Ladies and gentlemen, good day and welcome to the eMudhra Limited Q1 and FY 2025 earnings conference call. As a reminder, all participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Venkataraman Srinivasan, Executive Chairman. Thank you, and over to you, sir.
Yeah. Thank you very much, and good evening to all of you, and welcome all of you to this conference call, Q1 FY 2025 earnings conference call. I am happy to address you today and share our quarterly results. We have started FY 2025 on an optimistic note and a good performance across all metrics. Our total income increased by 17.7% year-on-year, with the EBITDA and PAT growing by 19% year-on-year and 11.1% year-on-year, respectively. In India, we saw strong deal momentum in the BFSI sector for integrated eSign , eStamping through emSigner, particularly for customer onboarding and lending workflows. We also engaged in several important digital transformation projects in eGovernment. However, government projects faced delays due to the central elections. Our presence in the United States is strengthening, with increased penetration for certificate life-cycle management and PKI offerings. We have also secured deals in the education sector through Ikon's established relationships.
In Europe, the introduction of European identity wallets is expected to present better opportunities for trust services and enterprise solutions. Furthermore, we have established a local presence in emerging markets such as the Philippines and Malaysia, positioning ourselves to leverage digital transformation opportunities. Our investments in Kenya are yielding positive results, supported by a strong national drive for digital transformation. Additionally, we are engaged in several PKI deployment opportunities as part of digital public infrastructure rollouts in various African countries. We are investing in enhancing our services capability to meet professional needs for product implementation. This investment also aims to improve our ability to upsell into target customer spends for cybersecurity, including security operations, data privacy, threat intelligence, and generative AI. In line with this strategy, we are acquiring Two95 International-based in New Jersey to strengthen our services capabilities and gain access to a new customer base for our products.
This acquisition is expected to be completed shortly. The regulator has introduced changes to the trust services sector, implementing a new business model effective July 15, 2024. Under this model, certain authorities are now required to invoice end customers directly based on a transparent pricing policy and pay partners a referral commission, replacing the previous system where we invoiced partners who then sold to end customers. This change has led to a decline in certificate purchases with partners in Q1 as they cannot maintain stock, but we expect improved revenue in the coming quarters due to direct invoicing to end customers. Moving forward through our organic and inorganic growth strategies, we will continue to expand into new geographies with growing opportunities in the market across all our business lines and upselling potential to existing customers.
Our key project wins, deal wins for e-signature workflows and services in the education sector, including digital transformation for a large state university in the U.S. Midwest, implementation of PKI stack for a product company developing technology for the gaming industry in the USA, rollout of e-signature-based workflows for a large eGovernment project in Kenya, implementation of bank-wide digital transformation using e-signatures for a large bank in Qatar, rollout of e-signature workflow for a large hospitality chain in the Philippines, acquisition of many new clients for integrated eSign and eStamping in India for lending workflow across NBFC small finance banks, continued deal wins for identity and access management suite across smart cities and digital banking implementation in India, continued deal wins in Middle East banks as a result of scope expansion for digital transformation using our emSigner platform, acquisition of Ikon to expand personal services and for market access in a new customer base, signing of global partnership agreement with Tech Mahindra to sell cybersecurity and e-signature offering, appointment of Carmine Auletta as head of Europe to expand into the European markets, establishment of local market presence in the Philippines and Malaysia in Asia Pacific.
These were the key highlights and project wins. May I now request Mr. Ritesh Raj Pariyani to take us through the financial performance of the company?
Thank you, Chairman. Hello everyone. I hope all of you are doing well. Let me begin by sharing the key financials for Q1 FY 2025. We are pleased to announce that our revenue from operations in Q1 FY 2025 was INR 950.2 million, a year-on-year growth of 70.7%. The revenue growth was driven by growth in enterprise solution and upselling into existing customers. The enterprise solution segment generated a revenue of INR 678 million, while the trust service revenue was INR 246 million. In Q1 FY 2025, EBITDA rose to INR 295 million, a 19% increase year-on-year with a margin of 31%. Net profit reached INR 182 million, up by 11.1% year-on-year with a margin at 19.2%. EBITDA and PAT margins were maintained.
