The investor presentation and press release have already been shared with you and are available on our website. During the call today, our leadership team will walk you through the highlights of the quarter, covering our financial performance, business momentum, and strategic priorities, and will then take your questions. We have with us today Mr. Arun Jain, Chairman and Managing Director; Mr. Manish Maakan, Chief Executive Officer, Intellect Global Transaction Banking; Mr. Rajesh Saxena, Chief Executive Officer, Intellect Global Consumer Banking; Mr. Banesh Prabhu, Chief Executive Officer, Intellect AI; Ms. Vasudha Subramaniam, Chief Financial Officer; and Mr. Vikas Misra, Chief Strategy Officer. We are also joined by several senior members of the Intellect Design Arena Management Team. Before we begin, I would like to draw your attention to the Safe Harbor Statement. Certain statements made during this call may be forward-looking in nature.
These involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied. These statements should be read in conjunction with the risks detailed in our filings and disclosure. With that, I would now like to invite Ms. Vasudha Subramaniam, our CFO, to take you through the financial performance of the quarter. Over to you, Vasudha.
Thank you, Nachu. Good evening, everyone. Thank you for joining us on our Q2 earnings call. It's a pleasure to connect with all of you again and walk you through what has been another solid quarter for Intellect , a quarter that reflects not only our momentum in top line and profitability but also the underlying strength of our platform and strategy, business model maturity, and consistent execution. Let me begin by sharing the highlights of our second quarter and then move on to a composite view of our half-year performance. In Q2, Intellect delivered revenue of INR 789 crore, registering a year-on-year growth of 34%. On a sequential basis, we grew 7% over Q1. Our EBITDA for the quarter stood at INR 184 crore, growing 68% year-on-year. Net profit almost doubled, reaching INR 102 crore, a 94% year-on-year increase.
Our license-linked revenue, which includes license fees, platform subscription, and annual maintenance, stood at INR 423 crore in Q2, up by 69% year-on-year. Our ARR, annual recurring revenue, crossed the INR 1,080 crore mark, establishing a strong and predictable foundation for future growth. What is also noteworthy this quarter is our continued strength in collections and cash flow. Collections stood at INR 753 crore in Q2, up from INR 550 crore a year ago, reflecting a 37% increase year-on-year. Our cash and cash equivalents have risen to INR 927 crore compared to INR 755 crore in Q2 of last year, highlighting our robust working capital management and improved operational efficiencies. Now, let's look at the half-year performance to understand the broader trajectory. For the first half of the current year, we recorded a revenue of INR 1,523 crore, representing a 26% growth over the same period last year.
EBITDA for half-year stood at INR 360 crore, reflecting a 46% growth year-on-year, while PAT for H1 reached INR 197 crore, up 55% from INR 126 crore in H1 FY 2025. This transformation and revenue quality is not just a numerical shift. It reflects a strategic evolution, creating value through sustained investments in product innovation, strong customer relationships, and prudent operational discipline. Let me now speak about the accelerating growth we are witnessing with our two synergistic platforms, eMACH.ai and Purple Fabric. Together, they are powering enterprise-wide transformation at scale, enabling financial institutions to embrace intelligent, composable, and open architectures that deliver measurable business outcomes. In Q2 of the current financial year, Intellect recorded 18 new deal wins, including 11 multi-million-dollar "destiny deals." These are large strategic engagements that span multiple modules and represent deep long-term partnerships with some of the world's leading banks and financial institutions.
In parallel, we enabled 22 successful digital transformations this quarter, validating not only the breadth of our offerings but also our delivery excellence. Looking at the demand side, our global deal funnel has now crossed INR 12,000 crore. This represents both the depth of opportunity and the strategic nature of our engagements. Leadership strength is a critical part of our ability to scale and deepen client engagements. This quarter, we announced two significant leadership appointments that strengthen our global presence and growth momentum. Vivek Gupta joined us as President and Global Head of Consulting. With over three decades of experience in global banking and large-scale transformation programs, Vivek will lead Intellect Consulting to help clients accelerate business value using our eMACH.ai and Purple Fabric platforms. We also welcomed Rakesh Srivastava as President and Chief Revenue Officer for the Americas.
With deep expertise across financial services and fintech, Rakesh will spearhead our growth and client relationships across the U.S., Mexico, and South America. I'm also excited to share that we are investing in the creation of a state-of-the-art 725,000 sq ft facility at our Siruseri campus, which will house the Purple Fabric AI Labs, Design Thinking Centers, eMACH.ai Academy, and residential infrastructure to support our leadership development and training initiatives. This facility is not just a space, it is a strategic investment in IP creation, customer core innovation, and the future-ready talent. In conclusion, this has been a strong quarter on all fronts: revenue, profitability, cash flow, and platform growth. We remain confident of sustained growth in the second half of the year. The opportunity landscape is expanding, the deal funnel is strong, our execution machinery is battle-tested, and our platforms are proving themselves across regions.
Thank you once again for your time today and for your continued belief in Intellect . Do you want to add anything, or can we open for questions?
