Ladies and gentlemen, good day, and welcome to eMudhra Limited Q1 FY 2024 earnings conference call, hosted by Antique Stock Broking Limited. 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Raju Barnawal from Antique Stock Broking Limited. Thank you, and over to you, sir.
Thank you, Neeraj. Good afternoon, everyone. On behalf of Antique Stock Broking Limited, I welcome you all to eMudhra Limited Q1 FY 2024 earnings conference call. Today, from the eMudhra Limited management side, we have with us Mr. Venkatraman Srinivasan, Executive Chairman, Mr. Saji K, Chief Financial Officer, Mr. Kaushik Srinivasan, Senior Vice President, Product Development. Now, without further delay, I'll hand over the call to the Chairman, sir, for his opening remarks, post which we will have, we'll open the floor for question and answer session. Thank you, and over to you, sir.
Yeah. Thank you very much. Good evening to all the participants. Welcome, all of you, to this meeting. I wish to welcome each one of you to our 2024 first quarter investor and analyst briefing at eMudhra, and thank all the shareholders for their support. Before I delve into our performance in this quarter, let me reiterate our mission. Our mission is to accelerate the world's transition to a secure and integrated digital society. Our commitment to safeguarding individuals, businesses, and governments from cyber threats, and enabling businesses to transition to paperless way of doing business, is at the core of everything we do. This is in line with the new paradigm in cybersecurity called Zero Trust, which means never trust, always verify. As the cyber landscape continues to evolve, we continue to innovate to bring new offering, newer offerings to the market.
Let us start by reviewing our financial performance during the past quarter. I am pleased to announce that we have once again achieved healthy growth in revenue and profits. Our consistent innovation and customer-centric approach have allowed us to forge strong relationship with our clients. About numbers, Saji will talk later. About the other qualitative aspects, I'll talk now. Our global expansion efforts are starting to bear fruit with a number of wins in North America, Middle East, and Africa geographies. We have also started winning business in the trust services, particularly SSL, TLS certificate business in international markets. We further continue to invest in local sales teams, expanded engagement with IT research community, and marketing efforts, as we continue to go after both greenfield and replacement opportunities in emerging and developed markets, respectively.
We also completed acquisition of Ikon Tech Services towards the end of last quarter. Are now positioning our solutions into their client base in education, financial services for cross-selling and upselling opportunities. In India, both trust services and enterprise solutions continued to show upward trend on a year-on-year basis. We saw continued price stability in the trust services business for sale through partners. The revenue is expected to improve in the second quarter as a consequence of e-government and tax filing season. Our direct-to-customer sale of digital signature certificates continues to grow in line with historical trends. Impetus, as a result of eSign and e-stamping for digitization, has helped us win several eSign deals in banking and financial services space in India.
The order book for enterprise solutions in India continues to be robust, and we anticipate uptick in the enterprise business as new large government and BFSI projects for the year in cybersecurity and paperless transformation get executed. We also continue to collaborate and partner with leading technology companies, and our emSigner product is now live on AWS Marketplace, allowing AWS customers easy access and use of the product. Our emSigner product is also now live on Microsoft and Google platforms as extensions, enabling paperless workflows without having to leave those platforms, such as Word and Outlook. The cybersecurity industry continues to evolve, and cybercriminals continue to become more sophisticated, and their attacks are increasingly disruptive and damaging. We continue to invest in research and development to try to stay ahead of the curve and developing cutting-edge solutions.
These include areas such as post-quantum cryptography and generative AI, which can help us build differentiated product capabilities and positioning Zero Trust. Furthermore, our corporate social responsibility initiatives have continued to drive positive change. We are actively engaged with educational institutions to promote cybersecurity awareness and nurture future talent in this critical field. Additionally, we have participated in various community outreach programs, making a meaningful impact on society beyond the realm of business. As we move into the next quarter and beyond, we are confident in our ability to sustain our growth trajectory and continue to reinvest some of our margins into driving this growth. Our strategic roadmap. includes further advancements in Zero Trust, post-quantum cryptography, and generative AI, enhancing our ability to increase our reach.
