Ladies and gentlemen, good day and welcome to the IRIS Business Services Limited Q2 FY 2026 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 Ms. Asha Gupta. Thank you, and over to you, ma'am.
Thank you, Ishan. Good evening to all of you. Welcome to Q2 FY 2026 earnings call of IRIS Business Services Limited. The results and presentation have already been mailed to you, and you can also view it on our website, www.irisbusiness.com. In case anyone does not have the copy of press release or presentation, or you're 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 and CEO, Ms. Deepta Rangarajan, Co-founder and whole-time director, Mr. P. K. X. Thomas, whole-time director and CTO, and Mr. Vineet Kandoi, Chief Financial Officer.
We will start the call with a brief overview of the quarter and half-year gone by, and then it will be followed by a Q&A session. Before we proceed with the call, I would like to remind you that the discussion may contain forward-looking statements or that may involve known or unknown risks, uncertainties, and other factors. It must be viewed in conjunction with our business risk that could cause future results, performance, or achievements to differ significantly from what we have expressed or implied by such forward-looking statements. Having said that, I will now hand over the call to Mr. K. Balachandran. Over to you, sir.
Good afternoon. I hope all of you can hear me. Welcome to the IRIS earnings call. We are grateful for the good turnout and the time you are spending with us. This time around, we have advanced the call to 4:00 P.M. from our usual 5:00 P.M. slot. If that is inconvenient, please let us know. We can revert back from next time onwards. From IRIS, as Asha mentioned, we have Deepta, Thomas, Vineet, and I, apart from our senior management folks as well. We have uploaded an investor presentation on the Exchange website today, a couple of hours ago, and we hope that some of you had an opportunity to see this as well. This time around, in the investor presentation, we have disclosed information related to product line, revenues, and annual recurring revenue trends.
Now, as all of you are aware, we had a conference call this July when we talked about the then impending divestment of our TaxTech business. I'm happy to report that the transaction has been consummated, which also mentioned that at our AGM, and you are seeing the exceptional income in our income statement in the Q2 results. Now, coming to the first half results, obviously, the SupTech segment of IRIS has given a boost to our revenues, while in the RegTech segment, we have made significant progress in expanding our offerings in the non-mandate areas, which is all about going deeper in the reporting supply chain of enterprises from a financial reporting point of view, and now going forward, even from the ESG reporting point of view, which is non-financial in nature. Now, let me dwell a bit on our RegTech segment.
We have articulated in the past that our intention is to invest and grow this business. Our focus is unequivocally on growing the ARR of this business line. Within the RegTech segment, we have IRIS CARBON and IRIS iDEAL, which is the automated bank reporting solution, as our main business lines. Now, I'm happy to report that IRIS CARBON's ARR, annual recurring revenue, has grown 14% in the first half compared to the ARR figure as at March 2023. We are happy to note that the bulk of this ARR growth has also come through our disclosure management offering, which is, as I mentioned earlier, it's all about going deeper into the enterprise. Now, I should mention that we did face a revenue drop, though not ARR, in our IRIS iDEAL business, which is our bank automated reporting solution.
This is mainly owing to some delays in purchase decisions by the prospect banks. A good part of IRIS iDEAL revenue, which we have mentioned in the past, is coming through license and implementation sales, and therefore, there is a bit of lumpiness associated with the revenue recognition in this particular business line. Having said that, we are increasingly offering IRIS iDEAL customers a subscription model as well. We are, I would say, cautiously optimistic that these postponed purchase decisions would come back to the table, and it is already starting to happen from the second half of this year onward. We are not really troubled, except that there has been a bit of a blip when you look at the revenue accrued in IRIS iDEAL, but not necessarily in the ARR. ARR of IRIS iDEAL is going up as well. Now, let me come back to IRIS CARBON.
Of course, this is a business where we are gearing up to scale substantially going forward. There is action on the sales, marketing, and product development fronts as we prepare to move to the next level. We are confident of making solid progress over the next few years to capture share in this market, which is in an early stage of growth. There are multiple industry reports about this market. One industry report, which we recently had subscribed to, is talking about a $7 billion market over the next 5-6 years, growing at about 15%-17%. This is an early stage, and we want to make sure that we make the best of this growth in this market.
