This meeting is being recorded.
The fiscal years 2022-20 23, ending December 31st, 2022. The investor presentation and facilities. We cannot hear you, Praveen. You may not be knowing whether it's. Sorry for the interruption. Let me continue the deck. There's a safe harbor statement which has been there in any of these presentations we make on quarterly results, which speaks about it that this is not all the statements which is made in this release concerning our future prospect or forward-looking statements.
Forward-looking statements by their nature involve number of risks and uncertainties that could cause actual results to differ materially from the market expectations. There's a full statement which is there as part of the deck, which Praveen normally read out to all of you. This time we'll not go through the presentation deck.
We want to look at it since our business is monitored on a last 12-month basis, it's annualized business. Our data which shows for this quarter. Again, we have last 12 months revenue, last INR 2,026 crore revenues, which is a 21% growth on INR 1,751 crore. Our platform revenue has grown at 43% from INR 464 crore- INR 324 crore.
Our license revenue has a dip. There's a slowdown of license revenue decision-making in Europe, which was the earlier point we made after the Ukraine war that there's a decision slowdown. It is at -18%, so down in to INR 360 crore- INR 297 crore. Our AMC has healthy growth by 14% from INR 316 crore- INR 361 crore in last 12 months. Obviously, our PAT has come down substantially from INR 334 crore of LTM to mere number INR 272 crore because of the increased investment which I mentioned for moving the business software to platform.
I'll take you over there. Our EBITDA margin is minus 4% from INR 437 crore- INR 419 crore. While the gross margin is from INR 1,000 crore- INR 1,061 crore. Gross margin percentage has come down from 57% to 55%. EBITDA has come down from 25%- 20%, and license link revenue has grown by 12% from INR 1,000 crore to INR 1,021 crore. These are top line metrics number. In this, The improvement side is healthy growing at 21%.
EBITDA is having a constraint of the high cost investment, which was planned investment. Third thing is that the [Inaudible] sequel days has moved from 2, 139 days. That is a other point which we need to be explained in this result. What is the basis of this three different elements? Our quarterly numbers are INR 555 crore. Our quarterly number is INR 105 crore EBITDA. These are two major numbers and 139 days of the DSO. The first number is moving EBITDA from 25%- 20%. This 5% reinvestment back from moving the business from front to platform.
During my April presentation, we mentioned about moving the business from 25%- 20%. That 5% will be reinvesting back or looking at a very positive number what we are seeing in a platform-based business. That's one important piece which we are trying to intact. This last quarter number was much lower. This quarter we are close to 19% EBITDA in this quarter for INR 105 crore. We are looking next quarter will be better than this number. Second point I want to make, our investment in people is always in is not a linear.
It is always happen on a what I would say, step basis. Step base are $45 million, $60 million quarterly run rate at $60 million- $75 million run rate. Now we are close to, on constant currency, our revenue, our $72 million. We are close to $75 million, which we are looking at it to be doing it. This number of $60 million-$75 million, we looked at it in last October. Released in five quarters, we reach from close to $75 million and we are expecting Q4 we will able to cross $75 million on constant currency basis. On the DSO days, we have something called contractually not due revenue.
When we sell a five-year deal with a customer, a long-term deal with a customer, the money get due after certain milestone. And those milestones are makes our contractually not due number, including GeM, because GeM also they pay us X% upfront and Y% after the product gets delivered. When the payment is marked on the system, I shared with you. That number of contractually not due out of the total that is due of INR 248 crore, that number which is contractually not due is over INR 250 crore.
That's a... Which will distort my figure of DSO of 139 days. If you take it away, that number is close to 108 days of DSO. When we look at geographically, this number, it is in Americas our DSOs are just 16 days, in Europe our DSOs are 28 days, APAC is 189 days, EMEA is 177 days, and India is 131 days, if you remove the contractually not due number from the whole DSO reporting. Now let me come to the product versus platform strategy.
The platform revenue are growing healthy to INR 464 crore last 13, which is almost we started from INR 50 crore to INR 464 crore. In past three years we are able to move that platform revenue, which is giving a sustainability to that business. Now let me give a flavor of each business. In iGTB, we mentioned about two main product lines, liquidity product line and iGTB product line. Both are leading core front products, where we are winning three out of four deals in the marketplace.
Both these products are performing very, very well. There was a delay in decision cycle time last quarter. Last two quarters or last three quarters, there was a decision slow down cycle. We lost some of the revenue, like Sberb ank, we lost after, on the date of signing the contract. would have been $20 million contract when the team had went for the signing it off on 24th of February. Unfortunately, the war happened on the same day. Those happens, but that doesn't change the business scenario or the compelling business position which is happy.
In this area, the iGTB, if I look at liquidity, we are now getting a good traction since interest rates, global interest rates are higher. There is a good traction. France, we are announcing the second deal in the France after Société Générale last year. Now we are announcing second largest bank in France has also selected liquidity. We have another 3-4 deals in liquidity in France. Liquidity is now moving into Canada.
We can look at Spain and other countries. We are looking very focused way, country by country, to take a major market share. If top two or three banks take our liquidity and GDB, we are leadership quadrant is established. We did it in GDB, same way we are doing it over here. In DCB business, the two platform, one is core banking platform, which is we call IBC. In last six months, our microservices based, API based, cloud native, event driven, headless platform has been very well accepted in the marketplace.
We are able to differentiate ourselves in Europe and America or Canadian market, this headless is a great proposition. We are working in at least seven deals over there in Europe market on MiCAR compliant or MiCAR born, I would not say compliant, MiCAR born core banking system. One good news to the investor is now we are in top three, one of the top three players in core banking now. When we are looking at survey, and when RFP we are participating, we are part of Thought Machine.
Thought Machine is a new competitor emerging in a new technology space, and Temenos is a 900 pound gorilla sitting in Europe with a large customer size of it, increments. These are the two more competition in core banking. Core banking market space perspective, getting qualified in top three is a very, very big success from our viewpoint. We are seeing that we are able to compete head on with Thought Machine and some other deals. Temenos is coming third. It is very soothing proposition.
Those deals may not have closed in last six months. Deal closing in core banking takes 12-24 months. Cycle time for changing the core banking that we are engaging the customer can go as high as 24 months. We implemented this solution for one of the German clients, which we announced the deal two years back. Our second largest retailer of Germany, that system is working smoothly. In November, they are processing 300,000 calls on a single day using our microservices architecture.