In closing, I would like to extend my gratitude to all the participants on the call and to our shareholders for their support and belief in our vision and mission. Now, I am going to hand over the call to our CFO, Saji Louiz, who will take you through the numbers. Thank you.
Thank you, Chairman. Good afternoon, everyone. Our total income for Q1 FY 2024 increased year-on-year basis by 52.9%, reaching INR 807.3 million. The significant revenue growth was primarily driven by the success of our enterprise solution in overseas markets. Moving on to our EBITDA, which is INR 247.5 million in Q1 FY 2024, a year-on-year growth of 16.9%, with a margin of 30.7%. Additionally, our net profit grew by 19.4% on year-on-year basis, reaching INR 163.7 million, with a margin of 20.3%. It is important to note that despite our investments in overseas markets to fuel future growth, we have managed to sustain net profit margin. Now, let us take a closer look at our enterprise revenue split.
We had a split of 25/75 between India and international markets. Furthermore, the revenue distribution between partner and direct sales was at 24/76. Lastly, our enterprise revenue division between cybersecurity and paperless segments stood at 71:29. With regard to our trust service revenue, we observed a balanced distribution of conventional digital signature revenue between channel and retail, with a split of 52/48. These numbers reflect our company's dedication to growth. We are optimistic about the future and are committed to pursuing our strategic goals. Thank you for your attention, and I now open the floor for questions and discussions.
Thank you very much. We'll now begin the question-and-answer session. Anyone who wishes to ask a question, may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, please wait for a moment while the question queue assembles. Participants, you may press star and one to ask the question. The first question is from the line of Amarnath Bhakat, from Ministry of Finance of Oman. Please go ahead.
Hi, am I audible?
Yes, yes.
Yeah. My first question is, both the revenue growth is quite healthy, in the expected line. The margin profile continuously, quarter after quarter, is decreasing by see from March 2022, from 41%, and now it is coming very close to 30%. Now, what do you attribute to this, the growth in the revenue and continuous lower EBITDA margin?
Yeah, the key thing is, if you see in the last one, one and a half years, to grow the international business, we have to expand internationally. For example, now we have set up a branch in Saudi Arabia, we have set up a branch in Qatar. We have set up a subsidiary in Kenya. In the U.S., we have recruited two, three senior people, almost four senior people. Like this, everywhere, and we have put some people in our office in Amsterdam and all that. As you are very well aware, the salaries in all those places are at least four to five times the salaries in India. For that, the effect is starting to come, but always there will be a lag in the effect, which will come over time. That's where the cost of our.
If you see the cost of, our, employee salary and other thing, and also the other overheads in those geographies, the office space, this, that, then there are travel everywhere, all this has gone up. That's where the margin percentage is reducing by reducing over time. Still, we have a good margin. Almost if you see, PAT margin is 20%. If you see most, quite a lot of even US product companies, they don't get anywhere 20% PAT margin. That's why as long as we are able to achieve the growth without any negative margin and maintain the PAT margin, or 1% or 2%, 2% drop in the PAT margin, I'm not worried, because in the long run, it is going to give, a lot more business and a lot more absolute number in the profitability.
From a % perspective, it could reduce, but the absolute number of profits will increase, and thereby the EPS will increase over time. That's where it is.
It's considering what you just now said, so it was quite expected also that as you grow more internationally.
Yes
there will be a pressure on the margin because of the high costs. Considering the current growth scenario and your expansion plan outside, in outside geographic, why do you think that this EBITDA margin is going to settle? Is this 30% where we are, we will be more or less near here, or it can go further down to some percentage? We just wanted to know this outlook, because your growth guidance for revenue, we know around 25%+, if this cost structure continues to move up, maybe the revenue will come on lag. Where do you think that this EBITDA margin will settle down?
I don't think it will go down, because already we are starting to see the results. We are also not proposing any further big expansion at present, because we have recently established all these offices. We will not increase on the cost. With the result, I do not think it will go down further. It may be maintained at this level or could be a 0.5%-1% increase also could be possible, depending on how much business come. I, we, we, we do not want to put too many other immediately other offices and all that. Gradually we will go up. That's why it may not decrease further.