Now, we will spend in a measured and well-thought-out manner, which is what we mentioned in the past as well, while we increase investments in key areas such as sales and marketing, along with the product enhancement, which is also a very important area because things are changing fast. We need to make sure that we are keeping up with what is required in the marketplace. Coming back to our SupTech business, we are happy to report that we have added two new logos, which we reported as well in the first half of the year, which is the Qatar Central Bank and the Qatar Tax Authority. The pipeline going forward is looking quite interesting as well. Our foray into the direct tax returns through this Qatar Tax Authority should help us to expand our offerings in similar areas.
This is analogous to what we have seen in the deposit insurance management space, where we are currently implementing something in South Africa, and we see this vertical is something which is again looking promising when you look at authorities in other countries as well. Of course, early days, but the idea is to build expertise in verticals, which in the SupTech space. Now, on the financial side, our balance sheet obviously has strengthened considerably post the divestment of the TaxTech business. Investment and cash right now in the books is at around INR 170 crore, while the net worth has moved to INR 189 crore from INR 76 crore as at March 2025, and the book value has shot up to INR 92 from INR 37. This is a small summary of what we have done in the last six months. Of course, we are here to take questions.
We are not going to go through the number narrative because that is anyway with you. All of us are here, and we welcome your observations, questions, etc. Thank you so much.
Ishan, please open the floor for a few minutes.
Yes, ma'am. 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 touch-tone 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'll wait for a moment while the question queue assembles. The first question is from the line of Ankit from Adezi Ventures Family Office. Please go ahead.
Hi, good afternoon. My first question is with regard to the margins that you've kind of seen in the hedge fund of this year. I mean, it's a drastic drop. I understand it's because of investments, but it's still a drastic drop in terms of settings. Do you see this kind of margin trajectory? I mean, even if I look at 8% operating margins that you were discussing in Q2, do you see this kind of margin trajectory for H2 as well? Or do you see a strong recovery coming ahead because of some reasons?
Okay. As far as margins are concerned, of course, we do not really give any forward-looking statements, but we have seen in the past as well, the second half, which usually brings down the first half. Having said that, we will continue to make investments in our RegTech space, and that would have the benefits with the lag coming in terms of revenues. That is what I could say at this point of time.
Okay. So, I mean, was there any rationale kind of behind such a sharp downtick in these margins and such a sharp ramp-up in investments? I mean, the point being that our profitability has dipped so significantly, and there was not even any sort of forewarning to the markets that this could happen. I just wanted to check that was this a course of action which was kind of planned in a certain way that such a sharp downtick would come in?
No, we have mentioned in the past that our focus is to grow the SaaS business, and we will make investments to grow the SaaS business, which is in sales and marketing primarily. That we have started doing because we have rolled out the disclosure management offering, and we need to make sure that we reach out to the market and there is an initial period before the momentum gets built. That all is happening as we speak. If you look at the sales and marketing expense, it has gone up, and that is mostly in the SaaS business. Now, we are trying to play a balancing act where we feel the SupTech business would compensate to some extent in terms of its growth and margins. In fact, the margins are slightly improved in the SupTech business.
Having said that, we will need to make the investments for ARR growth. We are very clear that ARR is what we need to focus on, and that would take the company forward. That is the trajectory we want to pursue. We will try to play it in as balanced a fashion as possible. Now, with capital at disposal, we have to make sure that we make the right moves to grow the ARR.
Any indications by till what time could you kind of remain in these single-digit margin areas again? I mean, how long could this take in terms of the investment time frame that you're looking at?
No, it's a tough question to answer. I think we had to cross a threshold in terms of our SaaS business. And threshold, I would say, is maybe some time away. So we need some indication. If you look at the global SaaS business, what we have seen is typically people spend for $1 of net new ARR, they spend maybe $1.52 of sales and marketing. We are much below that. But having said that, we have to increase those spends. And we are looking at growth, and we are looking at making sure that we've come to a point when those SaaSes are all about scale. And once the scale comes through the threshold levels, then the overall there's a lift in profitability.