I think that's the kind of power we are able to get a referenceable client in European market, which is giving us acceleration on this business. Second business of DCB under DCB is iCredit 360, which is designing credit products. It's a comprehensive 360 products, where all the credit portfolio of the bank, from retail loans to SME loan can be, SME loan to credit card, secured unsecured loan can be processed on this particular platform.
This platform, we announced three quarters back from one of the Swedish largest financial institution has selected us for their platform research. That platform has a very good traction because using the iCredit 360, one can design their own solutions. That's second, these two platform. Third platform they have, iGCB has got Quantum. Quantum, we had a good deal till June. Last two quarters we have a slowdown. We are having a pipeline of more than 7-8 deals which are there in central banking.
The best part is we are fighting this battle in a advanced market now. Central banking deals have moved from not only in the Africa market, it moved to the advanced market. Which is very, very heartening to know. We look at IntellectAI. We consolidated our business into three units from five units. We had a RTM unit and a wealth unit. RTM unit has been merged with iGCB business. Treasury business has been merged with iGCB business and wealth business has been merged with IntellectAI.
We renamed Intellect SEEC to IntellectAI. There are three units now. We have iGTB, iGCB and IntellectAI. All of the unit has been merged with. The thinking process behind all of it is Intellect Design Arena when we set up. Arena was a piece when we said that there will be incubation stage company and there will be an ecosystem building company and there will be a scale company. When a product is getting created and first five customers are there, which is in the incubation stage, we give a quite a lot of freedom to the team. It's around 150.
They work like a start-up company in that particular space. Once it reaches a first five customer, we believe that it's a time when we can use organizational resources at a scale level and global reach of the company, and that is the time when we merge with a larger unit. That's our strategy which we announced sometime in 2016, 2017. That's how it is done. Now, the major business is in these three units.
There are minor products in the retail space and some other space which are running, which are non-significant, so we will not be talking about those products in any of this conversation. The IntellectAI space, Magic Submission, which we launched in the U.S., which Ganesh has highlighted to you. From it does extraction, it does enrichment, it does transformation, it does validation. That piece which is there on underwriting policy now has matured to a level where it's moving in a design thinking where generally we have three circles are there.
First circle is called lean startup, second circle is called ecosystem, and third circle is called scale. This business of Magic Submission is moving from lean startup, where we are getting 10 clients to be working on the platform. Now to the ecosystem space. The three element for differentiating between startup, lean startup and ecosystem is in lean startup, it is desirability, feasibility and viability. Once viability gets established, then it moves into feasibility, value enhanceability, and adaptability.
It move to the value enhanceability and adaptability in the space which is disrupting the BPO space significantly. There's a very heavy pipeline. We will be hiring and investing more money in this business. Second business, wealth. We took some time under the leadership of Arun Jain, some of you know him. After his little lean startup, he handed over the baton to Ganesh and Sudhir to run this business. This business now have a great traction.
The largest Indian bank, SBI is a customer of this, which may be going live recently, and other two large wealth managers have also chosen. One of them is in this quarter. We are announcing the deal with the largest bank in this quarter. There's a pipeline of almost 80% of banks are considering to replace Miles with our Intellect Wealth Qube. That's a second line of business and very exciting journey because we are focused on RM Office as a key strategy there.
Third thing is AI platform, and that's where the IntellectAI name comes from. In this platform, we have a two core technology which I mentioned to you during our technology day. Both the technologies are now getting combined to deliver ESG and delivering corporate governance. At end of the presentation, maybe 10 minutes time, we'll just demonstrate how one of the outcome of this product, this IntellectAI platform, we launched Magic Invoice on this platform.
We launched ESG platform on this platform. Third product on the same platform is Sherlock. Sherlock demo I will be giving you once after question and answer session for last 10 minutes. Anybody who wants to stay back for asking questions, they can stay back. That is a preview, very, very small preview. We have been working on it. It will take another six months to get to the market, but that is a work which we'll be doing a preview at the end of the presentation. With this, I leave the platform for question and answer.
Hello.
Yes, Sunil.
Am I audible?
Yeah, now we are opening the session for Q&A. I request to please click on the Raise my hand so that your answer can be taken.
The first question is from Mr. Pratap Maliwal from Mount Intra Finance. Please unmute him to ask your question.
Hi, am I audible, please?
Yes.
I just had one question that last quarter, I believe that we had a contract of around $3 million that the revenues had not flowed in. Have we started booking those revenues now in this quarter?
Yeah, that revenue has been booked into this quarter for getting the current numbers.
Those revenues are flowing into which part of our business, is that platform revenue, license revenue? Perhaps if you could just, maybe tell us the quantum of how much we've booked out of the $3 million.
That $3 million is booked in the license revenue. There are deals through which it was there. They are license deals.
Okay. Okay, sir. Thank you. Yeah.
Thank you, sir.
Thank you.
The next question is there from Pradyuman Chaudhary from JM Financial. Pradyuman, please ask your question.
Hello, sir. Can you hear me?
Yeah.
Yeah.
Yeah. I'm just trying to get a basic understanding here. Like, traditionally, my understanding is that the BFSI focused product industry has been very slow growing. Like, there have been phases, when there's been a lot of investment and the growth has accelerated, whereas in other phases, because of the tendency of these banking customers to stick to their old softwares, the growth has been slow.
I just wanted to understand, currently are we entering into a high growth stage like, because of the entire COVID, which has led to digital transformation. Are we entering into a higher growth stage and is the demand coming back for the industry as a whole? I understand you guys have grown at a much healthier pace, overall for the industry, is it coming back?
I wouldn't say it's coming back for the industry. The products case will be slow growth only because decisions around changing the platform are very difficult decision in a bank. The cycle time of decisions are very, very long, and they are long because they are more than... In some of the contracts, just to highlight to you, we have 21 signatory in a one single contract. Even contract requires 21 signatory for a 1 single contract that are changing the platform. It's a difficult business.
Something that there are some tailwinds for us. One is we invested into cloud technology way ahead of time. In 2017, 2018, 2019, when our stock was lowest, we were in investing phase of the product, and we, and we are moving to the cloud technology and microservices technology. We kept on highlighting that this is an investment phase of the company. That's what we did it. Board has gone to say that we will build up this cloud technology.
