2023-2024, ending 30th September 2023. The investor presentation and press release has been sent to you, and is also available on our website. Our leadership team is present on this call to discuss the results. We have with us today Mr. Arun Jain, Chairman and Managing Director; Mr. Manish Maakan, CEO of iGTB; Mr. Rajesh Saxena, CEO of iGCB; Mr. Banesh Prabhu, CEO of IntellectAI; Ms. Vasudha Subramaniam, CFO. Besides, some other senior member of the Intellect management team are also present in the call. Mr. Arun Jain will brief you on the result, followed by Q&A session, where your question will be replied by the senior management team. Once the Q&A starts, you can ask a question by clicking on the Raise Your Hand, and we will unmute you so that everyone is able to listen to you.
Once you have, I would like to remind you that anything we say which refers to the outlook of the future is a forward-looking statement. This must be read in conjunction with the risks the company faces. With this, I request Arun to give his briefing. Arun?
Good evening. I wish to begin by thanking each investor for trusting the story of Indian fintech company, participating in cutting-edge technology space, shoulder to shoulder with global competition. I'll cover my conversation in three frames, and will take close to 15 minutes. Frame one, current quarter and first half year of FY 2024. Frame two, patterns and trends from last three years' data and the market, what we are addressing. Frame three, business outlook for next six months and coming years. Let me start with the frame one. This quarter, Intellect revenue grew 17% over the same quarter last year to INR 621 crore, while EBITDA grew 45% over the same period. The half-yearly revenue also grew healthily at 18% and PAT at 43% growth compared to the last year.
The company revenues are crossing INR 600 crore mark consistently for the past three quarters. All these results are in line with our confidence of growth at 15% level, which we were looking at it when we started the financial year. They are above 15%, close to 18% at this point of time. During this quarter, contracting in respect of two deals amounting close to INR 30 crore in revenues got deferred and could not be concluded. As in the past quarter, there is intangible cost of INR 12 crore towards RSU in quarterly results, so this is a cost which is getting booked, which is intangible in nature. We doubled our marketing activity during the last six months, having more than 700 meetings with relevant customers and prospects.
We participate in almost 20 events in the last six months for creating a larger brand awareness, reaching the right kind of a technology on eMACH.ai, and generating the leads. So, which we call P0 to P2, we have six stages of sales process. P0 to P2 is leads and lead process. P3, P4, P5 is the opportunity process. So what we publish in the results of total funnel of over INR 7,500 crore is basically our opportunities, which is at P3, P4, P5. We don't publish any lead related financial numbers, because at that time, we don't assign the financial numbers to it, and that's why we don't publish the number of P0, P1, P2. We have almost similar amount of leads in a P0, P1, P2, as much opportunities are there.
Only where the proposals are submitted, that's what we publish as a funnel for us. Now, I would like to move to frame two on the dialogue with you. After receiving smart questions from you about varying and unpredictable quarterly performance of Intellect in the past, our data analyst team plotted last 12 quarter data with trailing twelve months as pivot. Our CFO has shared her findings in this deck. The beauty is that on the basis of these numbers, Intellect has grown at 20% CAGR over a three-year period. Exactly 20%, which we guided the market, that we have designed our business to be 20%. So we feel that how can it be working exactly at 20% over the three-year period? 22% for two years and 18% for one year.
This sustained and designed growth is well above the industry growth rate. I call about 20% growth rate as a designed growth since that's the constant message we are sharing with the investor community consistently. This designed growth has three key principles and a strategy, on which this 20% growth confidence is there for the company. Principle one: extreme customer-focused business design. That is independently designed business for corporate banking needs in the form of IGTB, retail banking and SME lending business grouped under IGCB, wealth and insurance business under Intellect AI. This strategy helped in building business growth and operational sales based on cutting-edge differentiated products for our customers. Principle number two: Design the products for most demanding banks to drive last 2% is 200% differentiation in the products.
So when we work with a leader in the main market, like HSBC or J.P. Morgan Chase or HDFC Bank or RBI, we get that advantage of demanding requirement, and our product functionality becomes so much sharper than anybody else in the world. And we have advantage of working from west to east, from U.S. customer to the Singapore customer to Australia customer at a stretch, so we are able to get the right patterns because of the customer profiling that we have. Today, eight out of 12 products are in leadership quadrant of global technology, analysts like Gartner, Celent, Aite . This helps in premium pricing of products and enables to build business in Europe and Americas.