It's a good storyboard right now. What we are talking to the investor over the period of time is that we designed 20% growth year on year. I think it's on that same traction. The important thing which happened was eMACH.ai was the agenda for advanced country. This half year, we have seen America is growing significantly faster than other regions. The decision of last April and May, which we have taken to move to advanced market, is because eMACH is fitting into the legacy modernization space, where a lot of technologies are sitting with multiple mainframes, multiple old technologies are there. The entire investment we have done in low-code, no-code iTurmeric as a customer innovation platform, Purple Fabric as the next area, which is most usable in the Americas and Canada.
This is a reflection which I mentioned during July 2024 that we are investing in America, there will be a dip in the last year. To the investor, I just want to say that all the decisions which we are making are calibrated decisions. We are saying we will be investing INR 130 crore in Purple Fabric, the Business Impact AI platform. In the last three months, I would have met more than 100 different people during the various masterclasses, the partners, the end customers. What we are able to put, our R&D teams are able to put together a Business Impact AI platform in terms of enterprise knowledge garden, digital expert, enterprise governance, and LLM selection and optimization. Using it as an API is so well received right now, which requires new investments to be made.
Out of INR 130 crore investment, we are close to $15 million investment which we are looking to invest this year. As of now, in these numbers which you are seeing, almost INR 25 crore is Purple Fabric investments, which has been taken into account. Our EBITDA margin would have been better by 3%, 3.25%. The EBITDA margin could have been better than that, which makes it around close to about 25%, which are the guidance which earlier we were saying our margins will close to 25%. We are in range of 25% in spite of all the investments. Thank you very much for participating and trusting the company. We are here, all the management team is here to respond to the questions that we have.
Thank you, Vasudha, and thank you, Arun, for your detailed insights. We will now open the floor for questions. If you'd like to ask a question, please click on the raise hand button, and we'll unmute you so everyone can hear your questions. I repeat, please raise hand, click on the raise hand button, and we will unmute you. Our first question comes from Rahul Jain of Dolat Capital. Rahul, you may ask your question.
Yeah, I hope I'm audible.
Yeah.
First of all, congrats on very strong execution. I have a few questions on the inputs that you have just shared. First of all, under the hiring that we have done, these are very interesting positions. If you could help us specifically on consulting-led hiring, is it more to drive, from the point of view of, is it on that side of it, or is it more on the existing way of support that we provide to banks? It is on that side of it. This is for the consulting hiring. Similarly, on the other hiring, which was on the Chief Revenue Officer, is it around the Purple Fabric investment and to rightfully monetize on that part of it, or it's on a much more broader revenue stream from Americas?
Okay, you broke in between. I'm just repeating the question for you. What is the role of consulting in our journey? What is the role of it? That's the one question you asked. The second question is, the growth in North America is Purple Fabric or otherwise? The first question is.
Sorry to interrupt, but just to clarify, this was more specific to the two hiring that we announced. I'm saying, what is the role of these two gentlemen from a consulting reach point of view and from revenue for the Chief Revenue Officer, was it pertaining to Purple Fabric or overall Americas revenue? Thank you.
That's right. These two hirings, consulting is a question we are moving to business impact. Transformation space. With eMACH, we are looking at it. We can measure the impact by reducing the cycle time, reducing implementation, reducing the operation cost, and creating the business impact in terms of revenue generation. Consulting will be helpful for improving our pricing, improving our business impact communication, expanding the eMACH across the organization. When we are implementing one product, can we do three products in the same client? It will use cross-sell. That's the role Vivek Gupta will be playing. The role Rakesh Srivastava will be playing is as Country Head of our U.S. He will be looking after the full interest of Intellect for U.S.
Understood. The INR 25 crore investment that you talked about, was it pertaining to H1 data or only a Q2 thing?
Only Q2 things. H1 was first quarter was INR 10 crore, what you mentioned in the last call. INR 15 crore incremental has gone in this quarter. INR 15 crore incremental each quarter, we are targeting to make it INR 130 crore.
Right. In terms of payback on this investment or early sign of monetization, have we identified any timeline by when we could see this proof of concept converting into meaningful revenue for us?
Not yet. I think the opportunity size is so big that we don't want to monitor ROI on this yet. It's a minimum we need to do.
Right. I appreciate that. This kind of a product and opportunity would require a meaningful investment and much back-ended kind of a thing in terms of the ROI. The first meaningful revenue should be coming in FY 2027, or it could start this year as well?
We mentioned INR 200 crore in Purple Fabric last quarter will come this year. We are in line with that.
Okay. These are right now maybe in the pipeline stage, but can get into revenue?
No, no, no. The Purple Fabric in the U.S. is working from last few years, which you know insurance business is working on Purple Fabric underwriting space. Those revenues are already pipeline space in Purple Fabric.
Right. You are saying that those exponent and risk and lift opportunity very much in there, but the lending side of opportunities are yet to come into our revenues.
Yeah, there are many things out there. I think Purple Fabric strategy we have shared with you in separate session. I think just go back to it as a platform, as a lending, as a GRC, as an ESG. There are multiple ways of monetization of Purple Fabric with the partners is another role. We are not sharing all the strategy element in this conference call because it's private to us. There are multiple angles to the Purple Fabric strategy.