Because we built this cloud technology, today we are in very healthy position where entire iGCB business, iGCB business, AI business is all can be consumed and composed to deliver a specific solution with a contextuality built in. We promise the customer three things: composability to design their own solution, contextually to make decisions, appropriate decisions for themselves and for their customer by using AI, and we help them extend their solution using our iTurmeric workbench.
That's helped us out in growing better than our. Our promise to the market was or our design of the organization, not promise. Internal design was 20% growth year-on-year is our design of the organization. We always mentioned that it can be... Last year we grew 25%. This year we'll be growing slower, but 25%, 20% is our design. This value is designed around 20% year-on-year.
Okay, just a couple of follow-ups, sir. As such, COVID hasn't really been that big of an inflection for the industry is what I understand from your commentary. Second, other players that we have, like, we have Temenos, the likes of even Oracle Financial Services, the Oracle FLEXCUBE company, they are not really offering this cloud-based solution, is it?
They are having a lot of legacy sitting there. They are communicating the market, that they have a cloud-based technologies. When some architects sit down with them, We should not comment on our competitor, but it's more of a whitewash rather than a core cloud-born solution.
There are two kinds of things, cloud-born solution or, you make some solution compatible to cloud. I think we saw the trend ahead and invested ahead, they are on a catch-up game. That's why they're getting challenged. We are viewed along with Thought Machine as the leaders companies. That's the difference.
Okay, understood. Second, on the competitive intensity, definitely I, from your commentary as well, it's clear we've been doing well. Overall, even if you look at, like somewhere I had read that Oracle had won a customer where initially we were serving in Uganda, I believe. What is really happening in those terms? Are we witnessing significant competition in the industry as a whole? Are we gaining market share, especially in the consumer banking product? Are we gaining market share or are we maintaining or are we losing market share?
We have more deals over there in core banking now in Uganda, Zimbabwe or other African country. I think our focus is more towards Europe to fight the battle. I don't know whether you are tracking the company. If you track the company, you should track Thought Machine.
Thought Machine has invested $550 million investment in last seven years in building their product. Our corresponding investment is less than $50 million for core banking. They invested $550 million at a valuation of $2.7 billion only on core banking by the last investors came in there. That will help you in positioning the right understanding.
Okay. Understood. That's really helpful. Thank you.
Thank you so much. Next, we have Mr. Mohit Chandnani from Centrum Broking. Mohit, please ask your question.
Yeah. Hi, thank you for the opportunity. Two questions from my side. Firstly, you've mentioned that you're seeing decision cycles recover in Europe, and that Q4 looks rigidly better. Could I just get a little more color on this? What exactly are we seeing in the European markets right now in the short term, at least for Q4?
Banesh, would you like to answer?
Sure. I think, as you look at Europe, what we are seeing. Actually, we are seeing there is a play for, let's say tier one banks and large regional bank players where, what Arun talked about, our eMACH.ai platform, which is Mac and based on composability and extensibility, is what is seeing traction. And we are competing in many deals in Europe, as we speak, where we are competing three competitors. We are in last three, where we would have Thought Machine, Temenos and us.
We are seeing us and our solution and the way we have architected resonate with most of the banks in Europe. That's the good news. Also, as we have implemented and created references in Europe, we are seeing more and more opportunities in Europe, banks coming to us, customers are recognizing us, and the word of mouth and the references is building the brand image for us.
We are seeing more opportunities come to us. We are seeing that in these opportunities, we are in a head-to-head fight with one of these two other competitors that I talked about. We are seeing a good traction from a Europe perspective, both in UK and in continental Europe.
Okay. Okay. Thank you for that. My second question was on the U.S. I did notice that you've won a large deal with a US bank. Are we seeing more traction in the U.S. and could you maybe give us a little more color in the US market?
Yeah. US market color, U.S. and Canada is a common market we consider. North America market and with this solution which we mentioned about liquidity, sub accounts platform on a banking side. Magic Submission is on insurance side. Our digital solutions on GCP side as well as on on GDB side. There are four product line we are pushing in Canada. U.S., our entry strategy was Canada and then going to U.S. Now we are getting a good traction in U.S. now.
From an incremental growth perspective within U.S., U.S. will definitely be growing at 20%+ next year. That's the kind of a number we can put on the table, but it can be faster than 20% of the US market. US market in insurance, Magic Submission, Danish, if you want to cover, highlight how the US market is playing with you.
I think we are seeing a very strong traction on Magic Submission. I think we've already this year have over eight clients and a very, very good healthy pipeline of customers. I think Magic Submission in most of these, two of these clients are Tier 1 insurance companies. I think we are also seeing the replacement of, you know, one or two of our key competitors.
This sort of gives very good insight into how we will be disrupting the space around AI related to Magic Submission, where we are effectively eliminating the BPO companies and improving the speed of being able to process transaction very well. As a matter of fact, one of our clients came back and shared his number after our implementation of Magic Submission. That is, revenue is almost tripled for that month.
I think there's a very positive capability of AI tools available to help customers take decisions around submissions of underwriting documents in a much more efficient way and much faster and accurate way to help the underwriting team's decisions quicker. We're seeing excellent traction in the U.S. on this side.
If I can ask, what is the contribution of U.S. to the total revenue for Intellect?
Yeah. Are we publishing that number or no?
No, we are not publishing that number.
Mm-hmm. Mm.
In the coming months. In the coming years, it will be good.
Okay. My last question was on margins. I mean, we've seen a sequential improvement in EBITDA. What is your outlook on margins moving forward? Do you see more scope for improvement in margins and any steps that you're taking for further improvement?
Yes. Next quarter will be better.
Okay. Any spe cific drivers for this?
I mean, it's top line revenue. Our license has come down from INR 14 million last quarter to quarter if you see, it was INR 14.8 million, and this time INR 8.8 million. That is a INR 6 million shortfall. It's just the margin pressure. For us, the one has to just look at it, what kind of a license deal we win, techniques we win to create the margin. Behind the operational efficiency which we invest in, is step five investment.
Now between last Q2 and Q3, our operational cost above the EBITDA line is moved from INR 442 crore- INR 450 crore. Only INR 8 crore increased the operational cost. While that cost was increased between INR 375 crore- INR 443 crore for the three quarters over there. That three quarter was the period of January to September, was a period of substantial investments. This cost will suffice us for $80 million run rate, around $340 million run rate.