Intellect customer portfolio has seven out of top ten banks in Europe, eight of the top ten banks in Middle East, seven of the top ten banks in India, five of the top ten banks in North America, and five of the top ten banks in Asia and ANZ. That's a remarkable market customer. I think we've lost Arun. He probably rejoined, maybe the network. Yes. Yes, Arun , you can go ahead. Above three strategies have been growing iGTB to INR 950 crore business. iGTB business grew to INR 650 crore, while IntellectAI business grew close to INR 500 crore during the last twelve months. Coming to frame three, I'm sharing our leadership outlook for next six months and for next three years. As of now, we must acknowledge the instability of global geopolitical environment.
Israel-Palestine conflict, as well as Russia-Ukraine conflict, India-Canada conflict, are all on the horizon. We, as a management team, take cognizance of these conflicts and hope for our world to become more peaceful in coming years or coming months for our growth of the business. But yet we need to design the business for the future. Where are we getting our confidence level in spite of these geopolitical disturbances? We launched eMACH.ai platform with the most comprehensive microservices for financial industry to drive composable and contextual solutions in February 2023. And this is the one platform which received so well because entire industry wants this, a desired direction of industry to move towards.
As of now, the separation of events, microservices, APIs on cloud, headless, and bundled with AI, Intellect plays very significant role because there is no single player who has got all the six components coming together under one roof for giving a composable and contextual solution. This has led to big partnership with Microsoft, Azure, Accenture, AWS, KPMG, and IBM. We are working very closely with them for large digital transformation deals. Intellect Technology start helping our customers by using iTurmeric as a composable technologies. Effort cycle time has come down by 40%, so we can. We are now able to propose full digital transformation at 40% lower cost than our competition. Intellect has launched iGTB Copilot, along with Microsoft, at International Corporate Banking event, Sibos, in Toronto, which has been very well received for its ability to drive decision support advice using generative AI.
As of now, generative AI is being used for a lot of customer experience spaces, but over here this was done for business decision purposes. We also launched generative AI-based underwriting recommendation for P&C insurance on Intellect U.S. Cloud. This also has received significant mileage because now the P&C process is completely autonomous from submitting documents for P&C Insurance, which collects our document intelligence to underwriting entire process to the recommendation, up to the recommendation stage, and that data processing is autonomous in nature. Both iTurmeric technology, which makes composable platforms, and my IDX technology, which makes a contextual technology, drives the kind of a rich product positioning for retail banking, lending, wealth, global payments, global trans- digital transaction banking, trade and supply chain finance, and insurance. Because they are the width of the product and depth and cutting-edge technologies is driving our growth.
For this year, we are confident of growing the revenue by 15% on annualized basis and profit growth of more than 30%. So that's what our current outlook is looking at it, 15, 15%+ in spite of the global or geopolitical environment. And if we are lucky, we can be closer to our design growth of 20%, but we are planning 15% growth for the yearly basis. Thank you very much for listening to the three frames, and I will open the platform for your question answers.
Thank you, Arun. Now you can, we move to Q&A. I request, in case you want to ask a question, please, click on on this so that you can ask, we'll unmute you. Please ask the question. Okay. First, we have Mr. Mohit Jain from Anand Rathi Securities.
Please unmute him. Mohit, you can also unmute yourself and ask the question. Mohit, you're there?
Yes, sir. So my question was related to this partnership that you just announced. So how is it going to help us and the one which you announced about Sibos and Microsoft? So one is, how is it helping in our current set of products that we are selling? And second, it appears to me, apart from this delay in the quarter, you are also looking at slightly slower growth for the year, while our exposure to the troubled regions may not be that high. So just to clarify, are you seeing further weakness in banking? And second, this partnership with Microsoft. These are the two questions I have.
First question, Manish, would you like to answer the partnership question, to Mohit?
Yeah. Mohit, I think this is a very disruptive partnership along with Microsoft. iGTB Copilot, which we launched at Sibos, this is a whole new way of deriving value from data, which is sitting in the banks, and we're going to look at capitalizing our extensive domain expertise in commercial and corporate banking. In our phase one, we are introducing an array of about 50+ AI use cases covering our existing stream of cash management, liquidity, investments, payments, virtual account, trade, and supply chain finance. First of all, these copilots are being designed to assist banks and corporate treasury role holders for better customer experience, cost and operation efficiency, and risk management in partnership with Microsoft. So first, it will help make our products look much more smarter, much more adaptable from what the market needs are.
Second, it's a completely new revenue stream which we are building upon for taking it forward.