Yeah. I must appreciate your team because recently we saw your stall at GFF and the best set of collateral that were available on any stall. I think it was Intellect Design , and there was significant collateral kept for all your eMACH and Purple Fabric kind of an offering, which is very relevant for that kind of a forum. Kudos for that. Just lastly from my side is on the CapEx side, which you just announced. Is there any investment and timeline that we have identified for this infrastructure spend that you just highlighted?
This is for we always do investment once in 10 years. This is the investment for the next 10 years when we are creating a capacity for the next 10 years for business impact, co-creation with a customer. We would like to invite customers coming over there, global customers coming over there, design the solution, compose the solution themselves, contextualize it. It is a residential facility of 100 rooms so the customer can come there, stay there as an executive facility. This is the whole area where AI business will be done in a collaboration with the customer. To us, AI is a very collaborative exercise with the customer. eMACH is a very collaborative exercise with the customer on business impact. That's why all the three pieces of it, U.S. piece, consulting piece, and this infrastructure piece, all three are coming together in a single initiative.
When we did the business plan, they were all three approved at that time.
Sure. Thank you. That's it from my side.
Thank you, Rahul.
Thank you, Rahul. Our next question comes from Sushovan Nayak from Anand Rathi. Sushovan, please go ahead.
Hi, is my voice audible?
Yes, you are.
Thank you very much for the opportunity and congratulations on a good set of numbers. Just one thing. I just wanted to understand how is the integration of C1 going on? I believe initially when it was novated, the contracts were not very profitable, but you had to leverage on eMACH.ai platform to improve the profitability, and I think it was going on track. If you could just give us a little more color on that, that would be helpful. Thank you.
It's going on well, Rajesh. Can I update you?
Yeah. First of all, thank you for that question. I think to your question, the integration between C1 and the Intellect team is going as per plan. During the last quarter, I think we mentioned it also, we've been able to sign up with 35 credit unions to move from the Erstwhile Forge platform into the new platforms, to the new eMACH DEP platform . I think that's a significant movement that in one quarter, we were able to move 35. We will be moving 35 customers who just signed the contract over the next couple of quarters. It is going on plan, and we have a plan to significantly grow these numbers over the next couple of quarters.
there anything on the color of the margins, when do you think that it will be in line with the company's present margins? I believe the total addressable market is 170 credit unions. Is there any timeline that you're looking at to onboard all of them?
Yeah. I think the way we are looking at the credit union space, you talked about the 170 credit unions. There is an opportunity of 170 credit unions from a DEP platform. There are other cross-sell and upsell opportunities like selling them lending solutions, selling them commercial solutions, selling them core banking solutions. The solution space is not only the DEP p latform space, but also an opportunity to upsell and cross-sell. Regarding margins, I think I'll defer that to Vasudha. Vasudha, you want to take that question?
We initially said it will be margin diluter, but we have made some margins in Q1 and Q2. We expect that to continue in the quarters to come, and it might increase also, like Rajesh said.
Is it fair to assume, ma'am, that this will be low single-digit margins as of now?
Yes, you can assume that, yeah.
As of now, yes.
Thank you so much. Thanks a lot for the opportunity.
Look at the overall, yeah. [Foreign language].
Sure.
Yeah.
Thank you, Sushovan. Let's take the next question in the queue. We have Deekshant Boolchandani from DB Wealth. Deekshant, you can ask your question.
Deekshant, you are on mute.
While we get Deekshant's line in the case, we'll go for the next person. We'll have Nemish Shah from Emkay Investment Managers Limited. Nemish, you can start your question.
Yeah, hi. Am I audible?
Yes, you are, Nemish. You can ask your question.
Thank you for the opportunity and congratulations on a good set of numbers. I just wanted some insight on how our partnerships with system integrators are kind of panning out. If you could just throw some insight on that. Specifically on the pipeline front, we've seen a good strong growth on a pipeline, which is now at about $12,000 outposts. If you could just share how much is that now coming from the partnerships that we have, say, versus a year back.
Okay. The partnership strategy is working very well. We are now in advanced conversation with most of the players, most of the SI player, IT services player, they need the AI platform. The big opportunity is that IT service player today are under pressure. They need an AI platform to work on. That is what currently we are working on. Almost 10 to 12 IT service companies have gone through the boot camp, working with Purple Fabric. Pipeline-wise, I would say pipeline has substantially increased more than. I think the exact number we'll not like to share with you what the pipeline number is there, but it's substantially improved in the last one year because of Purple Fabric is a significant contributor of the pipeline besides the eMACH contribution.
Sure. Yeah, that's it from my side. Thank you.
Thank you, Nemish. We have Mihir Manohar from TRUST Mutual Fund for the next question. Mihir, over to you.
Yeah, hi. Thanks for giving the opportunity. Congratulations on a good set of numbers. Sir, I wanted to understand on the Purple Fabric side, I mean, specifically, how is the pipeline building up on a quarter-on-quarter or on a year-on-year basis? Is it more than double-digit? How to understand that? Which geographies, which kind of customers are building up this pipeline? On a broad basis, let's say for the full year, we are targeting INR 200 crore of revenue. Manish, what would be the revenue that we would have received from Purple Fabric?