This cost will suffice us. If we are shooting for another $100 million from $80 million, we may require another step-up cost, and that cost will be there for two or three quarters when we take a decision. It will be there for three quarters. This cost increase will be there, margin will come down. You will observe the company will get into higher margin space, but we reinvest that investment money back to step up the business.
Okay. Thank you. Thank you, sir.
Thank you, Mohit. Next we have Mr. Mohit Jain from Anand Rathi Securities. Mohit, please ask your question.
Yeah. Sir, two questions. One and both related to revenue growth only. One is that is there a slowdown or some sort of softness you guys are seeing on the SaaS growth for this year, meaning this quarter or nine months? The second related question is, when do we see revenue momentum building up again? When we look at it from a Q2 year-over-year perspective, last nine months have not been so good. We are way behind the 20% trajectory that we often spoke about over last year.
When do you think, we can catch up to that? TCV wise also it appears that our deal wins quarter-on-quarter are sort of stagnating, at least the large ones. In that context, what should we expect from the top line?
Our projections are same, 20% on design. When we had last year 45%, we didn't change. Anytime, Mohit, we don't change the trail we are. We celebrate the 25% growth. When license growth comes that is still we are looking for 20%.20% when we plan the business, few quarters will be 15%, few quarters will be 25%. That variation is a part of the business plan itself. We are moving on that trajectory.
Sir with license revenue slowing down, you still think 20% is something we should target?
We are seeing that your LTM basis is still 21% growth, Mohit. LTM basis. We are seeing always monitor our.
Sir, you're referring to rupee growth, probably. We are looking at dollar growth.
Yeah. You need to pick up some point. Which is to beat the company down. If the 21% growth is 21% growth, yeah. You're investing in rupees only, you're not investing in dollars yet.
No, no. We are not.
Okay.
Basically we are targeting 20% rupee growth, is the point.
That's right.
Perfect, sir. Thank you very much. Sir, sorry.
Hello?
Sorry, I missed one part. On the SaaS growth, is there any slowdown in SaaS revenue growth?
In this quarter, last quarter, GeM has, we are coming to fast flash or pricing comes down over there. The GeM growth is, which is normally should have been much higher, has come down there. Due to price line.
Okay. Outside GeM?
cross INR 1 lakh a year now. After crossing INR 1 lakh a year, our discounting is much higher.
Okay. Outside GeM you do not see any slowdown in SaaS, right? We could see that because-
No. Only GeM we have so.
Perfect, sir. Thank you very much. That's all.
Thanks, Mohit. Next we have Sugandi Sood from InCred. Sugandi, you're there?
Yes. Hi. Thank you for taking my question. I just wanted to verify, as you mentioned in your initial remarks that you are looking at a $75 million run rate, if I got that number correct, in the coming quarter. Also, just looking at your disclosures that you make on funnel. I wanted to get a sense in terms of deal wins, is there any extension in the term of contracts that we are experiencing?
Because our deal win momentum on the larger deals has been improving at the margin. On the revenue growth front, I understand there are offsetting factors in traditional license probably. Is there any change in the tenure of contracts? Yeah, those two questions to begin with.
There are two kind of a deal. These are based on license plus AMC, which we offer term license. Earlier we were using perpetual licenses. Now we started offering only term license of five years, seven years. That there's a increment revenue after seven years can be accrued to the company. That's the one policy change we have made in the company policy of giving a term license rather than perpetual license. Which has a upstream after seven years, which may not be visible now, but this will give us a future protection to our revenues.
Secondly thing is a platform-based revenue which has got two kind of a pricing strategy. We call it, V1 is my license revenue. We call it V two is my subscription-based revenue, where I give the platform to the customer and charging him $50,000 per month to $200,000 per month is a variation of the platform when I offer to the customer. Which means between $600,000- $2.4 million is a kind of a number which variation which is there. This is on a subscription basis as long he uses.
So for that, we need to make very high upfront investment of PoC, proof of concept to the customer to sell it. Once you sell it at $2.4 million for 10 year, that deal become $24 million. That after 30 years, our margin on those deals goes up to 70%. Yes. On third year time. First two years, our margins may be as low as 20% for those deals. That's a second construct. These are two construct which is there.
The SaaS contracts, is there a contracted duration for these? Is there, you know, beyond which point we renegotiate terms?
Initially, typically, SaaS contracts are three to five years. Normally SaaS contracts are lifelong. They're difficult to move out in banking system.
Actually, like whole infrastructure not discretionary to switch on, switch off.
Sure, sure. My question is mainly on, you know, just trying to correlate the fraction in deal wins with the revenue recognition based on, you know, the tenure of the contract. Basically, what we are saying is, in fact, the tenure has shortened because of the policy change. Is that correct?
No, Swagandha. It was perpetual. Now it's five to seven years, so the company actually makes more money. That's the first one. The second side we are seeing is the funnel is growing which means there is demand. It's just the frequency of closures, the win rates, those are bit of challenge. There is demand. Getting business case approved, which is taking time at times.
Sure. Sir, would it be possible to give an idea of the AMC revenue, how much of it is on account of legacy and how much would be from platform?
AMC doesn't go to platform. AMC is only for the non-legacy customers base.
It's only for the.
License.
Non-platform revenues. Yes. Okay.
That's right.
Sure. Thank you. I'll just hop back in the zoom.
Yeah.
Thanks, Sugandi. Next, we have Mr. Harshil Sethia from AUM Advisors. Harshil, please ask your question. Harshil? You there?
Am I audible?
Yeah. Please go on.
Sir, first question which I had was on slide 15 of our presentation, where you mentioned that our current funnel is approx INR 70,000 crore. How do we calculate that?
What is that? $855 million is the funnel. That's what we are looking at it. Yeah. $855 million, INR 7,000 crore. Something wrong in INR 7,000 crore. It's a $855 million funnel. Just look at it maybe, so you can see. Because it was mentioned in millions and that's a crore number. It is INR 70,000 million crore. Put a zero there. Sorry for the accounting error. It's INR 7,000 crore. Sorry. INR 70,000 million crore is the number.
