, absolutely. Malaysia was our first foray internationally, and we continue to push and gain market share both in India and Malaysia. We are also seeing opportunities coming up in Singapore and UAE, for which we would be building those platforms looking for future growth.
Okay. That's it for my side. Thank you.
Thank you. Ladies and gentlemen, that was the last question for today's conference call. I now hand the conference over to the management for closing comments.
Thank you once again. Thanks for coming in good numbers and asking your questions. We always find it very instructive to listen to your questions. We always go back and look at it more deeply. We do get an aggressive information that we can use going forward as well. Thank you once again. As per our normal practice, we typically hold our conference calls after every six months. That will continue this year as well. We could meet on our results conference call in the second half of the year after our Q2 results are published. Have a good evening, and thank you so much once again.
Thank you. On behalf of IRIS Business Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.