Okay. Sure. You were talking about the SupTech business earlier. If I look at the SupTech business in terms of how is the pipeline ahead, how does kind of growth look out for the SupTech business for, say, the next 1, 1.5 years versus your current phase? Are there any major contract rundowns, etc., that we should be aware of?
You're talking about the contract getting rundown? Is that what you're saying, that we are utilizing the SupTech?
Yeah.
Yeah. We are constantly looking at building the pipeline, the pipeline building process zone. We remain optimistic of a decent growth in the SupTech business, for sure.
Okay. Sure. I'll come back and queue for further questions. Thank you.
Thank you. The next question is from the line of Rahul Bhansali from Parami Capital. Please go ahead.
Hi. Thank you for the opportunity. Am I audible?
Yes, you are, Rahul.
Thank you. I just wanted to understand on the disclosure management, could you please give us an update on when we can see revenues coming through from there?
We have mentioned that our ARR for the first half has grown by about 14%. We are giving the numbers in our slides as well. If you look at the overall ARR for the company from INR 28.4 crores for IRIS CARBON, it would have moved from INR 28.4 crores to maybe INR 32.4 crores. This is net new ARR. A bulk of this has come from the IRIS Disclosure Management that we just rolled out in the marketplace. Early days, but it has given us net new ARR.
The number of clients, I guess, is much lower because I remember in the AGM, we mentioned that the pricing is an order of magnitude higher than the XBRL pricing that we have, right?
The average ticket price is certainly much higher.
Understood. Could you speak about Board International, please?
Board International, I would maybe request Anu to give some color to the Board International partnership. Anu heads our IRIS CARBON as a business line, Anuradha. She's here. So over to you, Anu.
Very good evening, everybody. Board International is a very key player in the EPM space. They have solutions around consolidation, planning, budgeting. They have customer base both in Europe, U.K., and also USA. We have seen this to be a beginning of a good partnership where they are also in the space of the Office of the CFO offering solutions. Disclosure management seems to be a very good aligned solution that they can offer to their existing customers.
Any data on what the contract terms are like? I mean, duration, is the go-to-market together, etc., or is it that they take over the go-to-market? Will our product branding be separate, etc.?
Overall, unfortunately, on the contracts, we are not in a position to communicate anything. Overall, both the IRIS CARBON and the Board platforms are integrated. That should give a very powerful value proposition for customers. It is early days. We just signed the partnership, and we need to kind of work between both organizations to set out the modalities and the next steps around this.
Understood. Thank you. My last question is, I mean, it's very heartening to see the increase in sales and marketing and our aggression there. I mean, where are we in the timeline in terms of investing there? Have we done with our investments, or do we have more ahead?
The investments in sales and marketing?
Yes. Yeah. I mean, we have seen our employee expenditure increase sharply by around INR 7 crore. Are we done with our investments, or do we expect more going forward?
We need to invest more. We are very clear that we need to invest more because we are looking at a very significant ARR growth rate going forward. For that, we need to keep on investing.
Thank you. Looking forward to the journey ahead. Thank you so much.
Thank you.
Thank you. The next question is from the line of Yash Naik from KamayaKya Wealth Management. Please go ahead.
Thank you for the opportunity. As we already mentioned, we are sitting on the cash balance of over INR 170 crore. Could you outline your capital allocation strategy for this? Are you prioritizing any acquisition or new product development or any other specific initiative? Also, around INR 95 crore is under the non-current assets. Could you explain the nature of that amount also?
We need to talk about that.
On the non-current asset part, spark in the IFD for the time being, since I invested in investment in mutual funds, which is purely in the current asset. I think the non-current asset specially is where we have invested in a fixed deposit with banks for more than 3 months.
Very much. Yeah. We used this pool to build our business organically from an inorganic perspective early days. We are just speaking to a few people to understand other possibilities where we can look at opportunities in a very prudent manner. These are very early days. Right now, the focus is to build the business organically. We are in a position to do that because we are comfort on the balance sheet.
Okay.
Anuradha, looking ahead, what do you see as our key growth engine? When the primary thrust comes from the CARBON or maybe ESG position or from the RegTech offering or the data analytics that we are currently in. Could you shed some light on that?