200 crores for Purple Fabric only, no? What is the question? INR 200 crores for Purple Fabric for this year.
Yeah, for Manish, how much would be the number for first half?
First half. We don't declare it right now. We don't define the numbers product-wise. As a strategy, we never do product-wise numbers.
Okay. Understood. Understood. I just wanted to understand on this thing. I mean, is it like a top-up offering or is it a cannibalization of the existing offering which is there? How does the overall business work for Purple Fabric along with the customers?
I think you should attend a masterclass first, yeah. Purple Fabric masterclass to understand what AI is. It's a completely different line of business. What does the cannibalization mean to me? Sorry to be slightly harsh on this call. I think we are communicating masterclass on Purple Fabric. It's such a differentiated product against Palantir. It's the biggest opportunity an investor can have. If you don't understand that it's cannibalizing something else, I think we have a very serious issue as an investor to understand what company your company has. Did a product which is compared to Palantir. You should study Palantir, and you should study the masterclass of me which is available on YouTube to understand what Purple Fabric is.
Understood. Sure. I will do that. That's what I'm going to say.
Yeah, because it's so different. Your company has done a job. You should be proud of some Indian company to do something for business impact AI, which is as good as Palantir, which is a $400 billion market cap company.
Sure. Absolutely, sir. That's it from my side.
Our next question comes from Vivek Kumar of Best Pals Advisory LLP. Vivek, over to you. You can ask your question.
Can I be audible, sir?
You are.
Thank you, sir. Thank you for the opportunity. Sir, can you give outlook product-wise? I'm not asking the revenue breakdown, but normally we give outlook about our core banking and about our GTB and what are the trends playing out in each of the I'm not asking for numbers, but for the next 2, 3 years, yeah, those things. Because which is what is driving growth? And where do you see? Because you remember telling these three where the and now you have Purple Fabric. You have Purple Fabric, though you have given more than enough for us. I'm just asking about outlook.
I think what is outlook-wise, you look at it, the core banking migration is the biggest space we shared with you. We won the deal in core banking migration using eMACH.ai. That's one space where the growth opportunities are there, which Rajesh has mentioned, the credit union of 170 credit union, we can go into core banking and lending as cross-sell opportunities. They are not only digital engagement opportunity, but core banking and lending can go on the same credit union on the market space after DEP . There's a next 2, 3 years, we have a clear visibility of core banking migration to get into that. Manish can give wholesale banking and payments and liquidity. There are three lines of business which wholesale banking is coming out with. Foreign banks, there is trending into the global landscape.
Wholesale banking is becoming equally important along with liquidity and the payment systems which is there. We won the large payment deals in this quarter against the global competition on the payment side. Our Pay9 architecture is very unique over there. Three platforms, Liquidity, Payments, and Wholesale Banking. Fifth platform is Wealth. Wealth with SBI and Kotak running on the wealth, it has become a solid product which is there, which we are looking to take out of Asia to Europe. That's the same strategy which we followed for other products. We took core in India first, then we take core into Asia, then we took core to Europe. Now we are taking core to the Americas. This route is the same highway as there. Highway goes from India, comes from India, goes to Asia, then goes to Europe, and Europe to America is our highway of taking products.
These are five product lines which are core product lines. The supplementary product lines are trade, supply chain, finance is another important line. Credit card is another line which we are looking at to transform this business. All these products are coming with the AI embedded inside it, creates a differentiation because Purple Fabric is embedded in all the products and creating each product line is an AI embedded product line. That's what our bullishness or our pipeline is increasing because we are able to differentiate where the product comes with AI built-in, eMACH built-in, iTurmeric built-in, which my competitors have not invested enough. We have a sweet spot here.
Thank you, sir. Last question. Can we say we are moving outside our 20% growth rate for the next 2, 3 years, given that we have seeded so many things? It looks like that, maybe I don't know if I'm reading too much in the one quarter.
We are designed for 20%. We will design for 20%. We achieve higher or we achieve lower. You don't beat us when we are growing 10%. It always happens in this industry when we grow a few quarters less, a few quarters higher. We stay at 20% design growth.
Can we take EBITDA margin around 23%, same percentage, around 23%, 22%, 23% for this year, even with this INR 130 crore coming up?
There's no need of depicting any numbers over there. Just if 20% growth is happening, it's an EBITDA margin should grow better.
Thank you, sir. Thank you.
First half, 26% revenue growth, 46% EBITDA growth. That should be the indicator for you.
Okay, thank you, sir. Thank you very much, sir.
Thank you, Vivek. Moving on, our next question is from Sajal Kapoor, representing Anti-Fragile Thinking. Sajal, please go ahead.
Yeah, thank you for giving me this opportunity. Arun Sahib, what important insight about modern banking, insurance, or payments do we understand bigger and better compared to our older competitors? Because clearly, we have beaten a lot of the incumbents in this game again and again.