On second question, Mohit, the revenue growth, we are looking at it, can be better than this, but as of now, I think 30% margin growth, we are right. Companies are looking much lower numbers. It looks to be better, but let's see how it pans out. It can be better than this.
Sir, as a follow-up, like, are we building in that GeM impact also as part of slow transition? Or do you think that is not in second half of the year, and we should look at it from FY 2025 standpoint?
We are not too sure about that, but on margin level, we are taking into account. On a revenue side, maybe I'm not taking into account what will happen after December, but on profit side, we are confident of meeting 30% growth on an annual basis.
So in the current guidance, we are building in current level of GeM revenues till March, right?
No, no, no. I'm saying irrespective of GeM revenue or not, 30% margin growth will be there.
Okay, so whether it goes or stays, the point is that your guidance takes into account the potential volatility due to GeM.
Yeah. So the margin, the revenue line will change, but not the profit line.
Okay. Great, sir. Thank you, and all the best.
So I'm indirectly saying what the margin we make.
Thank you, Mohit. Next, we have Mr. Nishid Shah from Ambika. Nishid Shah... Please unmute yourself and ask the question.
First of all, congratulations to the entire team for a very good set of numbers on a half yearly and on a year-on-year basis. I think, Arun, some time back you had mentioned that, Intellect should be evaluated on a year-to-year basis and not on a quarterly basis, not on a sequential basis, given the delays in the closures and the global environment. So I appreciate that. Can you give more details on the two questions? One, on some details on the delay in the closure of two deals. What is the value, and are we likely to see a closure this quarter? And second question is on the U.S. geography. How is the partnership progressing with, Microsoft? We have been talking about it for last, four, five quarters, and with Accenture.
So where are we seeing traction with Microsoft or are we seeing traction with both Microsoft and Accenture? Those are my two questions.
Okay. So, first question was on your growth, which is, last like LTM basis. We should be monitoring on year and LTM basis. Quarter- to- quarter, we cannot do it. So again, I want to emphasize that quarter- to- quarter doesn't make sense. We published this time, this number from September 2020, the slide number 12. We have a INR 142 crore revenue. We moved from INR 142 crore revenue on to INR 2,441 crore revenue in last twelve quarters. And there's a consistent growth quarter on quarter. There's no drop in the quarter on LTM basis. There's a drop in the quarter normally happens, but on LTM basis, there's no single quarter where the drop is there on LTM basis.
So that's the one point I want to ensure, that we will look at it and please look at the advise the investor to monitor the product companies on LTM basis rather than monitoring the product company on quarterly basis. Responding to U.S. geography growth, we have very good leads in insurance business in U.S. Banesh, if you want to highlight what is happening in underwriting area, in insurance working. That is, we are working with AWS, closely with them, and they are also bringing some leads beside our own leads which are coming in U.S. market.
Yeah. So I think the partnership with AWS, as you know, the insurance business in North America is completely hosted on the AWS platform. And all our clients, and presently we have, you know, quite a few SOWs that are in the process of getting contract closures. I think the important thing here is AWS works very closely with us now in identifying potential underwriting insurance opportunities. We've sort of got an underwriting ecosystem that fully operates on AWS. So we've added the generative AI component in. I think the generative AI component is helping the underwriters use the data more efficiently, along with their own underwriting standards to take decisions. So I think AWS doesn't have a similar product anywhere in the world, and when they looked at our product, they said this is probably the best in cloud that is available.
They are actually in the process right now of partnering with us to offer it to more and more insurance providers. That is one of the pretty good outcomes that we have with AWS right now.
Nishit, this is a very, very positive area where the revenue doesn't get booked, it's a cloud revenue. It's a lag indicator. We are giving this revenue, is what Banesh is doing. We are working with deals deals right now, where POCs are - they are in POC stage, because AI adoption requires POC build-up. We upfront invest in POC rather than implementation, which is typically in other product lines. Like in core banking, we do implementation afterwards. While on this line, we do a POC before the actual sale happens. We have upfront investment, and since there are seven such POCs are happening, for which three are in contracting stage and four will come to the contracting stage, likely to happen. Each deal has a ARR potential of more than $2 million, each deal.
Arun, number two deals which got delayed, are we likely to see closure in the next quarter or two?
Yeah, yeah. That's what we are expecting.
How much is the value of those deals? You said, I think, you said INR 50 crore.
30 crore, I mentioned. INR 30 crore deals should be signed in this quarter.
Yeah. Thanks. Thanks for the clarification. Thank you, and all the best.
Thank you, Nishit.
Thank you, Nishit bhai.