Of course, CARBON is a priority area for us. We are looking at growing the ARR in a robust manner.
The data tech part is still pre-revenue. We are rolling out an offering in the market. We will be in a better position to talk about this maybe in the next conference call after the next 6 months. SupTech is a business which is growing at a good pace, and we continue to nurture that as we go forward. IRIS iDEAL as well is a business which is now expanding in markets outside India. We are trying to deepen the offering by also looking at an end-to-end solution using growth extraction as well as analytics on top of the basic XBRL-based regulatory reporting. These are the areas we will continue to invest and nurture.
Sir, the employee costs have increased significantly in this quarter. Also, could you share the headcount increase in the H1?
Headcount increase would be about 8%, roughly.
Okay. Is it related to the new hiring from maybe senior-level hiring, or is it for the increase of the existing employees?
There were a few hires at the senior-level as well. Senior and, I would say, middle-level we have hired because there are requirements especially from IRIS CARBON point of view. So that we are done.
Is it for the sales and marketing or for the product development?
I would say it's a combination of both sales and marketing delivery and product development.
Okay. Sir, on the credit side, could you share the commercial role and the scaling for that? Are you planning to capitalize that, or are you planning to get it free of cost?
Peridot, at this point of time, we are trying to enhance the offering. We already enhanced it, and now we have an invoicing solution on top of Peridot. We have the MSMEtv , which is a channel for offering content and tools for the MSME to build awareness, expertise, etc. We have another layer for matching government schemes. The fourth layer, which we will be introducing in a pilot manner by end of this month or early December, would be a lending layer. Using this, MSMEs will be able to access loans from potential lenders through our platform. We are not a lender, but we will be able to offer lending products through the platform. These are the four layers we are building, and these are at a pilot stage.
Once we run it and we understand the whole process and how the MSMEs are reacting to it, we look at a scaler. Towards that, I think we'll be able to give you more details maybe after some of this or going through the papers. Yeah.
Are you planning to capitalize that or give it up for free?
A little early at this point of time. Having said that, this is a business with a different set of characteristics. We would like to definitely run it in a combatant-led manner going forward.
Okay. Sir, beyond that, we have the data reach funding. What concrete step are you taking to monetize your data asset and build a scalable data-led revenue stream going ahead?
See, we work with data. We are not working with proprietary data. We work with data. We build solutions using data and logic and a set of features. That we continue to do. Even in the MSME space, since we are a GSP and IRP even at this point of time, we will be looking at how to leverage that in offering solutions both to the MSMEs and the lending community. That angle will continue.
Since the ESG sustainability reporting remains a strong global thing, with what new development of product finance are you pursuing on the ESG side? Has this started contributing meaningfully to our revenue or any color?
On the ESG side, do you want to come in and give some color on that?
We have a few modules on the ESG side, both on the data collection side, sustainability reporting, also, of course, integrating with our core disclosure management platform, plus integrating and aligning several ESG frameworks, global ESG frameworks. We are already in the process of, we have rolled it out in conversations with various prospect customers to be able to get our early customers on the ESG side. Advanced stages of conversation with both customers and partners. We have what we believe is a pretty strong MVP product on the ESG side. We are in the process of building the sales site.
Do we have any current revenue from that, or it's currently in?
Sorry to interrupt. Mr. Yash, may I request you to join the queue?
Okay. Okay.
Thank you. The next question is from the line of Lakshmin arayan from Tunga. Please go ahead.
Hi. I have a few questions. Just want to understand how many permanent employees are there on roles for us, and how many are non-permanent?
Permanent employees would be about 40, and about 60 could be non-permanent.
Okay. Okay. So there has been a reduction from the March end because of some reallocation of people to the other company, right?
That's right. That's right.
Okay. Now, what is the mix between SupTech and RegTech in terms of the, I mean, you said 440 employees, right? I want to understand what is the mix? How many of them are in SupTech business, and how many of them are RegTech, and how many of them are in TaxTech?
Okay. So the TaxTech, roughly about close to 100 people have moved out. In RegTech, right now, we might be having close to 240-250 people. And SupTech would be about 150.