If you look at our site or my lectures, if you look at it, eMACH.ai. We've gone from design thinking, where we understand the customer desirability better. Not customer desirability, customers' customer desirability, which, if Manish speaks for a few minutes, is about each industry segment to understand that customer desirability. Then we move to first principle thinking. First principle thinking is why banks exist, because events exist in the company. We do fundamental shift in the way we design our product, then my competitors do it. I don't want to compare with Tesla, but the point, the way Tesla has challenged the starting first principle thinking they applied in Tesla, we applied in banking technology, saying event, microservices, API, cloud, headless, and AI. The six first principles which any bank will require. We invested all the money around making that perfect, composable, and contextual.
From the last 5 years, you are hearing that same story. Initially, you're not understanding what is composable and contextual. It was labeled when we put composable and contextual in 2020. It took five years for them to come to the reality. That investment is there. The differentiation is design thinking, first principle thinking, and the way we design the product. That's why we are able to take one- by- one competition. We are not jumping all of it together. We are saying first take one space, then take the next space, then you take the next space, and then take the leadership there. Manish, you want to add to this?
No, no. I think you called it out. This is the differentiation we are driving from that perspective. I think we should stay at there.
Thank you. My second and last question is, how is our R&D, you know, the processes, especially around AI and ML and eMACH labs, how are the processes explicitly designed to sort of encourage frequent small-scale or, you know, quote-unquote, "safe failures," sort of trial and error that generate immense amounts of economies of learning without jeopardizing the company's stability or spreading any systemic risk? We have to make small mistakes, gain significant learning as a result, and then become even better and extrapolate our successes into other domains, hopefully.
First time, you are asking a very good question in the investor call about R&D because I think our strength is R&D. 1,200 research engineers are working. How many companies have 1,200 research engineers given the freedom of working together? If you look at the average instinct in the company, it is so phenomenal that everybody just works like a team, research engineers. We make a lot of mistakes. It's not that we don't make a mistake. I acknowledge in the AI space from 2016. First three cycles, we didn't succeed. 2016 to 2018, we didn't succeed. 2018 to 2020, we didn't succeed. It takes an amount of resilience for the research team to work. The research is a completely new paradigm for the Indian IT industry, that how the research is to be conducted.
I like your question that you are emphasizing that component of research, which I was trying to highlight for quite some time, but investors are more focused on returns and immediate outcome. This research requires 5 years to 7 years kind of a cycle time to translate the research into the business outcome. Fortunately, we could stay with our course. We didn't cut down our AI investments when we failed in 2022. We continued those investments. Today, we can get the benefit of it ahead of the industry where every IT service company requires a platform, and they are saying, "Oh, they are building a platform." I have a doubt that they can build a platform because research is not their cup of tea.
Absolutely. It's a different DNA, Arun , that. Doing as a service. Indian IT traditional model has been project maintenance, you know, just service model. I mean, people, it takes a lot of courage and conviction to invest behind generating your own IP rather than working for someone else's IP. That's where I think we have been trying and making small mistakes is absolutely fine. Look at our balance sheet. I mean, that's. Numbers speak louder than whatever narrative we could spin around it. Net cash balance sheet gives us a lot of optionality to continue to innovate. Yes, we'll make mistakes in the future as well, but you know think about two, three big successes that could take us into a completely different orbit. Eventually, we'll get there. Thank you for all those responses.
Thank you.
Before we move to the next question, just a quick reminder. If you have questions, please click on the Raise Your Hand button. We'll call out your name and unmute you to take your questions. Let's move to the next question in the queue. Pawan Katariya from Bullseye, you are up next. Please go ahead with your questions.
Good evening. Congratulations on another strong quarter. I have a follow-up question on margins. You had earlier guided for 27%, 28% margins. I understand the INR 25 crore investment in Purple Fabric this quarter. That was a deliberate strategic spend. Should we assume that the investment phase continues in H2, or do we expect operating leverage to bring margins near 27%, 28%?
It's a time to invest more and more, yeah. I'm just looking when I spent, I just came back from the U.S. I spent 2 weeks' time there. I made two trips to the U.S., first in August and then in October. Opportunities are humongous. How much we need to invest is a question right now, so that we should not make a significant error, but we need to invest more and more. Margin is not my concern right now. Margin will happen anywhere.
Okay, sir. Since finally, Purple Fabric is now scaling commercially, could you quantify how much interest or how many qualified leads it has generated and what portion of the current INR 12,000 crore funnel is linked to it? I’ve attended your Purple Fabric Masterclass, and it was pretty impressive. I just would like to know, out of the INR 12,000 crore funnel, how much is linked to Purple Fabric?
Let me not quantify that right now. My current product portfolio itself is Purple Fabric- embedded. If I say every pipeline has a Purple Fabric embedding, I would say almost 70% of my pipeline has a Purple Fabric embedding into it.
Okay.
If I look at separately, the partnership pipeline is also separate. I think AI is everywhere. We have today, just to share with you, we have 3,500 people in Intellect using Purple Fabric. We have 9,000 agents, which we are using internally for our own efficiency gains. 9,000 agents in the last 6 months they have created.