When you are moving between million and crore, these kind of errors are happening. like explanation is INR 7,000 crore is the funnel size, what we have as of now, which has worked. When we qualify the deal, where we know client has needing a solution, there's a criteria called BANT criteria. The client has a budget, client has authority, client has a need and client has a timeline. Once the four parameter get established, that funnel we bring into $855 million funnel.
That's a system which we have. Then there's a lead pipeline which we don't report here. Lead pipeline could be similar size, which is where the budget or timelines for the customer is not defined. That is the other set of funnel which we work on.
Okay. Is this, the INR 7,000 crores or INR 70,000 million, is this contracts in our hand executable or do we have to bid for it and then the client will select out of the top three or whatever it is or how will?
We are saying these are the pipeline. This is not contracted. Contracted, these are bids out there. Every prospect we either given bid or we're gonna be giving bid shortly.
Okay. How much is generally the conversion ratio for us?
The conversion ratio varies. We look at it conversion ratio on destiny deals. In the next slide, 57 deals are there. We look at it, the 68 deals in design, where it was 57 deals last quarter, last year same period. Out of 68 deals, you look at it 60 deals you close this quarter. Every time 10% every quarter, 10%-15% is the close ratio.
Secondly, you know, where one of the previous participants asked about the 20%, that we are building a 20% growth rate company and you said, and you know the LTM number for us is 21%. Out of which I guess 10% is due to the Forex exchange rate. Do we also take a call on Forex rates to justify growth?
We do take a some call. We have a hedge loss of INR 9 crore this quarter. We do take a three-year hedge call, which was around, we take 60% of the forward on a hedge call and 40% we leave it open.
Sir, actually, my question was not on the hedging end of our business or how do we hedge our revenue. My question is that when we say a 20% growth company, so shouldn't us being a product and a dollar-wise company, shouldn't we take it on CC basis?
We are taking constant currency basis. Constant currency is $72 million. Since we are comparing all our earnings, everything on the roads, we want to just simplify our communication on Indian rupee currency, otherwise multi-currency confuses the systems.
Okay.
Because several currencies are there, it's keep on moving from one currency. We had a lot, large exposure in GBP and Euro currencies, which has got a large fluctuation from 1.24- 1.03 GBP has fluctuated. That's, it's a huge reporting issues.
When we say that it is a 20% growth company or that the company that you are building, should we take it in terms of constant currency only going ahead that, you know, we'll be like on a longer term period, we'll be able to deliver 20% on constant currency basis?
That's right. That's right.
Okay.
Thank you, Harshil. Next, we have Mr. Rahul Jain from Dolat Capital. Rahul, please ask your question. Rahul Jain?
Hello, am I audible?
Yeah, Rahul, please go ahead.
Hello?
Yeah, Rahul, please go ahead.
Yeah. Yeah, sorry for that. Firstly, my question is related to your profitability. As you see, your pipeline right now and you already have, you know, a fair bit of hang in terms of where the mindset moving in terms of, SaaS versus, license kind of a deal. Is it optimum time to understand a gradual shift toward, you know, the SaaS model and the eventual impact of that on the profitability to arrive at the potential profitability of the business? Initially, I think the growth-led operating leverage was obvious factor.
Since, growth may be slightly slower than what we were thinking earlier, given the macro and also because of the mix of the SaaS, both could come as an headwind. Is there an realignment that we need to do to our margin band?
That's a good point out. We have to work it out for the impact. It's still a jury is not clear because we are getting a client which is asking for license revenue in Europe and Americas as well as license revenue in Asia Pacific. This is still the jury is not fully out. We have just 50-50 kind of a jury, where few customers are in CapEx space and few customers are OpEx based customers. It's difficult to have an immediately, but your suggestion is good that we should be working out on the impact of SaaS model versus the license model.
Right. Of course, I know you don't know which deal within the pipeline you will end up winning, and eventual mix could be very different. Any range you would like to give for next year and the potential swing in the SaaS revenue that can happen, versus this year?
We can only say that Magic Submission has a very good pipeline which can grow 50% year-over-year. That is the one thing which we know that SaaS deal of Magic Submission can grow 50% in US market. The rest of it, I will not be able to give any rough level.
Right. Just one more question, if I may. Regarding the growth, of course, a lot of people have asked in different way. The way this year started, and what we were expecting out of this year, in terms of a growth, and the way it has shaped up and also based on the minimal input that you have at this point, from your client conversation. Is it fair to assume that next year at this point also looks like at best, be at the current pace? Or you think there are some reason to think positive, more positive than what this year was?
We are more positive with the MiCAR compliance software and AI solution. We are differentiating on two things for the architecture and intelligence. We are the company which is architecture-based and intelligence-based. These are two keywords to which we are helping the banks to grow faster. The exact number in the next quarterly call, looking at the first three months of the new financial year, the new calendar year, financial year for lot of clients, we'll able to be better. We can get it better that time.
Sure. Sure. Just one last bit on Arun, if you're aware about this development in Temenos where the CEO and executive chairman are about to leave the organization and the new lead if there's any opportunity for us or you think these are part and parcel of this business and there's not major advantage or disadvantage because of that?
Yeah. They are part of the business. People sell, buy a company, merge. Yeah, it's okay. This is like that only.
Sure, sure.
Too much of a into this. We need to be good in ourselves, create value for our customers. All these things still happen.
Great. That's it from my side. Thank you so much.
Thanks a lot, Rahul. Next we have Mr. Anil Sarin from Centrum Broking. Anil, please ask your question.
Yeah. Hi. Am I audible?
Yeah. Yeah, Anilji. Please, please go on.
Great. First off, it's been a good kind of a recovery in this quarter, coming off the base of the previous quarter, so congratulations on that. My first question is on the banking-as-a-service. I think there was an initiative along with a large tech company to go in the U.S. Is there any update you would like to provide?
Sorry, banking-as-a-service through the past, maybe.
Yeah. No, that's the demand in U.S. That's where we're working along with the cloud providers. It's still on our one of the growth journeys right now. That's where U.S. is saying between this banking-as-a-service as well as Magic Submission feel positive in the coming years. Okay.
from Israel called Virtual Account. They are like Embedded finance.
Okay. Anil, thank you. On Magic Submission, I mean, you know, there is a fair amount of enthusiasm. First off, it's a, it's a platform. It's a SaaS solution or it's a licensed software?