TaxTech?
TaxTech is a business that was divested that had about 100.
I mean, I think anybody still, I mean, any small business will still have it, or it's everybody has actually kind of moved out?
Everyone from the TaxTech business has moved out.
Got it.
Yeah.
No, because it appears in the segment itself. I was just wondering whether any employees have still been salaried in this quarter. I think that's the reason why I asked this question. In terms of sales and marketing, what is the number of people we have, and how many people we have increased in the last 6 months over the previous 6 months?
We were to come back on the increased part. I'm not having it right away. If I include the marketing team, we have a good marketing team now based out of Hyderabad for CARBON. If I include that, and if I include the overall across different divisions, we'll be having around 50 people in sales and marketing. All of which are good numbers in the SBR side, creating leads around 360.
Okay. There was a senior person based out of Delhi. Apparently, after she left, has that post been filled, or how are you thinking about it, and what happened to the Delhi office?
Not yet, sir. We are in the process of filling the post. We are actually looking to get someone here in Bombay.
We'll be Bombay-based. That is our idea. The process is on to replace with the right senior guy.
Delhi office is still on, right? How many do you have in Delhi office?
It has been downsized, but it's still there are about 4-5 people.
Okay. Outside India, what is the number of people we have?
Outside India is about 2-3 people.
Okay. That's good. Okay.
Because even now, at this point of time, the sales and marketing is primarily operated out of India.
Okay. So when you say you're investing more, what does that actually mean in the business? Is it more to do with the tech team in India, or are you attending some conferences? Or when you say you're investing more, can you just help me understand what does that mean?
Okay. There are two or three elements to it. One is, of course, we added people in sales and marketing. Of course, in product development as well, because we have built ESG modules and further enhancements. Coming to sales and marketing, people do travel quite a bit. They go for conferences and they interact with customers. That is something which has been happening quite intensively over the last few months. That will also lead to increased costs, which you have seen in our numbers. Outside that, we are looking at placing a few people in the markets abroad as well. That work is also something we will be appreciating.
Got it. Okay. Okay. Thank you so much.
Thank you. The next question is from the line of Ankit from Adezi Ventures Family Office. Please go ahead.
Yeah. Hi. My question is with regard to the South Africa contract that you're having with SupTech. How long is that contract still scheduled to go on? When do you start seeing a dip in revenues coming in from that contract?
The current contract should be completed in this financial year. Having said that, which is something I mentioned in the previous call as well, we are in discussion with the client in terms of going deeper into the requirements of the deposit insurance solution. We hope that this will be something we will continue going forward.
Okay. Okay. Secondly, I just want to understand. I understand you're investing in employees and the business, but could you help us with what exactly happened in RegTech? Because it seems like a business which was doing, say, INR 7.5 crore-INR 8 crore over the last half of the year is currently in loss. Even though sales have been growing slightly. What exactly happened here? I can understand investments in employees, but I do not think that would be to the tune of this number.
There are two parts to it. One I mentioned initially that the iDEAL revenues, there was a dip by about INR 2 crore, which is mentioned in the slides which I uploaded some time back. That has created some dip in top line. Top line has shown a decline in RegTech for the first 6 months, while CARBON has shown a small increase, though it is still, I would say, fairly flat. On top of that, we have spent on sales and marketing and product development in CARBON, which would be maybe as much as 50% more than what we are doing in H1, FY 2025. A combination of this would have reduced the margins for the company on the whole, and obviously for RegTech as well. Of course, SupTech is profitable, but RegTech has made a loss in the first 6 months.
I would hasten to add that all this is temporary. We need to build the book. We need to build ARR. Once we cross the threshold, then we'll get the economics which Sadri is famous for.
Okay. With regard to the cash that you have in hand, any discussions on inorganic acquisitions or any concrete movement on that, or do you plan to kind of use that to invest with other businesses?
I missed that, [crosstalk].
Inorganic acquisitions. I think you already answered. You can go ahead.