Now I request Chairman Sir to take the call.
Yeah. Yes. We can continue with question and answer.
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 will wait for a moment while the question queue assembles. The first question is from the line of Parikshit Kabra from PKD Advisors LLP. Please go ahead.
Hi. Thanks for the opportunity. Always lovely to hear all the exciting things that are happening with eMudhra. I actually had a question regarding Ikon and Ikon 's revenue contribution. So in the Q2 conference call, when we had asked for how much Ikon revenue was contributed, that was INR 10 crores in Q2. And by the end of the year in FY 2024, the number had become INR 68 crores that was being contributed. So I was trying to understand, has Ikon 's revenue grown so aggressively? Is it possible for you to share what was the revenue contribution from Q2- Q4 or even Q1 this year from Ikon ?
You see, Ikon last year, last year we said total revenue contribution from services is about INR 68 crore.
Yes.
crore, almost INR 54 crore was from Ikon . So when we expanded, it was whatever size it was, it also grew almost around 20%, I think. So that's why it came to INR 54 crore. And now what has happened, Ikon is also selling our product. We are also selling Ikon customers. So that way, distinctly understanding because if we totally allow it to be separately run without any cross-functioning and cross-pollination, customer taking advantage of the customers of each other segment, it is going to be very difficult, and the purpose will not be there. So that's why exactly separate, separately measuring Ikon and measuring the eMudhra Inc separately, that may not serve much purpose because they are, for example, recently they closed a deal on the state of Wyoming, which is for our product. So similarly, we close certain deals for their services.
So then it comes in our top line and their transfer pricing, those kind of things. But generally, Ikon has also grown around 20%. Almost last year, their contribution was around INR 54-58 crores.
But if Q2 was INR 10 crore and the whole of FY 2024, which that is essentially three quarters of INR 54 crore, then we are seeing a lot more growth quarter-on-quarter from Ikon itself, right? It's because INR 10 crore, then I'm assuming it's about INR 20 crore, then it's 30, sorry, another INR 24 crore.
Yeah. Because they are also selling our product and service also growing. That's why.
No, but you said that out of INR 68 crores of service revenue, INR 54 crores of revenue is Ikon . So that's all INR 54 crores of service revenue, or does it also include product revenue?
Currently, you see, they are around INR 18 crore per quarter.
That is service plus revenue or just service?
Predominantly service, but some little product also will be there.
Okay.
Exactly that way we are not bifurcating. Yeah.
Okay. And this INR 18 crore of service revenue or whatever, this entire INR 54 crore, whatever Ikon 's revenue, that is completely sitting within our segmental reporting we provide enterprise, international enterprise revenue. It's sitting under that head?
Can you repeat the question?
In our segmental results, we provide a segment which is enterprise business and international revenue, right?
Correct.
Is the Ikon revenue sitting completely within that head?
It will come in the international.
Correct. That's what I was.
In the inter. Yeah, yeah, yeah.
Got it. The next part was to understand the cost head of operating expense. I was wanting to understand whether is any of the manpower cost sitting within the operating expense head, or is that all in the employee expense?
No, no. It will also be in the operating expense. No, because whatever is totally service business, Ikon service as well as our own service business we got from some banks and all that, which is directly relating to the revenue, it will go in the operating expense. Wherever it relates to the general technology cost, operating cost, and all that, that will come in the salary and the employment expense.
Got it. Got it. So in FY 2024 compared to FY 2023, when we saw a jump in the operating expense as a percentage of revenue, is that essentially due to the introduction of the service business that we had added in FY 2024?
Yeah, yeah, yeah. Service business, and sometimes depending on the quantum of hardware involved, that also can cause variation in the operating expense.
Got it. All the manpower expenses that we have incurred for investments in our BD, that is all sitting within employee benefits expenses, right?
Investment for which one?
Like in the U.S. when you are getting new.
Correct, correct. Yes.