It's a SaaS solution. The offering to the client is an AWS fully hosted Magic Submission which includes ingestion of documents straight from emails through to fulfillment and into the underwriting platforms. Some of them will use our underwriting platform, some use other underwriting platforms.
The ability to enrich the quality of data and do the whole AI capturing of information from documents or helping people in from various commercial line businesses of insurance process faster and more accurately is the heart of the suite. It is fully a SaaS-based solution. Subscription solution and is normally charged at a minimum subscription level depending on the number of submissions the client wants to start with.
Got it. Is it like, you know, we have iGTB, we have iGCB. One license sale of Magic Submission, how would it relate to a one license, or, sorry, one kind of a subscription-based sale of a iGTB or a iGTB? Like how big is this product?
Initially when we launched this Magic Submission last year, we were looking the deal value per client could be close to half a million dollars. Now, we are getting clients with the Magic Submission which can go up to $3 million ARR, not even deal value. We have deals in the pipeline which is ARR of $3 million, submissions. Single deal. Single client. Yeah.
Single deal.
In the U.S. for insurance is 200 million submissions a year, just to give you a picture of the size of the market. We are
Okay. Okay. That's very helpful. Again, still going on with U.S., I mean, an earlier participant had also asked this, but I just wanted a little bit more clarity. Is that generally when we speak of Intellect, you know, there is a feeling that, oh, very strong in Asia-Pac and Africa, getting, you know, quite strong in Europe, but U.S. is a WIP. On the other hand now we have this Magic Submission. How would you sort of, at an overall level describe your progress, recent progress in the U.S.?
It's a part of strategy, Anil. We have communicated from 2017 the strategy that we will sell in Europe and then we enter into the U.S. U.S. we started focusing only two years back. We are getting a very good traction once we are able to master the technology in Europe. Our, it is part of 2015 strategy. Nothing changed. Nothing. Good is US business is being viewed as platform subscription business, so it's not eating into any of our licensed business. These are new products and new markets being grown. The targets are baseline.
Again, on the core banking, that process that is going on, which can be a lengthy process as explained. Earlier you were mentioning Mambu also within those top three. Now the name has been dropped. Is that, I mean, if you can just throw some light on that?
Mambu. Mambu is losing out.
Okay.
We crossed some of the Mambu. Banesh can answer that.
I think, what we see, we have, when we are competing and the kind of, opportunities that we are seeing, and, you know, typically a bank would start with a long list and then go to a short list. As I said, in most of the cases, in especially in Europe and, advanced markets, we are seeing Thought Machine and Temenos as our competitors. We do see very, in one or two opportunities in Mambu, but Mambu is more tuned.
What we are finding is Mambu is more tuned for a start-up digital bank with limited user journeys. We are not really seeing them, at least at this point of time, as a big competitor, as we go and compete in some of these markets and some of the clients that we are competing with.
Okay. Okay, first of all, I mean, congratulations on making it to that elite group. I mean, especially since the kind of funding that has gone into one of your competitor and the size of the other competitor and the history of that other competitor, for you to move into the top three is something for all of us to be proud of. I mean, you know, there was a reference that Arun made about valuation of Thought Machine also.
Would you, would you just attribute it to the frothy nature of the previous funding round, or is this an indication of what Thought Machine can actually achieve? From that, I'm trying to draw some conclusions regarding Intellect also.
Yeah. Anil, we don't know the difference of the two, this funding has happened very late in the last two, three months. Frothy point was not there. We are also making the business case. That business case of core banking is so large. The market side, like today, FIS, Fiserv, they run into a INR 5 billion, INR 7 billion kind of a market size, that is what we are attacking.
Obviously, it is difficult to attack America, FIS and Fiserv are so embedded into the system, Temenos is a value system there, local systems are there. 1,000 bank market, at INR 5 million each, if you take, it's a INR 5 billion market. That's a, every bank needs a core banking. While liquidity can be taken by top 300 banks, core banking will be taken by all the 1,000 banks.
Right. Got it.
5,000. 5,000 banks. Manish corrected me.
5,000 banks. Good, you've made an entry into the thing. I just have two more questions, if I may sneak those in.
Mm-hmm.
One is, you know, your SaaS now run rate, SaaS stroke platform run rate is now crossing INR 100 crore. There is GeM component in that, as you just explained, but that I can say that it's a INR 400 crore kind of a revenue run rate. Based on the momentum that you're seeing, based on especially Magic Submissions will be contributed to that.
When does it start becoming a $100 million per annum, such that you know, you can absorb the PoC cost. It is very, it's very strange in SaaS that firstly, you take a revenue hit, second, you take a margin hit because the business acquisition cost remains the same, but the revenue is a fraction.
To the naked eye, to an outsider, it appears like, oh, my God, the business is suffering, whereas you feel the business is doing very well. Where is that inflection point where, you know, there is enough money coming in from SaaS, high margin revenue coming in, which pays for the PoCs and the, all the, you know, beauty parade that you have to do?
We are now coming to $50 million, as you say, INR 400 crore, which is coming to $50 million. $50 million-$100 million is a journey. Maybe it'll take another 8-12 quarters to get into that journey of $100 million run rate. I really appreciate, Anil, understanding the underlying dynamics. You understand the business kinetics of not icing that. Every time using the word business kinetics of the SaaS business. SaaS business is having a kinetic. It is a kinetic energy which drives the growth of our business.
Whatever PoC cost has a double whammy on us, that gets countered by the size of the. When we have a Magic Submission, if we have 20 clients or 25 clients, then we're able to get into the 50% margin zone. As soon as it becomes 50 clients, we'll be getting to the 70% margin zone.
Right. Right. No, thank you for that. My last, absolute last question is, you know, you had started this journey of e-enrolling partners in Europe and, you know, a few quarters ago you had mentioned. The way I look at it, I mean, there are very powerful Indian system integrators. Why have you not gone with Indian system integrators, which can really lead to, you know, faster sales growth for you?
We're working with them. As of now, with Indian as well as we don't have a differentiation between Indian and foreign, but I think local relationships and client relationships are important. Our core bank partners, client relationships and delivery capability, their competency delivery.
There are two factors which are looking at it. We are not, I mean, saying Indian is different from an international, but Accenture or IBM has a deeper relationship in influencing the core systems for strategic systems versus some of the service providers who have a deep relationship with CIOs. We are looking for both of them.