Inorganic, we haven't initiated anything right now. Very early days. Having said that, we are speaking to a few people we know personally, trying to get their views as well, what kind of strategy we should formulate here. We are cautious. We are frugal, and we want to make sure that we build the whole thing in a very sensible manner. We haven't definitely ruled this out at the early stage at this point of time. If you look at the whole thing, the cash came to the company only by end of August or middle of August. We are just starting the whole thing and looking at how this can be managed.
Is there also a chance that some of this cash might be used to invest into the business rather than inorganic?
Could you repeat, please?
Is there also a chance that some of this cash is used to invest into the business directly rather than inorganic acquisitions?
Absolutely. I think, like Bali had mentioned earlier, we are definitely going to be investing on organic growth. We think there is enough headroom for that. I think he mentioned this earlier. He said, having said that, I think someone else had also asked a question around possible inorganic. I think it is early days to kind of comment on that. We will definitely be using this to invest in the businesses to grow organically.
Okay. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Siddhar Shah, an individual investor. Please go ahead.
Yeah. Hi. Thanks for taking my question. One was, I think overall our ARR revenues seem to be slightly more than 50% of our total revenues now. Is that geographical split very different from kind of the split you've given in the presentation, where about 50% is Africa?
Yeah. You're right. You're right. I mean, there will be, Africa would be more one-family nature at this point of time. The ARR revenues would be more from Europe and the U.S. and some action from the Middle East as well.
Okay. So as expected, predominantly the U.S. and Europe.
Correct.
Especially from the RegTech point of view, correct.
Yes. Yes. Yes. I think just on this question of cash, you all had done a prep, then you all sold this business, and you all have a large amount of cash. If no inorganic opportunities come, would you all consider doing a share buyback at some point?
Yeah. I thought it was too soon to say. I think right now, this is definitely not on our minds because we feel if you want to grow, let's say, 35% ARR in the RegTech space, we need to make sure that we have enough ammunition kept dry with us.
I'll just add to what Bali said. If you take a look at the SupTech space, if you take a look at CARBON, which is enterprise cash, and if you take a look at iDEAL, which is BFSI, and we map the competitive landscape, most of our competitors are international, and they have a lot of gunpowder. We're just about, so we believe that there is headroom to grow and that we would like to use this to grow the business line. While we will not rule out anything, of course, at any point in time, we'll soon to.
Yeah. You know, to think about this, I would clearly say that we will invest in the existing business lines and grow it to a level where it is starting to generate good profits and good margins, especially RegTech. Then I think this question would be more germane.
Understood. That's very helpful. Thank you so much.
Thank you.
Thank you. The next question is from the line of Nimish Guhil, an individual investor. Please go ahead.
Yes. Can you hear me? Hello?
Yes.
I want to ask you a query. You have said that this is your first supervisory data collection platform project from the state of Qatar. Are there other similar kind of projects which are lined up for in discussion stage?
From a tax filing point of view, of course, this is the first project. We are hoping to get the initial set of filings completed over the next this semester itself, post which we'll be approaching other prospects. Of course, we are initially discussing some of the stuff we are doing in Qatar. Right now, we are keen to make sure that the platform is functional, and this is something we can start showcasing. This is an important opening for us, and we hope to build on that.
Okay. I'd like to state that there are two contracts you have won in this quarter. So how many long-term contracts are you currently having, and how many further are in pipeline discussion?
I mentioned in our IRIS report when we had mentioned this in the founders' letters that this year we are looking at four new logos to come, four new contracts to come, out of which two have come.
Okay. Okay. Recurring revenue, currently, I see that there is slight growth in recurring revenue. Can we expect similar kind of growth, or it can be more from next financial year?
SupTech Aruta Group, for the company on the whole, I can say for CARBON point of view, our internal target is to grow ARR 35% for this financial year. We have done 14%. We are hoping to hit 35%. Okay. I'm just sticking my neck out and saying that this is our internal target for CARBON for this year. For others, we don't want to give a number right now. We have seen for 6 months how SupTech ARR has grown. We are given that. Yeah. We should not look at that business in a similar vein such as the SaaS business, which CARBON is. Even the iDEAL business, we have mentioned that there is a combination of license and implementation sale. At times, we also sell based on subscription basis. It all will be contingent upon how the banks want to structure the purchase process.