Next, we have Mr. Anil Sarin from Centrum. Anilji, can you ask the question?
Hi, Arun, hi, the whole team. Great progress being made. In fact, I want to congratulate you on your annual report also. You have dedicated, I think, about 40 pages. I think all the SBU heads have gone into, you know, great detail, taken a lot of pains to explain for lay people like myself, and I quite enjoyed. And after reading, I was able to understand and appreciate the technology that you bring to the table. So, a great job over there. And basically, I mean, you know, it just underscores the superiority that your products have.
Now, we have to wait and see, I mean, it's already happening, but we have to wait and see how at a larger scale, I mean, given the scope, the depth and the width that you already enjoy... I think, you know, good numbers should be expected in the coming times. If I just add this INR 30 crore back, then the margins, you know, even for the second quarter, shoot up to, you know, a decent number. So my question, I think already Mohit and Nishit have already asked, I guess it will be a repetition.
But, I mean, given that, you know, at the halfway mark, if I just take the liberty of adding back the INR 30 crore, given that at the halfway mark you are tracking so well, for the second half, you know, there has to be a material decline in the growth rate to sort of, come up to the 16% revenue growth outlook, which, you have. So, are you anticipating, a kind of a slowdown of that nature?
No, no, Anil, we are not looking slowdown. I think the problem with the investor is they, they have a very, you have a very mathematical mind, and you put quick calculations. Our business is not like as mathematical as possible, and to look at it, we are not looking any slowdown, but we will be cautious. Cautiously optimistic, I would say, Anil, than saying we are slowing down. And we want to just say, in current environment, 15%-18% growth is a good number, so let's look at it that way. And if we are lucky to have, I mentioned, our design growth number is 20%. I mentioned from last four years, we are not changing any paradigm on it.
But the success of 20%, it happened in, for last three years is 20%, for two years is 22%. So this is, once you are doing it, we will achieve 20% for next three years, and we are looking... That is a number I think, Anil, you should be looking at, that can a company can grow 20% top line for three years? If they can, we can grow 20% year-on-year, our profit will grow 40% year-on-year. Our ratio of revenue to profit is 2 times.
Right, right, right. In fact, you know, on that point, one can comment that, so you have multiple products, and you have multiple geographies. And there are not too many companies like that, that I am aware of-
Yeah
... which have, they're so entrenched, so entrenched all over the world. So I think war is not a problem for people like you. I mean, you are so spread out, so spread out, I don't think that... But obviously time will tell. And I think you already answered that question that, you know, as you scale up, the EBITDA margins need to, you know, need to meaning it will, it's a function of operating leverage. As you, as you start, delivering the deals, it should head towards, much higher than what it currently is. Am I on the right track?
That's right, Anil. I given it two design principles: 20% growth, 30% EV EBITDA. Now, 30% EBITDA, I don't want to promise it. Last time I said 30% EBITDA, everybody jumped on it. Why it is 18%? Why it is 21%? The business is designed around two principles, that it will be 30% EBITDA. When 30% EBITDA will come in is not about, I cannot predict that kind of a number.
Okay.
The business has been designed for that kind of a cost structures and the operating leverage level, and that's why we moved to the product business.
So in your annual report comment also, in the chairman's letter, you had mentioned that now is the time for partnerships. So today we have four partners. What is the outlook, you know, that is, what do you expect, like, how deep can we go with each partner? And how many partners would you realistically need to achieve your, you know, targets and goals?
But these are very important. These five partnerships which I'm mentioning, Microsoft, AWS, IBM, Accenture, KPMG, they're all big partnerships. We may have a smaller partnerships around. We have 30 other smaller partnership at country level, which we are not mentioning about it here, which those are basically country-specific partners which solve our problem at a local level. This is a good network. We may require one or two more, but to meet this expectation of them, because when they bring the deal, they are, they are heavy deals. Manish was mentioning that Microsoft, when they bring the deal, they are bringing digital transformation deal to us, and those deals could be $30 million deal, $40 million deal, $50 million deal. It requires a huge amount of pre-sale time on our part. So I think we are comfortable right now on this partnership.
We need to nurture them. That's our focus for next six months.
Thank you so much. Today you have the proud position of being the fastest growing IT company, so please keep it up. We are cheering for you. Thank you.
Thank you, Anil.
Thank you, Anil Ji.
Now we have Mr. Mukul Verma from Verma Associates. Mukul, can you ask the question?
Am I audible?
Yeah, I am, Mukul. Please go ahead.