My last question would be, sir, considering your recent expansions, as you just now said.
Please hold on, sir. Your voice is echoing.
Yeah, just a moment. Give me, give me a second, sir. Am I audible now?
Yes.
Yeah. With just considering the different geography reach you achieved, now your past growth guidance of 35%+ is it still valid or considering the higher revenue will go coming in the future, you would like to revise your growth guidance going forward?
No, at present, we don't want to revise, but mostly we can. If you see the currently, we have achieved whatever that INR 80 crore revenue in the first quarter, so further growth is possible, so that's why. At this juncture, we do not want to revise upwards or anything, but definitely what our guidance we have given is quite possible and easily achievable. If at all, some positive surplus can be there.
Sir, are we doing something specifically onto the AI front as well, along with our, in either in the cybersecurity area or in any other area?
This, Kaushik will answer, being a technical question.
Yeah. We are continuously working on embedding artificial intelligence and also the new areas of generative AI into our technology. In cybersecurity, particularly, this concept of adaptive authentication is gaining steam, where based on user behavior and essentially machine learning, we are able to understand if there's any anomaly in such behavior. The other big area that we are looking to also do research and development is in the area of generative AI. Particularly, we are dealing with a lot of documents on our paperless, you know, platform. How can we assess risk in that context using generative AI is one area of exploration. The second area is more internally, how do we enable various teams from support to sales to marketing with generative AI is another big area.
The third area around cybersecurity is mostly in the area of this post-quantum cryptography, which also a lot of interest is currently being shown, right? These are the three areas, one on the AI and two on post-quantum cryptography, is what we are working on.
Thank you. I will come back in the queue.
Thank you. Participants, you may press star and one to ask the question. Next question is on the line of Surbhi from Bellwether. Please go ahead.
Yeah. Thank you so much for the opportunity. Sir, would it be possible for you to share, what is the order book for us in our hand, and, what is the proportion of the hot and warm pipeline sales?
Order book and pipeline. With that, readily I do not have. Maybe separately we can give in line with what we gave in the last quarter, but it is quite healthy. For our guidance of 25%, we don't see any risk, but anyway, separately we can share with you.
Okay.
The total pipeline. No, we are sharing the order book. Pipeline, we don't share. Order book, we'll share.
Okay. Secondly, one of the key projects, wins for us was the rollout of PKI infrastructure in a country in Africa. For that, can you sort of throw some light on how big or how significant is this entire project for us?
PKI project in Africa.
You mean from a revenue contribution or more from a project, significance?
Project significance. Yeah, broadly, this seems to be like a rollout in an entire country and not just a company specific to here. Wanted to hear your thoughts on how significant this is?
Without naming the country, it's a significant country in the East African region. They are currently on the path to establishing a digital signature infrastructure, as the country itself is embarking on a complete paperless transformation, driven by the e-governance agenda. Very similar to what India is building in terms of the digital public infrastructure, that country is also aiming to do something similar. This project will sort of establish that backbone. Once this is in place, then a lot of opportunities will come in the e-government and banking and financial services space for paperless transformation. It sort of gives us an early mover advantage in that country to go and drive something similar to what is being done in India. From a revenue significance?
Revenue perspective, it will be to start with, the initial project is around $1.6 million, and over time it can grow.
Okay, the deal size is $1.6 million.
Yeah, yeah.
Yeah. Okay, thank you. Thank you so much.
Thank you. Next question is on the line of Vivek Sethia from HDFC Securities. Please go ahead.
Hi. I had a couple of questions on revenue. If you could guide me on, like, for first, for enterprise solutions, why has been there a decline in the enterprise solutions India business, if you could help with that?
Yeah, in India, enterprise business, quite a bit depends on the government also. In the government, if you see, generally, cycle-wise, the last quarter of every financial year is very attractive, then the first quarter becomes really lackluster kind of quarter. That's where the India enterprise revenue this quarter has been less, but globally it has grown. From the coming quarters, healthy pipeline is there and healthy order book, which can be executed, is there. Again, the most of the decline will be overcome from the coming quarters.
How much growth can be expected in the India business of enterprise solutions? Any ballpark percentage range?