Those two businesses are different, while CARBON is a proper SaaS business where we are looking at a very good ARR growth rate.
Next thing is, currently, we see a lot of uncertainties from term policies on CARBON issues and ESG. So can you give a color of how things you are looking to pan out in the near-term future and next five years, both things? For IRIS CARBON business and other ESG initiatives or IRIS.
You're talking about policy uncertainties globally, right? Therefore, the impact on the businesses?
Yes. Yes.
Yeah. So I mean, clearly, there has been an impact. Already has happened. For example, some of what we were expecting to have rolled out in the ESG space in Europe, I think we've spoken about this in the past, they slowed it down. They had this thing called omnibus. A lot of ESG mandates started kind of slowing down. There was a bit of a cascade effect. There was also supposed to be an ESG mandate rollout in the U.S. that has also slowed down. From an overall mandate perspective, there could be a bit of a slowdown that we see as a consequence of this. I don't know that we can say what will happen in 5 years, but this is certainly true for the near term.
I think having said that, some of the solutions or modules that we are offering, even in ESG and also in the total management, are not necessarily very tightly coupled only in the context of a mandate. We are already beginning to kind of decouple from the mandates. There are, of course, modules that support mandates as and when they come. We have seen headwinds, and I think we have talked about it as well, especially in the near term.
Our focus has been to also make sure that we build value for the customers outside of meeting the mandate requirements. That is starting to bear fruit.
Okay. Lastly, we have seen that employee and other expenses are climbing quarter on quarter. Are these one-time, or is it going to be for next year also, it will be the same thing?
Yes. You're talking about the—
Employee expenses? Could you repeat the question?
Expenses have been climbing quarter on quarter from last year. Sales are not improving in tandem. Is this like you are doing some employee hiring and expenses in R&D? Are these one-time expenses? Can you give a color of what is happening and when we can see stabilizing margins and everything?
No, these are not one-time expenses. What happens is, of course, you spend so that you get customers, and you build the ARR. But the ARR actually then starts getting reflected in the coming months in your revenue while your expenses get immediately captured in the expense statement. If you look at the first 6 months, we might have grown our employee expenses by 26%. The ARR growth in CARBON has been 14%, but 14% is not getting reflected because you have, there's a time difference, and it will come as and when the accrual starts. Accrual is spread over the next 12 months. There is a timing difference part.
One thing I mentioned in the early part of the conference call as well, the industry standard in the SaaS business, I'm now talking about CARBON, etc., that people spend, say, upwards of $1.5 in sales and marketing for $1 of ARR. Okay. Actually, if you look at the working hours, the number of people talking about 2.3. Of course, we want to be much more cautious, but we will still spend so that we build our ARR growth, which usually gets reflected in the next year or even sooner than that. Typically, suppose you have a, say, 30% growth, that 30% is fully captured in the next year. That's the way the whole math works, correct?
Okay. Okay. That's great. Can you tell what will be the operating margins normalized when all these things have stabilized? What should we be expecting from the company?
Maybe on this particular point, I will come back because we need to process threshold. And once we process threshold, I think we'll get better visibility on operating margins. Right now, I don't want to talk about that. You can look at some of the companies in the marketplace, global marketplace.
We are looking for something like, it is just for understanding what should we be expecting in the future when everything has come into place. You said that front-loading of expenses is happening right now, and it will catch up with the business. If a calculation or something like, what is the range we should be expecting in the future? Maybe six months or one year afterwards, or what should be the range we should expect the business should be?
I don't know. I don't want to give any explicit answer on this. You have seen our SupTech business went to about 30% operating margin. For the SaaS business, we need to come to a higher scale before we start talking about this.
Sorry to interrupt. I request Mr. Nimish to rejoin the queue. Thank you. The next question is from the line of Raghav from Kamakhya Wealth Management. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Sir, about 56%-58% of your revenue this time is recurring in nature. How do you see this proportion trending over the next, let's say, 2-3 years? Are there any specific segments where you expect the recurring share to structurally increase? In addition to that, if you can give some top-line guidance, how are we going to see that trajectory for the overall business?