Okay. That's sitting there. Okay. Perfect. My last question is around the latest acquisition. This seems to be more an acquisition to complement our product portfolio rather than acquire new customers. Can I get a sense of what do you guys believe will be the revenue potential or incremental revenue that this product can add over the next few quarters?
Yes. How it will explain the product, then we can explain the revenue potential.
Yeah. I mean, so the thesis is largely around all of the frauds that are happening with respect to sort of identity theft on emails, right? So this company is primarily focused around the email security area. And they already have customer base where they have penetrated the ability to issue these types of certificates called S/MIME certificates. And now it'll be a bolt-on product capability to what we have. The problem statement is because users have emails running on clients like Outlook that are provided by the company devices such as your phones, which are again multi-environment, multi-operating system. This sort of product solves that ability to provision sort of S/MIME certificates across a range of platforms and environments, right? So that is more from a technology and from a bolt-on product capability that will sort of help us compete with some of the other bigger players.
From a revenue growth perspective, maybe I'll just quickly hand it over to Chairman.
From the revenue growth, this again cannot be independently. We cannot measure because we have so many device certificate and then the website certificate and then the individual certificate, organization certificate, everything. So this is one piece which was missing, the email security certificate. So when we added the total in the total trust service business, it will complement and it will increase also. So this is what will happen. So exactly if you see from a revenue perspective, maybe over time it can, but from a value what we are paying compared to similar product to what we evaluated earlier, it is much, much lower. So that's where we feel that it will add a lot of value. But exactly only email security, what revenue it will project, it is difficult. But current year, last year, $500,000 they achieved. This year they are expecting around $800,000.
That is independently sold by them. But our brand image and our various thing, we think this may easily go to some INR 3 million-INR 4 million separately also within one or two years.
Got it. Got it. So but this revenue from this business will be part of the enterprise business, I would have thought, not the trust business, right?
Yes. Part of the enterprise business. And here we are acquiring 100% of the company. So separate measurement and all will not be there. It will be in the driving.
No. Again, there are two components. One is a platform component which will sit in the enterprise. And then the S/MIME certificates that are coming under our public trust, the consumption of the certificates will come under trust services.
Okay. Got it. All right. Perfect. Thanks. Thanks a lot, Ritesh. Thanks a lot, Srinivasan Sir. Thank you.
Thank you. The next question is from the line of Mokshi Shah from Agility Advisors. Please go ahead.
Hello?
Yes.
Yes, ma'am. You're audible.
Yeah. So I have a few questions. First, on the enterprise business, what is the current order book if you could tell me that? And what kind of new orders are we expecting in the next financial years?
No. Order book is generally in the quarterly thing. We do not do the order book. But order book growth is generally good, and it is aligned with the previous growth only. And from that order book, we are comfortable that we will be able to achieve that 25%-30% growth what we had projected earlier.
Yeah. Okay. Could you give us some more light on the data center project? We already have a project in Bangalore and a disaster recovery center in Chennai. Are we planning something in that? Is there any growth potential that we could see from the data center?
Yeah. Data center, two data center. We did 1 in Bangalore and 1 in Chennai. This is for the because it is mandatory to have a disaster recovery site. So it's the exact Bangalore Chennai data center is the exact replica of the Bangalore data center because it is mandatory to have. So our entire trust service business, if you see last year what we achieved, about INR 104 crore business, that came out of this data center. And these data centers can cater to the growth for at least five years. That's what we feel. And 1 more data center we have implemented in Amsterdam. So from that data center, European trust service business will be run. But European trust service, again, we have to get the accreditation from Europe, so that may take some time. But for that accreditation, having the data center is a precondition.
That's where it may take some time. That is the European data center in Netherlands.
Can we see some revenue generation from this? What kind of services are we actually providing?
From the data center?
Yes.
The data center is for captive usage. It is not for third-party hosting. It is for hosting only our trust services.
Okay.
Yeah.
Okay. Got it.
Mokshi Shah, does that answer your question?
Yes. Yes.
Okay. Thank you. Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Nithin Sharma from MC Pro Research. Please go ahead.
Yeah. Hi. Thank you for taking my question. Can you help us understand how does the launch of Protean's e-sign product affect your business?
Sorry? Can you come again?