Separate, separately, we cannot estimate India enterprise alone. Overall, that is the guidance what we have given. Because if you see, when we are in three segments, one segment goes down, one segment takes care, other segment goes down, some segment takes care. Segment by segment, assuring that this is the growth will happen is a very, tricky matter.
The line for the participant dropped. We move on to the next participant. Next question is from the line of Aadesh from Motilal Oswal. Please go ahead.
Hello, sir.
Sorry to interrupt you. Can you please sort of speak through the handset?
Yeah. Is it better now?
There is still a very disturbance coming from the line.
Is it better now?
Yeah, go ahead.
Yeah.
Yeah.
Just wanted to know on the previous participant's question, that, apart from declining in India business, we are also seeing some margin compression over there. Is it fairly because of the operating leverage, and once growth comes back, we should see margins also improving in our India enterprise business again?
Yes, correct.
Right. Thank you, sir. I will, I'll come back in touch.
Yeah.
Thank you. Participants, you may press star and one to ask the question. Next question is from line of Srinath V. from Bellwether Capital. Please, go ahead.
Hi, sir. Wanted to understand if Ikon numbers are included in this quarter's numbers. Have you been able to consolidate the numbers? Second is, where do we stand on integration of our platform with Ikon, both on, you know, mining their customers for no paperless solutions, as well as using their, you know, team as a base for service in U.S.? The last one, Kaushik wanted to understand that they are into cloud infrastructure management, which is also a reasonably priced opportunity in the U.S. You know, are we looking to kind of help them out with some product build-out based in Bangalore? Because, you know, these kind of products, we would be probably in a better position to build out a core product.
Does this area of cloud infrastructure management kind of appeal to you as a segment that, you know, even we can grow along with them over a period of time?
Yeah, Ikon integration perspective, last 1 week or some 6 days, it has been integrated because we filed the completion of everything on June 24th or June 25th, something. That way, that portion, small portion, is integrated into the current quarter. From the integration of the team and the business perspective, already our sales team is working along with Ikon sales team, and Ikon has introduced our sales teams to 5, 5 different customers in the education segment and one, one or two in the BFSI segment. Out of that, one particular customer, the, the talk has gone in a much advanced level, and exactly they are in the process of detailing out what they would take from our paperless transformation solution. That way, this synergy and all this from a sales perspective is already going on.
From the technical perspective, maybe Kaushik may explain.
Yeah, specifically on cloud infrastructure management, we have not, sort of, explored that area, because currently the focus is on how can we cross-sell our products into their existing clients. We'll take that point and internally evaluate, what kind of meaningful opportunity could arise, and then accordingly, sort of take this forward.
Got it. Got it. Largely the integration is, is underway on, on, on both the sides, both on product as well as on marketing. Is that a fair assessment? From an accounting perspective, next quarter, the numbers will show for ICON in our numbers, or it's already showing in this quarter?
No, next quarter, next quarter it will show. This quarter that six days or seven days is shown. In the next quarter it will show.
Got it. Sir, I also observed that we have made one hire from Nexus, one senior hire. This happened some time back itself. Are we looking at expanding some of our, you know, certification products in the, in the private sector market in, in U.S.? Is that a, is that something that we are setting up for?
Yeah, yeah, that is what we are attempting, because our emSign PKI is there. With emSign PKI, if we get certain certifications in the US, we can penetrate the US market also. That's where we have hired this Scott Rea, who came from the DigiCert, not from Digital Trust, and prior to that he was working in the.
IdenTrust.
IdenTrust and all those things, he knows the system and the equations in the U.S. market well. After he came, we have also got one of the certification and some two, three more other certification we have to get. The idea is to push our product into that market also, the, the trust services product.
Okay. This will be like a, like a, a trust service in, in a, inside a particular corporate for, like, walled within all the employees. Is it something like that or, or am I. Is my understanding way off?
SSL certificate, private PKI certificate, and various types of certificates, which are used for encrypting the data. Those kind of thing, maybe Kaushik can explain it more.