As a corollary, I mean, has there been any progress? I mean, you've got into relationship, you have committed people onto that relationship. Have they also committed senior leaders and is there any, you know, traction?
Yeah. Microsoft has committed senior people. AWS has committed senior people into this relationship. We are doing the event in Bombay on 31 st February, where the senior-most person from AWS is flying down for that event.
Okay. Is there a pipeline building as a result of all that senior management attention onto that?
It takes time. I think I would say pipeline is building. There's a direct pipeline and there's a referenceable pipeline. The referenceable pipeline you start building in a phase 1, and then direct pipeline you start building in a phase II.
Okay. Great. Congratulations once again. Thank you very much.
Thank you.
Thank you, Anil.
We have a funding of.
Very-
small demo One of the AI businesses to. Since you are there and you are looking at Indian market, we just want to give a preview of five minutes to the investors on one of the corporate governance, ESG corporate governance. We call this product under RASH right now. We've named it, the internal name right now is Sherlock, which is for corporate data investigation. Banesh will take over, some 10 minutes time for you.
Yeah.
Yeah. Deepak will join on the fourth. Deepak are you there?
Yes. Yes, sir. Yeah.
Yeah. Just if you could present, you know, the thing. Sherlock, what we've been doing with the ESG business, clients that we're dealing with, as probably mentioned to you earlier, one of them is the world's largest sovereign fund, sovereign wealth fund. They basically use data to be able to access questions related to ES and G, which is all the three elements of environment, social and governance. We are gonna sort of touch on one governance capability that we have also available.
Deepak, who is the CTO for Intellect AI, is on the call. He's gonna actually take us through a very quick way. You will relate to this very easily. This was done obviously for investors, it's people like you who will actually be able to relate to it, you know, in an easy way.
He's gonna sign in and show it to you. If there are any, you know, thoughts or questions, please feel free to, you know. If you don't have the time, send it over to us. Any feedback also. Yeah, yeah. Basically, what it'll do is it'll take an ISIN number or a company name, and it'll give you a lot of specific information about governance of a company. He's right now typing in Tata Steel, and that's, you know, that's already something that we have access. It'll give you an idea. Deepak, go ahead.
Sure.
Okay, yeah. Go ahead, Deepak.
I think it's the. Here, looking for the company details, right from a corporate due diligence perspective, every information that you require, it is as simple as doing a Google search, looking for the company. Here you can search either on the company name or its unique identification number. What I did was I just typed on Tata Steel Limited, and I got a CIN number. Based on that, I selected.
This is typically when you search for that for the first time, it'll take anywhere between 3- 10 minutes, depending upon the size of data that is required to be acquired across. We connect to the multiple data sources, largely both public resources and other sources. Here, what you can look for is the company information and basically where the company, what is the DUNS number of the company, tax identification number, where it's registered, and also the charges.
Basically, what are the loans that company has on. In this case for the Tata Steel has loans from the various bank, from Central Bank, Industrial Development Bank, Canara Bank and everything. Also the status of that particular loans, whether they're open, closed, and all. You have a complete the book of loan information of that particular company.
Also the like financial statement, probably whatever is the recent statement that they have, we have, and we also can do a historical statements also. Where, and what is the ownership looks like from a mutual funds, promoters and everything. Also the subsidies of the companies. Again, there are they could be, I mean domestic or international. Also the related companies, especially if there are any.
The related need not be direct, it could be from indirect also, where the directors of this particular companies are also directors in another company. We'll be able to, kind of, triangulate and arrive at the particular information. Finally moving on to the who are the existing directors of this particular company. If you look into that, I mean, this generally, if you want to just take an information.
For example, Kaushik Chatterjee, who is an existing director. We also can get then complete view of where else Mr. Kaushik Chatterjee is a director. I mean, Centennial Steel Company Limited, Tata Steel. We can get into the complete view. This is the same for a pictorial view, but we also can get into the details. Where else Mr. Kaushik Chatterjee is director at present and also in the past, when the directorship has started and ended also, we can get a complete download of the particular information.
What also is possible here is, in this case, not only the present directors of this particular company and also the past directors of this particular company, and their nationality and all other particular details also we can get. What is another important information is we'll be continuously doing a social listening about this particular company, and whether there is any governance-related thing that may be flagged out, and it could be positive or it could be negative.
This is where we use our sentiment analysis to understand if there's. Again, that is specifically on the governance thing, anything that probably requires an attention. That also we can do. This gives a complete end-to-end aggregated information of the company and the financials and the subsidiaries, the directors and their current relationships with the directors of various other company and also the news about these companies. This is it.
This is a picture you get across all of these dimensions in a single place because we've already actually accessed and put together data both from various data sources as well as documents, et cetera, to pull this. This is done on the fly, just like a Google search.
Paytm. Just take Paytm. New company was Yes.
Okay, Paytm. Let me see. They will not have too many subsidiaries because they may not have too many.
Right. Right. Again, a similar information of Paytm. Paytm, I took a subsidy already. It could figure out the related companies of the Paytm, like One97 and everything. Paytm Payments Bank is the one that I took. While it didn't have the subsidiaries, here similarly for Paytm, who are all the directors? Who are the existing director? For example, Mr. Madhur Deora, again, he's actually director in many other companies, and also we can see all the company details of that particular director.
Similarly, again, where exactly he is already a director and all. At this moment he's director present actually in One97 and the parent company and many other companies. Again, past directorship is also with various other companies. This is an example of Mr. Madhur Deora. Similarly, looking into the social listening feed, right? While probably nothing happened recently, but again, it picked up in the past year, if any other incident happened, on this particular, this thing.
For example, in last year March, RBI has taken action on against the payment, Paytm Payments Bank under Section 35A and all. It kind of anything that comes into the governance related thing, either positive or negative, again, our AI models will pick up and give the alerts to the end user.
Yeah. This is just an example. Of course, obviously we'll keep building on capabilities as before, but this is a very, very comprehensive way for anybody who wants to govern a particular, you know, status of a company or something else. Obviously, we know there's a lot of noise around governance building up quite aggressively across the world.