Yeah. My question is that you had mentioned that you had won one deal against Thought Machine in Europe. So just wanted inputs on how we are doing against Thought Machine in Europe.
Thank you, Mukul. Rajesh, would you like to respond?
Sure. So I think when, not only Europe, if I look at U.K., Europe, Tier One clients, as well as regional banks-
...What we are seeing is that when these banks are looking at core transformation, they start with a long list, and then, typically we would, in most of the cases, we will end up with three players who are in the last three. One would be Temenos, one would be Thought Machine and Intellect. So-
Okay.
When we look at Temenos, they are coming from a rich functional stack, country models. Thought Machine will come from a technology perspective, and we are actually in a sweet spot wherein we bring the latest technology stack with the domain functionality. So that's what we are seeing. Versus Thought Machine, to your specific question, head-to-head, if you look at it, we are winning as many, if not more deals, versus Thought Machine. Of course, Thought Machine sees many more deals than we are seeing, because they spend a lot more money on marketing.
Mm.
So, from that perspective, we are looking at also, Arun talked about our marketing events, our branding, and how we are building our presence in many markets. So this is what we are seeing from a deal win perspective. I was in Sibos and recently in Money 20/20 in Las Vegas, where we end up meeting a lot of customers, prospects, and many of these customers are saying when we talk to them about Thought Machine and their experiences, they're talking about Thought Machine as having a strong framework, but it requires heavy work from an implementation and customization perspective. So total cost of operations as well as time to market are key challenges that Thought Machine is seeing, because they are still in the process of building the domain that we already have.
Okay, great. And one thing to add is, like we announced, certain deals during the quarter, which we win for some banks. But when it comes to results time, there are always more deals, one, than the ones we have announced during the quarter. So is it anything stopping us from announcing every deal, or it those are smaller deals, or we don't have permission, or how, how do we look at that?
Typically, we need to take a permission for announcing the deals. That's why we sometime gets delayed and there's a mismatch between our announcing and... For quarter is that we have to announce anyway, but we are not publishing the name of those deals.
Okay.
That's the reason, Mukul.
Okay. So, is there a possibility that we could still announce it as we win it without naming the bank, just to have a, you know, perspective of how much we are doing as and when?
Sure.
Is it possible or is there-
Sure. We'll just take a legal opinion on it and then accordingly act on it.
Great. Thank you so much. That's it from my end. All the best.
Thank you, Mukul. Thank you.
Thanks, Mukul. Next, we have Mr. Ramasamy KV from QFS, QFSL.
Yeah, hi. Thanks, Praveen. Arun J, congratulations on a great quarter. In my opinion, it was a great quarter because I come from a product background. My question is only twofold. One is: how is autonomous AI being used, and what is the potential in the next two years? Point number two is: how will the EBITDA growth pan out over 20% in the next two years?
Sure. The first question is about autonomous AI, and I think this is a, my favorite question. The investment we made in 2016, three years ahead of time, was understanding unstructured data. Just I'll take few more seconds to explain you what is unstructured data. Oracle, we store the DBMS, which is a relational data model, which we store in Oracle. Now, a financial institution has more documents, more paper than the structured data.
Correct.
From bill of entry to domain, bill of lading and your balance sheets and the cash flow statements. Now, these documents are to convert this unstructured data and creating a document intelligence is a science of its own. Now, a lot of small fintechs have come up who are taking one use case of one type of document, like Perfios will take a few use cases for underwriting space. Someone or somebody else will come, who will take a few underwriting cases for, which will take up in trading space or in supply chain finance space. So they take document by document. The difference, what we have done at Intellect level is we created a platform first. When a lot of questions were being asked in 2018, why your investments are so high?
Parna was asking questions. A lot of questions were asked to Parna, that how you are... no results are there. I remember Bombay Technology Day or Investor Day where we were, we got questioned too much on that why you are investing so much. Now, today, we have created a platform for document intelligence management system. This is like a DIMS equivalent to DBMS of past time. So in next 10 years, to us, DIMS will be as big a space as DBMS of Oracle in the last 30 years of the space, which is about-
Okay.
How do you create an unstructured document intelligence into the system? Now, once we have under-
Makes sense-
Sorry, you want to say something?
No, no, I said makes sense. Yeah.
So the DIMS space, which is we have the full, full product suite on DIMS space. We had a session, how do you move design thinking for cognitive enterprises and cognitive banks, recently in Chennai, where 20 banks from India participated in that, two-day event to understand how we can apply DIMS for helping the banks to wire their operational documents to a data in an autonomous way. So that's the whole science of autonomous.