Yeah, yeah. Across the enterprise IT infrastructure, the website certificates also for various internal IT equipments like firewall, VPN access, things, right? That is the space that we are going after. Broadly, this is called, what is called certificate lifecycle management, and Scott is helping us. Also, Scott helped us get into this IGTF, which is a Global Federation for Interoperability in the Trust Services, and now eMudhra is also a member there. This is giving us a lot more visibility in the American markets.
Perfect. Well, thanks, thanks a lot, guys. I'll get back with the questions.
Thank you.
Thank you. Next question is from the line of Vivek Sethia from HDFC Securities. Please go ahead.
Hi. Actually, my line got disconnected in between. Continuing with my question on the India enterprise business, like, how do you see that moving forward this year, going forward the next year as well, purely in terms of revenue and also margins, because the margins are up, but also, you know, come down, if you look at it segment-wise, both enterprise India and global, if you could, put, throw some light on that?
Yeah. If you see the India enterprise business per se, and the India trust service business, this last quarter has been because if you see the enterprise business, it consists of a large part government business also. This government business, predominantly in the last quarter of financial year, a good business comes the first quarter, it is weak. Similarly, the trust service, India trust service business also, it is associated with income tax filing, company law filing, and many things. First quarter generally is weak. That's why the India business as such, was weaker in the first quarter. Now when it comes back, yes, definitely some margin improvement will be there. Overall, when we are expanding the other geographies, appointing some people internationally and all that, little margin increase could get offset by the other margin effect, other increase in cost also.
That's why while India margin definitely, yes, it could increase, but I, I do not want to project that the overall margin could increase in a big way.
About enterprise global, the margins have come down this quarter, and it, it has come down significantly. Is it purely attributable to you setting up new offices in the U.S., Amsterdam, and because of increase in cost? Is it purely attributable to that?
Yeah. Almost cost has increased by INR 3-4 crore per quarter. That level of increase has happened. Due to not only Qatar and all that, even U.S., Amsterdam, then Kenya, then Qatar, then Saudi Arabia, everywhere. Even some sales team we have put in Philippines also. It will all give result in the next 2-3 quarters.
Okay. Within the enterprise solutions business, how do you see this mix evolving? Because, I don't know if I'm right or wrong, as per our last conversation, I think you had said that, you know, you expect paperless to go at around somewhere 35%-40%, of the total enterprise business in terms of revenue. As per your presentation this quarter, it's only 29%. If you could, you know, throw some light on that as well.
The cybersecurity, the CA business is evolving in a much bigger way, and the, the value of each transaction is also quite higher. That's where, though initially we thought that the paperless segment will evolve in a bigger way, though it is evolving, the value per transaction is hardly some $200,000-$300,000, even abroad, per year or sometime even for the whole license. Whereas this CA, emCA solution, wherever it goes, the value is around $1 million, $700,000, sometime $1.5 million also. That's why the value-wise now, the cybersecurity is really increasing in a big way. Anything you want to complete?
No, that is correct, because this huge push of Zero Trust by various global IT research firms such as Gartner, Forrester.
Yeah.
All of the board-level focus on cybersecurity is giving a lot of momentum in many countries and organizations. There. As our Chairman said, the deal values are also much larger.
Yes.
Okay. Okay. Within the cybersecurity, which product has contributed, higher, like if, if 71% is cybersecurity, then how much is emCA and how much is emAS?
More and more we are going as integrated offerings because MCA provides the PKI, emAS provides the PKI validation, and then our, you know, emSign certificates are there to basically deploy these certificates. It is case-to-case basis, very hard to break it down and say each product is essentially contributing. On a quarterly basis, again, even harder to do.
Like going forward, should we as, I mean, while trying to understand the company, should we look at it as a whole or, 2 separate products?
No, we can as of now look at it as separate product, but over next to six months to nine months, more as a integrated product. Because the certificate lifecycle, that what we call the CLM, which earlier, what we were calling?
Certificate management.
Certificate management product. That product is also getting integrated with the emCA solution. On, on a combined basis, it produces much better value.
Okay.
That's why maybe over time, we can integrate both the product.