You're asking about the percentage of recurring business and how we are expecting to see it trend over the next two, three years in the context of the overall revenue. Was that your question, Raghav?
I'm asking about the recurring revenue first in the coming next 2-3 years. How do we see this proportion trending? Then I asked about the total revenue growth that we are projecting or we are targeting.
Recurring revenue should trend up because the RegTech business share would start going up, and that is mostly recurring revenue. The SupTech business does have a lumpy element in terms of one-time sales. We will keep on growing that business. The pace of growth at that business does compare to the pace of growth in the ARR-driven business. The assumption is that slowly but surely, the recurring revenue percentage in the overall pile should go up. That is the first point. In terms of if you want to give a we do not give guidance for the top line. That is for sure. I will give some idea of what kind of ARR growth we are looking for this financial year from the CARBON business. That is what I can say at this point of time.
Understood, sir. And sir, building upon the last candidate's question, do we see any revenue booking from the ESG and sustainability reporting?
We are working towards it. Raghav, obviously, there is a pipe. There are interesting, promising conversations. We certainly hope to, by the time we come to the next call, be able to share with you that we have acquired our first batch of customers on the sustainability reporting module side as well.
is a clear synergy between the discussion management for financial reporting and ESG reporting because if you are a large enterprise, you can use the same module in a very meaningful manner, and you tend to get very solid productivity improvements, efficiency improvements, accuracy, etc. This story is compelling, and we hope to get this story communicated to our customers going forward. It is already happening. We need to see the results come out.
Understood, sir. Sir, as you venture into new geographies, what is your growth strategy for acquiring new clients? Specifically, how are you approaching go-to-market in these regions?
Did you say new geographies?
Geographies. New geographies.
No, in the SupTech space, of course, we do look at either new logos or new geography. That's an ongoing process. That happens because we interact with regulators across the world in multiple forums. We offer our shops. We offer pilots, etc. That's an ongoing process. We hope to do this more in Asia and Africa, where we have a very good presence and list of testimonials. Not that we are not looking at other markets, but these are good markets for us. As far as CARBON is concerned, of course, we have presence in countries through our SupTech offerings in Asia and Africa. Going forward, we would also offer CARBON through partnerships in those markets as well. Right now, our focus is to build a book in Europe and the US, where the value proposition is quite compelling.
Okay, sir. And sir, is there a good market for CARBON in India?
We are beginning to explore the opportunity. In theory, yes, Raghav. There should be a good market because India also has a lot of large companies, a lot of large groups that would be able to benefit from solutions both on the disclosure management side and sustainability side. We have already conversations with some of these large groups in India as well.
Okay. Okay. Thank you so much. That's awesome, I think.
Thank you. The next question is from the line of Yash Naik from KamayaKya Wealth Management. Please go ahead.
Hello, everybody.
Yes, Yash.
Yeah, you have written a number of product IP over the years. Could you walk us through your accounting and amortization policy for that IP?
Could you repeat, Yash? A little unclear. Sorry.
Accounting policy for what, Yash? You were saying something about accounting policy. For the IPs that you have.
For the IPs.
For the IPs, you are saying?
Regarding the amortization of your IPs, sir.
Yeah, yeah. From 5 years from the put-to-use date, we amortize the IPs over the period of five years from the put-to-use date. That's the policy right now.
Okay. Thank you. All the questions are covered. Just one suggestion. There is very much disturbance from your management end. Could you please, next time, do the adjustment from that side?
I'm so sorry. Did you say that there's a disturbance from our side? That you're not able to hear us clearly?
We are unable to hear you, madam, properly.
Sincere apologies. We'll definitely get it corrected.
Okay. Thank you.
Thank you.
Thank you.
Thank you for the feedback.
Thank you. As there are no further questions, we have reached the end of the question-and-answer session. I would now like to hand the conference over to management for closing remarks.
Thank you very much once again for coming for this conference call and good numbers and listening to us and posting your questions, which are very important for us as well to understand your thoughts and your perception of the company. One thing we can say is that we feel we are on a good wicket, and now we are creating conditions for sustained growth over the next many years for IRIS, which can lead to the next scale of business and higher value creation. We expect to meet you again after six months. Thank you so much.
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.