So the Protean has launched an eSign product recently. I wanted to understand how does it affect your business? What kind of competition is there? Is there no overlap?
Yeah. No, we understand there has been a new product launch, but our products have evolved and matured over several years and featured on large IT research firm reports. And we already have a number of customers in the banking, NBFC, and the capital market space, right? So the capabilities required to solve for large complex enterprise workflows in the banking financial services require a deep focus, which we've solved for over several years. So we continue to watch the space, but as of now, we are not overly perturbed in terms of our ability to compete and win deals, and which we are anyway continuing to do.
Understood. I'll get back to the piece.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Surbhi from Vallum Capital. Please go ahead.
Yeah. Hi. This is Surbi from Vallum Capital. My first question is on the particular side of the enterprise business where we've seen good growth in this quarter. So I wanted to understand which geographies are contributing to the growth, and has a large part of growth for us come from the U.S.?
In the enterprise segment, the Middle East, Africa, and the U.S. both are contributing to the growth and contributing to the revenue. In Africa also, we continue to get a lot of deals from the Middle East also. That way we do that.
Okay. Fair to say that the large project that we did in Kenya contributed to the growth this quarter?
Yeah. Kenya, we got some major orders from the, I think, government.
Yeah. The government. So we've also been able to upsell into a number of our existing customers in Middle East, Africa for more work. The U.S. also, we opened a few key accounts, like as I highlighted earlier, the education industry, gaming industry, etc. So a large part of our sort of order wins came from these two geographies.
Well done. The second question is on your cybersecurity business. You mentioned there's good traction on the emAS side in the U.S. So Ritesh, can you give some sense around how is that strategy of being a redundant hardware for emAS ? Do you see these conversations materializing in the direction? And what's your overall outlook for the cybersecurity?
I mean, so if you've been observing the overall SSL/TLS trust services space by some of our global competitors, many of them have recently had certain sort of incidents. As a consequence, many of the customers have come back to us saying that, "Can you sort of provide certain redundancy in terms of the consumption of trust services?" That's been our pitch apart from the product capability. This is giving us good entry into some of the key market names that we are looking at, right? Obviously, it's a land and expand strategy, so we'll have to start somewhere and then over time grow the account. But I think we are seeing early positive signs of landing good order wins from that space.
Does the Entrust issue sort of give you some leverage there and has that opened up some opportunities?
Yeah. Across the board, it's just not Entrust . There are other trust services providers also, right? So I think all good positive conversations are the result of some of these sort of developments.
Okay. Anything on the outlook for this segment?
Sorry?
Anything on the outlook on this segment from your side?
Yeah. So again, so when we sell, we sell both a platform and trust services. So on a broader level, like our chairman sort of outlined, we are fairly confident of the overall growth trajectory. And particularly also within the U.S. market, we've made the right sort of noise and having the right conversations. Hopefully, these will materialize into order wins here.
All right. All right. And last one on email security. How are you seeing the scale-up for this product? Will this be more a standalone product, or will it be more integrated to your existing cybersecurity stack? And do you see any opportunity within your existing clients to scale up this product?
Yeah. So the idea is to integrate that product into our core stack of trust services and S/MIME certificates. As you may be seeing, there is a lot of phishing attacks that are going around with respect to emails. There fraudulent emails are coming to end users. And we feel this is very much in a surge state in many of the markets and customers that we are talking to. So as such, some of the growth numbers our chairman outlined for that company as an independent entity. But once integrated and if we are able to talk to our existing customers, we could potentially see a slightly accelerated growth trajectory.
Okay. That's it from my side. Thank you.
Thank you. The next question is from the line of Pratap from Mount Intra Finance. Please go ahead.
Hello. Am I audible?
Yes, sir. You're audible.
Hi. Thanks for taking my question. I just saw on your presentation that the trust service business saw a dip in revenue due to some anticipated business model changes. What was the quantum of the revenue dip that we had this quarter?