Okay. Within the trust services, you said that the breakup is with 50-48 channel partners and retail. Like, what, what is the revenue share from the new product like eSign, SSL? If you could give an idea on that.
eSign, the SSL, again, the growth is there. What?
INR 8-9 crore is there.
Huh?
INR 8.9 crore is there.
Yeah.
Quarterly basis, we'll anyway get back.
Yeah.
Sorry?
We will get back on that because the CFO will calculate and get back to you.
Okay, okay. Just last question on the EBITDA margin. I remember a couple of quarters back, you had sort of given a ballpark range that, you know, you expect the EBITDA margin to be around the 37%-38% mark. Whereas now in Q1, it has dropped below 30%. I, I mean taking from what you said, that, you know, Q1 is supposed to be the weakest of the four quarters, how do you see the margins evolving going forward? Because FY 2023 also, it was around 35%. It fell down from 36 point-
There were 2 choice. One choice is to go slow on the growth, so that do not open several offices and all that. We thought that everywhere there is a lot of momentum, cybersecurity is a big momentum and all that. That's why simultaneously, we started Saudi Arabia office, we started Qatar office, in Philippines we put some people, U.S. we put some people. On all this, if you see foreign geography, the salaries are all 5x, 6 x, 8 x the salaries in India. That's where, though EBITDA margin-wise, margin may be less, but we are aiming at more profitability so that EPS growth can be there. Another thing is the momentum not to leave the market wide open. Over time, we can also penetrate the market. From that perspective.
If you see the top line is also one year to year-on-year basis, whatever it is there, 50% increase is there. All these factor has to be kept in mind, and finally, we have to aim at the more EPS rather than seeing only the margin. That's how we have been working. That's where the, though there is a little reduction in margin, we didn't want to, not to do the foreign offices. We have started the offices. Everywhere, momentum is picking up, the lead generation is happening and all that.
Okay. Okay. Okay, thank you. Yeah, that's it from me.
Thank you. Participants, you may press star and 1 to ask a question. Next question is from the line of Amit Chandra from HDFC Securities. Please go ahead.
Yeah, hi, sir, thanks for the opportunity. My question is on eSign segments. Obviously, you said that it's a growth driver, if you can elaborate on what is the opportunity you see in eSign because it's a growing segment, you know, whether we are, like, present in eSign only in India or are we offering it outside India also? Is it only included in core services or is it a part of the enterprise offerings also? In terms of revenue contribution, if you can, you know, like, tell us how much we have derived from eSign. Because if you see the competition there in eSign, a lot of players are there, like, most of them are government agencies also who offer eSign services.
How do you differentiate there in terms of eSign?
If you see the India eSign, what has happened is, while e-signature started with INR 35, it has now ended up with INR 1.7 per eSign, or INR 2 per eSign. The NSDL also has crashed the price, and all the other people who are resellers have also crashed the price. There is a C-DAC, which is a C-DAC, which is a government organization. They are offering for INR 2 and INR 1.7 and all this.
With this, while we are penetrating, while there is a lot of business coming, number of banks opting for eSign and all that, in our scheme of things are expecting this INR 350 crore revenue, INR 340 crore revenue, even if some INR 10 crore eSign happens, which is impossible to happen, maybe INR 2 crore, INR 3 crore eSign, INR 4 crore eSign can happen, still the revenue out of eSign can be only INR 7 crore-INR 8 crore. That is the situation today. That's why I'm not highlighting the eSign as a big separate segment. That's where we are also consciously planning how do we enter into eSign in Kenya, eSign in some other geography through our global signing route.
Because in all those other countries, the eSign is sold at almost $1 per signature or something like that, or SAR 10 per signature in Saudi Arabia, AED 10 per signature in Dubai and those kind of things. Whereas here it is crashed to less than INR 2. This is the problem. That's where it is there as a segment. Our growth is quite good. We are getting number of customers, and we are now trying to do as a platform, including emSigner platform, plus eSign, plus eStamp paper. In that platform, a lot of big companies have come. Several small finance bank has come, big banks have come, then the pure finance companies have come. All these are there, and the number of signatures are continuously increasing, but it may not significantly contribute to the overall top line.