We have completed this journey, which Manish was referring to in the U.S. for one use case, which is a P&C underwriting space for submitting close to 200 different type of documents has been extracted and intelligence has been built using and enriched and validated up to the generative AI in autonomous, where recommendation notes comes to the underwriter in a matter of day instead of matter of weeks. And that is where we are giving speed, cost save, accuracy, trusted data and recommendation, which is no single company as of now is cracking this issue at a holistic level. So if bank has to use the for their 20 different type of documents, and one of the deal which we won in Europe in this quarter is our key client, SJP.
You all know St. James's Place is the largest wealth manager. They have chosen the DIMS tool for using for entire wealth management portfolio. How the wealth management portfolio, the recommendation, the portfolio recommendation. They want to automate at least 20 use cases using DIMS. So that's the power of our tool on DIMS, which we are very, very hopeful. There's a company called Instabase, which is in the same space. If you want to go to their site, Instabase site, that will give you the kind of a flavor for you to look at it, where, what space we are in.
Okay. One question therefore that comes, Arunji, is will the cost peter out over the next two, three years?
Cost, what is the question?
So in autonomous AI, as we go forward and evolve, will the cost peter out, or reduce, over the next two, three years?
Yeah, yeah.
Therefore, the margins will get bigger?
That's right. So it's well, this is a proposition we are making to the banks, that if they want to buy IDX 965, dot AI, so DIMS, their operational costs can come down by 15%-20%.
15%-20%, that's a lot.
That's a lot. It's a, it's a lot. As of now, one single use case for this client in U.K., when I was meeting his CIO, he said that, "I saved GBP 6 million by just one use case on AI.
I think the space around operations transformation is very large. The target market around operations transformation for all its financial institutions is extremely large, and I think the DIMS platform takes those documents and changes the way the operational process happens through an autonomous capability and bringing in AI right through the process, whether it's underwriting, whether it's, you know, portfolio management. We've sort of tried to help for both underwriting from the U.S. insurance P&C side, as well as we've tried to help the relationship manager or the financial advisor from a wealth management side. And there's a similar set of things across our various business lines in Intellect that actually focuses on how DIMS can help operations transformation, and actually will take out a lot of operations cost.
As you know, any analyst and research will say that a lot of operational costs will get impacted because of AI, and I think DIMS is sort of at the heart of it, yeah.
Okay, great. Second part is EBITDA, about 20.
EBITDA percentage will improve, yeah. The 20% will improve quarter-on-quarter. It's a matter of time. We were around 25%-26% EBITDA. We invested-
Yeah.
We, two years back, we'd taken a call that we want to invest 6% from our own margins to the next generation cloud transformation. Three quarters, our revenue decline, our margins declined. Fourth quarter it can start coming back. We told nine months' time, we'll stick to the nine months' time, where the shortfall has come in. So I think, I love the investor like you who are trying to understand, but there are a lot of street investors who doesn't understand that, up and down, how does it happen?
That is because of a lack of understanding of product versus services, so that is bound to happen.
So it's okay. It doesn't matter for-
Yeah
... long-term investor like you. It's just a matter of-
Sure
... time. But we are committing to whatever we are committing, nine months' time, 20% time. For all the numbers that we are committing, I think I must say that wisdom of the management team at Intellect is able to justify that and live up to the expectation what we are saying. But initially, some people-
One, uh-
Yeah.
One small thing, can I add?
Yeah, please. Please suggest.
Can I add a third one?
Yeah.
So will this also impact us positively versus Thought Machine? Because Thought Machine initial costs are fairly high, whereas our costs would presumably be lower, initially.
Yeah, there's a different equation for Thought Machine. They are in investing mode, while we are. We are the very few companies in the world who are making such a hefty profit in this journey of cloud and AI.
Absolutely.
As of now, no product company will make profit, and nobody's expecting profit from them.
Yeah. Okay, great. Thanks a lot, Arunji. Got this. Thanks for taking the time. Thank you.
Thank you.
Thank you so much, Ram. Next, we have Mr. Divesh Mehta, 3 P Investment. Divesh?
Hello, am I audible, sir?
Yeah, yeah, please go ahead.
... So I appreciate the investments which Intellect has done over a period of time in the products. I think the next leg of what you have started in terms of SI partnership will be crucial to unlock values of the platforms and investments you have made in different products. The last time I recall, you had IBM as a partner. This time I think I've heard a few more incremental names. So if you can share where we are heading in terms of more names. Also, do these partnerships, wherever we are going in joint GTM, are they adding into the funnel size? Then I'll ask my next question.