This quarter, because of the change alone, we had a 64% dip in the trust service business. Because what happened was earlier, the partners were buying the stock, and they were selling stock. Always they will hold the stock, and a certain amount of stock will be there. In April, the Controller of Certifying Authorities announced that from July, the model will change and nobody can sell stock to anybody. Everything has to be individually sold to the end customers. Because of that, the partners stopped buying the stock.
So when they stopped buying the stock, because of that, the revenue came down. So actual need only they bought. So they didn't buy more stock to keep it with them. So that's where almost in one quarter, there was a reduction of 64 in the DSC business itself.
Okay. So now, how does this actually affect our pricing model going ahead? Because as I understand, the channel partners used to be sold at a heavy discount as compared to retail customers. So now, what is the pricing strategy for this particular vertical for us?
So because we cannot sell to channel partners, we have to give commission to the channel partner to bring the business. So another thing was that the regulator said we cannot have two different retail prices for selling something through the channel partner, something through the direct retail. So we merged both the prices and then came to some little bit on the retail side. So for example, we were selling to major channel partners at INR 270-300, and smaller partners at INR 400-450. And in the retail, we were selling at INR 2,000-2,500 for a class three two-year certificate, class three two-year signing certificate. For the same thing, now we have made a price of almost INR 1,500. So on the 1,500, again, we are offering 40% commission to the originating partner and 10% commission to the master partner.
With the result, on the channel segment, instead of a INR 300-350 realization, we may get INR 750-800 realization. On the retail segment, from a INR 2,300-2,400 realization, it may come down to INR 1,500 realization for the same product. Because the channel weightage is high, we feel that the overall realization could go better from the next quarter.
Okay. Thanks for that. Now, I just wanted to.
One more aspect is also that what is happening, if you see, this income tax department has made an announcement that for the tax audit acceptance of the tax audit report, other than companies like Individual, HUF, Partnership, and all, they may not need the digital signature certificate. So they may only, they can accept it by using the other OTP. So because of that, generally, otherwise, in July to September season, there will be heavy pull, and then a lot of demand will be there. We feel this particular order of the department can result in a reduction in the overall count for the respect of the tax audit case, which may affect 10%-20% on the volume also.
The effect would be about 20% on the volume. Is that correct?
Possibly 10%-20%. Exactly, we cannot quantify because the detail is not available.
Okay. Okay. Okay. Thank you. I'll fall back on the key. Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Aditya Doshi from M3 Investment. Please go ahead.
Hello. Sir, can you share what is the product per customer and how it has evolved over a period?
What is that? Can you repeat here? Some noise came, so I could not understand clearly.
Okay. Okay. So I wanted to understand what is the penetration of our product per customer and how it has evolved over a period?
Product per customer, there is no such thing because different products are of different nature. The customers also, we always try to push to large customers so that the value of each deal is higher. That's why if you see major banks are our customers, the defense forces are our customers, large enterprises are our customers. That is how it is there, not only in India, globally. I don't think there is, we can say anything defined as a product per customer.
Okay. Okay. And sir, second, I also saw in that Annual report, certain products we have rebranded. So just wanted to know what's the thought process behind this?
No. We had a product called emAS , EMA, eMudhra Authentication Solution. Now we have considerably enhanced the product so that it can become a complete identity and authentication management suite. So that's where we made it as a SecurePass.
Okay. So it's like updated version?
Natural. Yeah. Yeah. Got it.
Okay. Sir, third, regarding this acquisition, I saw that in the filing, we have mentioned it's for the IT. So are we also getting customers as well as their employees with us, or it's just the IT which will be integrated and sales?
No, IT and customers we will get. But on the employee side, we have a lot of technical knowledge, so maybe one or two we may take or we may not take also. But the main thing is the IT and customers.
Okay. What would be the count, sir, if you can share?
What is it?
How much would be the count of customers?
They had around 5 customers last year. This year, they've got another two, three customers.
Okay. Okay. Okay, sir. Thank you.
Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Venkataraman Srinivasan for closing comments.
Thank you. I would like to thank everybody for joining the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with our investor relations advisors. Thank you once again, and have a great day. Thank you.
On behalf of eMudhra Ltd, that concludes this conference. Thank you for joining us, and you may now disconnect your line.