That's great, sir. Thank you from my side.
Thank you, Pawan. We'll now move on to the next question. Vipul Kumar Shah from Sumangal Investment, you can ask a question. Please go ahead.
What will be the CapEx for this?
$20 million. $20 million is the CapEx, which is, I think, it dropped off.
I think it's true.
It will be spread over what time frame?
$20 million per year we are spending on the CapEx investment. The last few years is $20 million.
Okay. For 1,200 research engineers, what is our annual outgo?
In this quarter, R&D expense, which we are doing, R&D plus $20 million. If you look at it, we are spending.
First half is less than $10 million.
Pardon?
First half is less than $10 million.
$10 million capitalized, not?
Yeah, $10 million capitalized.
Total investment on research is.
about INR 55 crores in the first quarter and INR 60 crores in the second quarter. It's about INR 105 crores.
That's the R&D investment?
Oh, that's the R&D investment.
Plus CapEx.
Plus CapEx.
It's close to INR 200 crore in the first half.
Correct.
Okay, thank you.
200 crore is R&D investment in the first half.
Okay, sir. Thank you.
Thank you. We have a follow-up question from Sushovan Nayak of Anand Rathi. Sushovan, please go ahead.
Thank you so much for the opportunity again. Sir, I have had, obviously, the privilege of attending most of your masterclasses on Purple Fabric. Just wanted to understand if you could at least provide a directional view about when I'm looking at Foundry for Palantir or a C3.ai, what would be, if you could quantify, what would be the addressable market? Obviously, internally, you would have had some plans how much of that market you may want to capture the way you had articulated about the INR 200 crores this year. If you could just give some sort of a directional view on that. I would just love to understand your perspective here, sir. Thank you.
Purple Fabric, we are looking for IT service players to look at it. First, they should implement. We are looking for at least 100 partners to be there across the globe where the IT services partners are. Every country, we are looking for some 10 to 15 partners we want to select who will be using Purple Fabric for their internal use, like Intellect is using, which we call Purple Fabric Tech. They will take to their clients. Our partnership with some of the larger IT service companies who have 500- 1,000 clients are there, that will be the second space. To reach our access to Purple Fabric by direct salesforce, we can reach to, let's say, 500 clients. With the partners, I can reach to 2,000 clients. Our ecosystem will be close to, will be, in the next 2- 3 years, we'll be looking at it.
5,000 customers should be approaching Purple Fabric directly or through partners.
Any quantification in terms of revenue or the overall total addressable market, sir? If you could provide some direction, we would know if that is possible.
I mentioned in one of the masterclasses that opportunity is between INR 1,000 crore- INR 5,000 crore.
Yeah, sir. That would, of course. That answers the question. Thank you.
Yeah.
Thank you, Sushovan. Let's take the next question in the queue.
Just a minute, just to interrupt you.
Yeah.
I'm saying AI business is INR 1,000 crore- 5,000 crore number. When you have given, the risk is also there. It's changing every day. The point is, it's a highly volatile market. The speed at which we are able to get it adopted, that will be the important point for all of us. Don't take it with a pinch of salt of the INR 5,000 crore number. The opportunity size of TAM is INR 5,000 crore, which we believe it's possible if things are going in the right direction. Anything can happen in the AI space.
Thanks for the update, Arun. Our next question comes from Srinivasu K from TIA. Srinivasu, please go ahead.
Hello, sir. Congratulations for the great set of Q2 numbers. My first question is about India's DPDP Act and Data Localization. You already have Purple Fabric Cloud GIFT City.
Yeah.
That mandates local hosting. I just wanted to see the opportunity for Intellect.
GIFT City is only one means of doing it. GIFT City is not expanding. I'm saying the biggest opportunity is North America and Europe. Okay, next, I think he's dropped off.
Okay, you don't see much. Hello?
It's there. India is there. I think GIFT City is only a means to reach out to other people, not necessarily that GIFT City is one component of it. I'm not saying it's there or not there. I don't want to undermine it. It's just one component of it. If there are 10 components of Purple Fabric, GIFT City is one of them.
Yeah, that's fine. I'm just asking the opportunity, being an Indian software company, do you see a big opportunity based on this DPDP Act?
I didn't get it. What? DPDP Act?
Data Privacy Act.
Data Privacy Act, okay.
Yes, yes.
It should have, it is evolved. This is too early to say anything. We need to test it out, Data Privacy Act. How much the act is applicable, what situation the bank will use DEP. We are just evaluating. It's too early to say anything on it.
Okay. My next question is about the deals that you won in Q2, be it payments, treasury, or trade. Is this eMACH win sit above the incumbent cores?
These are the full payment transformation. Manish, you want to highlight that?
Your voice is not clear. The question.
The question is, out of the Q2 deal wins that you won, how many wins does eMACH sit above your competitor cores, like be it Temenos, be it Oracle, be it Finacle?
These have been all fought in the global landscape against each of these players. Like Arun spoke about the large payments transformation deal, these are the common players we are winning against. These are very significant deals from that perspective.