Manish, partnership question, you should take it. Manish, are you there? You're on mute.
Yeah. Sorry, sorry. No, I think, partnership, I think if you look at our phase one of the journey was about ensuring our products are right. As we build the brand, we really wanted to own the brand, build extensibility on SDKs and take it forward. I think that phase of journey with, like Arun called out, we've now got the world's largest banks as our core customers in every market. That's given us confidence, the ruggedness, robustness, resilience of the products. And we built now the extensibility where the partners can take it forward. My early experience with these partnerships are the deal values are going at least three-four times more than what we were initially selling it ourselves. So this is the right path, right journey.
I would say next 12, 18 months, they should start giving different kind of results for us, both in terms of quantum. They're an extended distribution and they're a surrogate branding along with each one of them is happening for us. They have MSAs, they have signed contracts, sometimes getting into new large tier one banks. They allow us last minute procurement phase that we don't want to take a new vendor in. I think through this route, we are able to kind of manage some of them. So let's keep fingers crossed this is the right path. A number of people have done it before, and this helps grow, so we're on the same trajectory. We've chosen select few. We've got very close relationships right at the top. We're getting the right support.
Sibos, I was quite overwhelmed with the kind of support we got, I got from these partners, so there were more readouts from them versus any fresh walk-ins that were coming at our store also. Things-
Okay, uh-
Positive.
In the same aspect, when you look at SI partnerships, the 3, 4, which you have already added, are already large enough.
Yes.
In this sense, can we look at SI partnerships in the perspective that an SI partnership to if any product company has an SI partnership, in some sense, it is easier to deal, win deals and even larger deals because banks are somewhat more comforted because the SI partners have a domain knowledge they can somewhat implement better. And, like... so the USP is largely the ex-
I think the,
More comfort, comfort on the implementation.
I'll just slightly correct what you said. What they bring is they understand banks, banks, how the banks implement that knowledge of a new bank, their methodology, all of that, they bring in. A strong domain along with each one of them, really helps the bank create a success, mutual joint success. And with now eMACH.ai, the capabilities eMACH.ai platform offers, extensibility of the platform, I think it's a win-win for banks themselves who want to do it themselves or bring in system integrators to do that. And this will bring us a higher share of a license revenue or a subscription revenue, where margins are gonna be always higher.
Okay, just one last question I'd like to squeeze in. So as we've increased our marketing efforts, is there any long-term trend where the SG&A cost line will take in terms of percentage of revenue? Are we expecting it to go higher versus previous years because of higher intensity of marketing efforts?
I think it will be 26% of the SG&A cost is closer to 26% as of now. I think they are remaining at the same level from last few years. So it, it shift by half a percent, half a percent here and there, not so much, and that will be maintained. But it's, it's not going to go up, maybe coming down, if the high number of revenue comes in. When we are moving towards a bucket from $75 million to... currently, we are at $75 million dollar bucket. So if you observe our patterns at 55, 60, 65, 70, now we are at $75 million, $76 million dollar number, $78 million.
The percentages remain the same.
Yeah. But for three, four quarter, number remains the same, then we move to 80, 85, then we move to 90, 95. At $100 million level, the percentage may come down.
I think if we're selling to four or five companies now, it takes that one year to get large number of their partners to know us better, and after that, the multiplier effect comes in, then the dominoes fall, and then our distribution gets multiplied truly from that perspective.
In this case, we have observed that a lot of companies or the SI partners have, okay, we have X number of Temenos experts who have X, like a certification or something.
Yes.
Eventually, will we also have some kind of certification for the SI partners?
Yes.
Is this in the works or if you can-
Yes.
Throw some more light?
Yes, it is in works with Accenture right now.
... to build COEs from where they can take this and take it forward.
Okay, uh-
In the last quarter, one deal was won with them. We won a large deal along with Accenture in Asia, and they're jointly investing in it to create COE. I have another deal running in France along with them, so that starts building the confidence. Okay.
Thanks. That's it, thanks.
Thank you, Divesh. Next, we have, I think, Darshan Vora is not there, looks like. Darshan, is there? No, Darshan is not there. Next, we have Mr. Vivek Kumar from Bestpals. Vivek, can I ask you a question? Vivek? Are you there, Vivek? Mr. Vivek Kumar from Bestpals .
Vivek, you need to unmute and then speak.
Please unmute yourself, Vivek. Vivek, you're there, no?
I'm there, yes.
Yeah. Unmute yourself and ask the question.
Hello, sir. Am I audible now?