This is just one way we can take Sherlock as a platform and help various people either govern companies, whether they are banks or, you know, asset managers or even investors and so on and so forth, or even regulators and or auditors and so on. I think it's a very, very broad-based capability. Thanks, Deepak. Thank you, Deepak. Ideally this will show a small preview of it. This can be enhanced with ESG compliance.
We can have an ESG score tomorrow, about to be converted into the score, trade score of a company. These capabilities are already there using the intelligence companies. Any comments anybody has? We can move to the final question.
Arun, there are a couple of more questions. Can we go ahead?
Just five more minutes maybe. Five more minutes.
Yeah. Next, we have Mr. Vivek Kumar from B&K Securities. Vivek, you are there? Please ask the question. Vivek? Please unmute yourself and ask the question. Please unmute yourself.
Are you able to hear me now?
Yeah. Yes, Vivek, please go ahead.
Arun, I'm just asking from your commentary, your last phone call, you have mentioned that the three wide areas like banking-as-a-service, this iGCB, where we are becoming one of the top three players, and then Intellect AI. You asked us to look at these three as the new growth areas. You have been giving extremely good commentary qualitatively.
My questions are, like you have mentioned in this result facilities that there are almost 10 deals that you are very confident of signing up in the next six months in Intellect AI. How much of the, like your all other participants are pushed about that you being the top three and all. How confident are you that this will turn into quantitative? I'm not saying immediate quarters, but how confident are you about your qualitative commentary turning into this quantitative in the coming one to two years?
As you have the data, I have to just tell you that this, when I show the same, the symptoms where we are talking about, we are showing it there that two places our IP has given us a leadership quadrant. To get into that corner quadrant of payment among 20 companies of payment and two leadership quadrant, I think, you need to judge based on that. These analysts are not recognizing us just based on some money we paid to them. The bank is respectable company.
If you look at payment space, how many companies are there in payment space, which is there in the last slide number 29 or the 10th. They are all the respected companies, including IBM, which is there on the extreme end of the quadrant outside circle. They are not inside circle. There are only two companies we are putting in inside circle, which is Intellect and Finastra. In other liquidity management, it's only one company in that inside circle. If you don't make a judgment on this, then it's your failure as an investor.
Oh, no. I'm just asking. Second case... The second question I'm following on this last sentence that you asked. Intellect Payments has been implemented in India's largest private bank with cross-country corporate payment coverage of 60% and expected to scale to 100% of transaction. Can you just... Because I really couldn't understand what do you mean by 60% of the country or corporate payments in the country or... I'm not asking the name of the bank, but can you explain this? Sorry.
Yeah, go ahead, Praveen.
The largest bank, yeah. The CBS. Okay. This is the 60% of their payments have moved on to this platform and it's going to grow. It's migrating from the other platform, and it's gonna grow by 100%. That's just to talk about the scale. It's also at a country level. Our game plan in India is to reach to that level based on what we have signed or what's in pipeline. That much amount of corporate payments will flow in our network in the next 12- 18 months.
Corporate payments on the country is what you're saying based on.
That is our global basis for this specific bank.
Okay. Okay. Okay. Thank you. Thank you. Thank you very much. Thanks, Arun.
Thank you.
Thank you. Next we have Mr. Nishit Shah. Nishit, please ask your question. Nishit? Are you there?
Hi. Am I audible?
Yes.
Congratulations on a good set of number, Arun, and your team. Also, special congratulations for the Fifth Third Bank deal win. Now, with this, how many banks in U.S. we have on the platform? How many we have in the pipeline?
With this we have now in North America, 10 banks on our platform. We have enough number on the insurance side. 15 odd are on the insurance side.
Okay.
10 are in banking side. We would be close to 25 customers, in North America.
Would we say that we will be at an inflection point in terms of penetrating the banking customers in U.S. with these number of reference sites?
We're not really inflection point. I don't know if the inflection point. I think we are building the pipeline. Becoming referenceable right now. We are becoming referenceable. It will take another 18 months for you to get a inflection point. We believe that 18 months we can be more closer to inflection point.
I think, Nishit, our previous references were a lot of global banks. Now we're getting US domestic banks as reference. That's the journey, like Arun said, 18 months more. There's so many implementation, we win more. That's when we'll get to become a local domestic player.
Yeah, understand. How is our partnership with Microsoft and Accenture and AWS progressing? That's not just confined to U.S., I understand. It's, it's global, right?
No, all three are global. All three, we are working all three of them. We are working in multiple deals with each of them. With IBM we are working in one of the large central banking deal. In Accenture we are working others few deals with Accenture. We are working with Azure. The land and commitment is there. AWS. All the four of them We are working right now.
They are all playing positive for us because they cross-reference us in major deals. Sometime we are directly working with them, sometime we work as a cross-reference competitive environment.
That's great. On the iGCB side, we had a lot of deals in the pipeline, especially in Europe, where we were in the top two competing. Are we closer to the kind of a certification there? Are we still away on that?
I think Europe is slowing down. The business cycle is slow, so that's the only issue there in Europe. I think you've seen we have announced a very large European bank upwards of $3 billion, where we have closed a deal in this quarter. French bank, yeah. French bank. Core banking, he's core banking. Yeah. Core banking evaluation cycles are much longer. Much, much longer.
Right. Thanks a lot.
Okay, thank you. Thank you. Praneev.
Thank you, Nishit. We can have, Arun, one more question. There's one more. Yeah. Vibhor Gupta from GSS. Vibhor? Vibhor Gupta? Vibhor, you are there?
No.
Yeah, yeah. Please go on.
Hi, sir. It's a very good quarter this time. Sir, are you planning for buyback?
No.
No, no. The stock price has fallen from INR 950-INR 450. It's a good time to buy back.
If you're suggesting something, we can... I'll put to the board, yes.
Okay. Thank you.
Thank you. Thank you very much. I think. Thank you for advising us on some of the strategies. It's good dialogue with you. I would call this investor conversation as a investor dialogue in the coming months. This time we had more time for conversation than presentation, since we know the company well, we track the company well, no point in wasting half an hour time, critical time.
Given the feedback on Sherlock, whether this market will be looking at it, you write a mail to Praneet. Anybody who wants to have a more detailed understanding of AI, we may do some session. Yeah. Separate session on it. Technology session. If any of your customers may be interested. Yes.
Thank you very much.
Thank you. Thank you. Thank you, everybody. Now we are closing the call. Thank you. You may log off.