Okay. Then the enterprise business, mostly the enterprise is global. How is the sales being driven there? Is it mostly through the partnership ecosystem or we have our in-house sales team? If you can split the pipeline or the order book in terms of how much is SI-driven and how much is in-house sales driven?
No, that is very difficult. Even the in-house sales time, several time drive it through partnership because the inability increases. Partnership partnership also inside sales team is continuously working, so that way, easily separating it is very, very tough. All kind of deals are there.
I, I'm just trying to understand the strength of the business.
On the whole, directly driven sales is 75%, and 25% is partner-driven.
Okay. So in terms of signing the partner, are we there with like most of the global, like large, implementation partners, or are we still looking to sign some more implementation partners? We are waiting for some size, then we can opt for more? How is the competition there in terms of process?
We have a separate, like inside sales team. There is a partner management team who continuously enroll partner. We already have several large partners like TGS, Infosys, and various other people, Tech Mahindra and all these partners. Nowadays we are also partnering with the other big, big four firms like Deloitte, KPMG, and those kind of partners. We are also having product partnerships. There are several kind of partnerships, and all the partnerships are okay. Now we have put our product in the AWS platform, so that automatically people can download from there and immediately install it.
Okay, sir. Thank you.
Yeah. Thank you.
Thank you. Participants, you may press star 1 to ask a question. Next question is from the line of Muskan, from Bastion Research. Please go ahead.
Congratulations, sir, on your great performance on the top-line front. Margins have been consistently declining in the last five-
Your voice is not coming clearly. Can you please speak through the handset?
Am I audible?
Hello.
Hello. Am I now audible?
Yes. Can you please speak a little louder?
Margins have been consistently declining in the last 5 quarters. Also, your operating expenses as a percentage of revenue have shot up from 10%- 22.2% on a year-on-year basis. What constitutes this operating expense, and what is driving this expense? Because before 2023, none of the years had these expenses more than 67% of revenue. Can you please highlight which process is driving this and why?
Your voice is not clear. Are you asking about why the operating expense went up?
Yes, as a % of revenue.
Yeah, operating expense, if you. As I explained earlier, we have opened several geography and recruited number of sales people and sales teams in multiple geographies. Once you do that, automatically the associated administrative expenses, the rent rates and taxes, everything goes up. Even to support all that, we have increased the number of people in the corporate office. That's where the salary has also increased, the other operating expense also has increased, and the top line has also increased. Compared to the last year, first quarter to this year, first quarter, 50% growth in top line is there. Instead of looking at only the margin, if you see the absolute profitability over time, we want the absolute profit and the EPS to increase.
In between some, because the first quarter, as I said, one segment, there was also a little problem in the Indian enterprise segment and the Indian trust service segment. Once this overcome, then again the things will look more positive than the current.
Thank you, sir.
Again, research also is there, so we have to continuously to derive more inward lead, we need to engage the partners than the other IDC and various technology research organizations. Each research nowadays is very costly. Everything comes at a price of $80,000-$100,000 kind of range.
Okay. sir, why has the domestic enterprise revenue declined on a quarter-on-quarter basis?
Domestic enterprise, quarter-on-quarter. Domestic enterprise, that is already explained to another questions. If you see, in domestic enterprise, the government is a major segment, and the government finalizes most of the order in the last quarter of a financial year, and the 1st quarter, generally it is very weak. That's where it has reduced.
Thank you, sir.
Thank you. Participants, you may press star and one to ask the question. Next follow-up question is from line of Amarnath from Ministry of Finance of Oman. Please go ahead.
Hello?
Yes.
Yeah. Just thank you for the follow-up opportunity. Just to go by what you just say, and several participants also asked the question, what we are understanding that the cost part in the international locations are many times of what the Indian location costs are. However, we may assume, according to the revenue per unit, whether it is a digital certificate or eSign, as you are also explaining, that part also far higher than what you can charge in India. Net, net, can we assume, as your revenue growth from those new international projection come in, overall margin and profitability will be far higher compared to the counterpart of Indian, Indian part of the same business?