Okay. How many eMACH customers adopted Purple Fabric as an AI layer in these deals?
I think that next level of data, right now we are not sharing.
Okay. Let me put it in a different way. When banks pick up a core plus componentized modules, what unique differentiation does your Purple Fabric or eMACH, the default AI workflow layer, offer rather than a hyperscaler tool chain?
Sushivan sir, I'll help you answer your question differently. Our Purple Fabric is embedded into eMACH, like in the co-banking, in the lending side, in the payment side. It's an embedded capability as well as it can sit outside on top of a Temenos or an Oracle or a Finastra or any one of them. From our configuration specific to these product segments, it can sit, it is embedded in our platform and it can sit on top of anything. Our opportunity, and then it's a licensing capability of what the customer is licensed for. That should help you understand where we are.
Okay. My last question is, the global orchestration players like ServiceNow, Pega, they're all talking about agentic workflows. How is your iTurmeric placed to capture this trend?
We have not launched iTurmeric against BPM, and that's an area which we can launch in 2026 or 2027. We are still using iTurmeric only to solve our own customer problem, not as a product against Pega. iTurmeric , Purple Fabric is a very detailed combination. When we are ready to launch, we'll launch it over there. From an investor perspective, you need to look at it. My INR 1,000 crore is the cash in the books, but I have a INR 10,000 crore of IP asset, which I can leverage at any point of time to go to market in different construct. That's the role of an IP company which we have built over the period of time. The iTurmeric will build up. We are patiently looking at it. We have more than 300 customers who are working on iTurmeric as of now, but we have not launched it.
When we have capacity to launch, maybe in June 2026 or January 2027, that is the time when we'll take a Purple Fabric against Pega and against ServiceNow.
Thank you. Thank you, sir. Best of luck for the H2.
Appreciate your questions, Srinivasu. Also, moving on, we have another really nice question from Deekshant Boolchandani from DB Wealth. Deekshant, you can ask your questions.
Hi, sir. Firstly, congratulations on the solid numbers. Moreover, congratulations to Intellect that we are now competing with someone like Palantir, and even saying that as an Indian, it's so proud of. It's a little bit long-winded question. Please help me here. I see that underwriting really appears to be a major challenge across finance overall, whichever geography that we are looking at. From my understanding, the Purple Fabric layer that we have created now can really revolutionize it with a better cost optimization. Again, that's my limited understanding, sir. I would love to hear from you. You have mentioned platforms like Palantir, and they do some enterprise intelligence in depth. I'm curious how Purple Fabric would compare to some U.S. companies like Affirm, which really excels in real-time risk assessment and management for their credit lending.
How can we create a better credit layer of assessment of underwriting so that that layer can be an agentic workflow for all these people, so that a lot of their OpEx gets saved up and which becomes our margin and our ?
Manish, you want to take it up?
Yeah, it's an interesting question. Let me try and explain this to you. See, the underwriting capability was one of the early investments we did in AI. The ability to orchestrate underwriting all the way from the submission from a customer, we've done it a lot in insurance, but we're also doing it in lending and other areas where you could basically take a submission of documents and have the digital experts, which are the agentic capability, to be able to work on that underwriting, validate some of that information, firstly extract it, validate it with data that is there within our knowledge gardens, and our knowledge gardens brings in data from market sources.
The ability for us to take this decision through digital experts on underwriting and provide the human an ability to do it faster and more efficiently and accurately is really the end-to-end embedding of Purple Fabric into the underwriting process. Manish mentioned, and some of you all asked the question about the investment in Purple Fabric. The investment in Purple Fabric is actually the investment in AI. No company today cannot invest in AI because it helps you internally in your own businesses, it improves the product, and it brings you the ability to bring the agentic solutions together to get better business impact outcome, which is why our platform is called the Open Business Impact Platform, because you have to use the agents to orchestrate end-to-end solutions for our customer using AI. It is not a layer that it works along; it connects and works along with eMACH.
It's not like a layer of eMACH or something. Partly these agents are embedded into eMACH solutions we have, and at the same time, they connect to many other solutions the client has for the digital expert to work efficiently. That's really the orchestration.
Okay, sir, just two follow-ups here. One, at some point of time, the workflows will get standardized for a lot of insurance players or finance players, P&L players. At that point of time, cost really becomes the only constraint, right, for them. If we are able to do it at a better optimized cost than the other party, they would want to stick with us. Also, the whole problem of going from one player to another. What kind of stickiness do we expect our sort of total solution to have? Because once someone has integrated with us, I'm thinking that stickiness should be high, right?
No, is your question to do with stickiness? Is your question to do with cost?
Aren't those two related?
No. A customer can stay with you and actually continues to, because this is not a one-time activity. Underwriting and improving the digital agents is a regular maintenance because you have new data, you have new systems. The ability for the agent to continuously improve underwriting for you is part of the process. Like in any system we use, the end-to-end underwriting has to get more efficient. Finally, you have to take the credit risk decision. You can get inputs to do it faster and quicker, but the final decision for each bank or institution is how much they want to lend and what is the risk-reward they want to do. The AI only helps you with much superior knowledge to be able to take those decisions more efficiently. The agent actually helps you do that.
I would like to add another Manish point. Let them explain. I think people are not understanding AI. A lot of us are understanding in the AI world, say AI is agentic. AI is not agentic. AI has changed the world. It's a new way of working in this world, where every manager has to work AI augmentation in your job as an analyst or as an investor. How many places are you using AI for a serious issue rather than a ChatGPT as a conversational agent? It's a new way of working in this era, and people are not realizing it. When we have 9,000 agents in Intellect, it's not that they are creating operational excellence or they are doing a part and parcel of their day-to-day work. They're thinking like that.
In the next 3 years, the AI will change the entire way a lot of businesses which you are evaluating today will change dramatically differently in the next three years. We are undermining the power of AI as an agentic power.
Sir, I understand where you're coming from, and I really appreciate where you're coming from. Moreover, let's say that someone like Anthropic or Claude, if they are creating similar financial workflows, how can we then be more competent there? Let's say 3 years or 5 years on the line.
Please attend the masterclass.
Sure, I will, sir. Thank you so much.
Okay, next.
Next question from Parag Barami. Parag, you may proceed.
Hi, can you hear me?
Yes, Parag, we can hear you.
Sir, I have been invested with Intellect as well as ALICE, and I've been closely tracking for almost 20, 25 years. I think the energy you show is amazing, so that's thank you. Next, my question is, last year, we signed a lot of SI contracts in Q2, Q3, for example, HCLTech and other big companies. I know it takes a few quarters for them to materialize. Can you give us an update about how it's going? How do you see that SI thing evolving in, say, maybe next 2, 3 years?
Very good. SI will be the way to grow. Purple Fabric, SIs will take us to their customers. They don't have an option. To me, many of the SIs don't have a platform to which they can deliver AI to their customers. Intellect brings a complete platform with enterprise governance, LLM optimization. Either they have to choose Palantir, or they have to choose Intellect, or they have to choose C3.ai . We are one of the three options available to SI to take to market. The investment we have made in a partnership over the last 2 years is playing well for the coming years. How much it works out. The determination of the package between INR 1,000 crore- INR 5,000 crore, that is a kind of a bandwidth which partner will define us.
Are you signing some contract coming through that route nowadays or still too early?
That's right. They're coming closer.
Okay. The next question is, our cash and cash balance is almost touching INR 1,000 crore. It's quite different from the COVID days when we were barely making profit and most of the questions were, conference call, when are you going to make profit? From that stage to where INR 1,000 crore is, it's a commendable achievement. I think you probably have got a critical mass. How do you look to utilize this cash and cash balance which is there and which is likely to grow even further now?
As of now, I think we need a lot of investments in AI, the market capture investment. I think this much cash is anyway required for us to look at it. It's a one-quarter cash. The numbers are touching close to INR 800 crore. INR 789 crore is a quarterly number. A company will require at least 6 months of the revenue as cash in the company books to have proper risk management practices. I think we are still short of. The simple principle is 6 months revenue should be cash in the company books as a risk management practice. Today, we are close to 5, 4.5 months cash in the books.
Okay. I think last quarter or maybe the quarter before that, you hinted a transaction, or you hinted investment like. Some portion of your profit you would be investing in CVC kind of activity. What is your thought process on it? Would you like to increase that number given our financial position now, taking in more banks or?
We are not getting distracted. We have a clear focus on eMACH.ai strategy to go forward in the market.
Okay. Good luck. Thank you. Thank you very much, sir, and good luck for the next part.
Just last question here, 6:00 P.M.
The last question comes from Pravesh Kochar of FourLion Capital. Pravesh, you can go ahead.
Hi, Goranjal sir, and thank you for taking my question. Hypothetically, if you were to operate at 10% margin, right, instead of 25% and invested in either R&D or doing free implementation for your pipeline customers, by how much could you accelerate your revenue or conversion of that pipeline? Thank you.
Usually 2 years, but there are more investors who want more than 10%. We need to play with a whole marketplace. As a CEO, it's a ball to play on. I think we need to increase our sales team substantially. We have increased, our salary cost has gone up now. SG&A cost is going up. In the next two quarters, we'll be investing more in sales costs. That's the investment we'll be making. I cannot predict what will happen to the immediate outcome because AI still is an early stage of people to understand. It's like the internet era of 1997. A lot of hype is there. There are many players out there which are saying Anthropic can do this, this can do this.
All of it is there in the, if you can take a right space of Palantir and Purple Fabric, I think that can be of different fortune, which can happen. It's not going to happen by more investment. It will happen with the right adoption of the platform by the certain key customer. Many variables are there. It's still keeping us awake at night on Purple Fabric, what opportunities it can throw at us, whether we are able to capture all the balls which are in the air.
Thank you.
Thank you, Pravesh. That concludes our Q&A session for today. Thank you, everyone, for joining today's call and for your insightful questions. If you have any additional queries, please feel free to reach out to us, and we'll be happy to respond. We appreciate your continued interest in Intellect and look forward to connecting again next quarter. Thank you, and have a great evening.