If, if I do the same business in those areas, at the initial, it may be having a cost because the revenue will follow, but once they set it, the overall profitability and EBITDA margin will be higher compared to the corresponding same business, what we are doing in India. If my understanding is correct?
No, it is correct if I just extrapolate the Excel sheet. In actual business, what happens, once you are there for two, three years, some other competitor comes, then they will try to reduce the price, they will try to poach some people. So many such dynamics changes, no? That's where exactly.
Yes.
We cannot say just because of this alone, the profit will shoot up or will not. Just if you take only these two factors, what you are saying is correct.
Just to, just to associate, good that you raised this question, that was my second question. What kind of a business moat we have? Means, is this easy for the competitor to come in the business and easily capture the market share or business share, what you are doing? Or is there some kind of a moat around that to protect the competitor to come easily inside the business? Because as you know, as you anyway say, this is a very high margin, high growth business, which will normally attract the competitors or competition quite quickly. Do, in our business, if you say, what is the moat which can protect our competitive advantage, either in India or in the outside global business where you are spreading?
No, now, if you see the technology landscape, currently the moat is there. No, no technology has moat forever. Moat is only a temporary phenomenon because actually, gradually, every technology is becoming more and more open source. Open source, then the ChatGPT is coming, the AI is coming, everything is there. That's why continuously, currently, we have created a moat. That's why not too much competition, only four or five competitors in the world for the our solution. There are Digiset, there is Entrust, there is some four, five companies. If you see the paperless transformation, DocuSign, Adobe, these kind of companies. Over time, more and more such companies may be able to come. We have to find another niche. This is a continuous process.
In this process now, with more and more open source technology, creating a very long-standing 5-year, 10-year moat is also very difficult. Within this framework, we have to continuously work. That is what.
Yeah. But as the competitor are coming, sir, the market size itself is expanding quite rapidly, right? That means if the market size become very big compared to what we are today, then it can accommodate even the higher number of competitors, and still, the growth prospect can continue.
Yeah, yeah, yeah. Definitely, that is what we are also hoping. That's where I am also saying that 25% growth is possible, we will be able to maintain the margin. Maybe we can increase the margin and all that, we cannot take totally this is what will happen. That's why the margin can go up from 20%- 30%. That kind of thing I do not want to hazard a guess.
Mm. What is our cash position now, sir?
Cash position is good. As of, around INR 90 crore or something is there, INR 80-INR 90 crore. As of March, INR 120 crore was there. This quarter, little bit, we did this acquisition also. For that acquisition, around INR 50 crore has gone, the balance, around INR 70 crore, something is there.
Will there be any planning for the dividend declaration? Because I, I don't know, generally, the CapEx part of your business is quite low. Of course, I don't know about how the things will be in the international location.
We have already declared and paid the dividend.
No, I'm talking about in the future, if this cash generation continues, and as you say, the future expansion plan is quite halted at the moment.
As of now, I think that every year, every year we should be able to pay the dividend. Should not be a problem.
Okay. Thank you, sir.
Bye.
Thank you. Participants, you may press star and 1 to ask a question. Ladies and gentlemen, you may press star and 1 to ask a question. Next question is from the line of Parikshit Kabra from Pkeday Advisors. Please go ahead.
Hi, can you hear me?
Yeah.
Okay. First of all, congratulations on your results. secondly, since you mentioned that you have launched it now on AWS as a self-serving product, any early signs on how much uptake is there?
No, we are still. This is, we've just launched and went live. Now only we have to work with our clients to basically enable this. What this means is, now customers wanting to deploy the product on AWS can, or on private clouds, can do it, you know, pretty simply, and hopefully, this will accelerate our cycle to do POC. We also are working with AWS to reach out through their network to the end customers, and hopefully, that will give us some, you know, momentum in the coming quarters.
Great. Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. Participants, you may press star and one to ask a question. Anyone who wishes to ask the question, may press star and one. As there are no further questions, I now hand the conference over to the management for closing comments.
Yeah. Thank you very much. Thanks to one and all for attending this conference and raising valid questions, and we could answer. Whatever question we could not answer, you can approach our CFO, he will provide the details. With that, we would like to end the call. Thank you very much once again.
Thank you very much. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.