Yeah, yeah. Please go ahead.
Thanks, Arunji, for the opportunity. I have two questions. One is, given the annual report that we are now in Intellect three, and you are seeing accelerated growth across your products, and two, with these SI partnerships and with AWS and Azure, when do you think we'll get back to a-- I'm not asking growth guidance in terms of guidance in terms of next two, three years, but when will we cross that 20% growth very comfortably? When do you think these things will start playing out? Because now that we are in, you have been writing this in annual report, and also now that we are going to distribution, you said last time that our only strategy now is three Ds: distribution, distribution, distribution. So when you-
Yeah.
When you are being cautiously optimistic, is it, are you seeing serious slowdown in terms of deal times, closure times, or you are just being cautiously optimistic, because of the things happening around? So just one thing, one question on this.
Yeah, I think 20% is a good, very good number. What I'm saying is that 20% growth will give us a margin growth of 30-35% year- on- year. That's a, means your margins are doubling in three years. At 30% level, our margins will be 1.2x, 2.2x in, at th- at 30% growth in three years. I think that's a very good number to look at it. If we are able to get INR 1,000 crore kind of a profit margin after three years, that will be a great number for all of us as an investor and, as a company.
So you're confident of the 20% growth over the three years, can I take that as a message?
Margin, so 20/30, we are saying if we are growing 20% of revenue, 30% on the bottom line is natural because of operating leverage.
And the slowdown you're... Sorry.
Our track record is also last three years CAGR, which Vasudha published, is of 20%+.
Yeah, yes, sir. No, no, I was just asking, are you seeing any serious slowdown on the deal closure times, or you are just being cautiously optimistic because of the environment? I just wanted that part. I understand that in the long run, you are confident on 20%, so that was the thing.
Well-
Sorry, sir.
You are asking 6 months question, yeah, we can't predict the future. That's the only thing.
Okay. Let me go to the second thing.
So many things are there.
So, Arunji, second question is, given the breadth of the kind, the number of products we have and the opportunity size that each product can address, if you talk about whether the AI or all the three things combined, don't you think at some stage we need to get some J curve in some products, and we should cross a 20% growth? I'm not asking time, neither, timelines, but just by inversion of basic logic, that if each product is addressing such a huge opportunity size and each, as it, each product starts maturing, don't you think there should be a time in the company where it, some companies start growing at much above 20% growth rates, or am I missing something?
No, I think the point is, there's a portfolio approach. One has to understand, very few product companies grow at a 20% on CAGR basis. If you look at ACI Worldwide, Temenos. Temenos is growing at a CAGR of 2.5% in last three years. So, and they grew, grow by acquisitions. If we are growing about 20% organically year-on-year, is a phenomenal number from a product company perspective, and that too, profitably. Not taking the money from the investor and keeping, buying the revenues. So that's a fairly good number. And, earlier also, I mentioned in one of the calls, we get inspired from HSBC Bank. They're slow and steady. In 10 years' time, somebody can reach somewhere.
The HSBC bank has set that model, thinking process in my mind, that let's not push too much beyond 20%, but be consistent.
All right.
The fourth largest market cap now in the world, in banking.
No, no, no. So I was just thinking from, like, given the opportunity size, someday it should be above 20%, is my, my understanding.
Thank you very much for your wishes. We would love to have it.
Thank you. Thank you, Arunji. Thank you for the opportunity.
Thank you, Vivek. Next, we have Mr. Shailesh Gandhi from Mehta Vakil & Company. Shailesh, you're there?
... Shailesh Gandhi? Are you there?
Shailesh, you need to unmute and then speak.
Shailesh, please unmute yourself. Shailesh? Unmute yourself and ask.
How many questions are there more? Maybe some four more are there.
Okay. Just keep up to four . Okay. I think Shailesh is not there, looks like. That's okay, next. We can take next. Next, we have Mr. Rahul Jain from Dolat Capital. Please unmute, Rahul. Rahul, unmute yourself and ask the question.
Yeah, hi, hope I'm audible.
Yes, yes, Rahul, please go ahead.
Yeah. Just wanted to understand your sense in terms of how the cloud deal market is shaping up. Because in the recent most quarter, we have seen Oracle announcing a $30 million plus size of a cloud deal, which I think is one of the largest cloud deal by on a banking software basis. So any perspective on cloud kind of a deal, and what we are seeing from in our pipeline perspective?
I'm not getting the reference. Which is a $30 million deal?
This is a large community bank, cloud-based deal announced by OFSS in the recent most quarter.
Okay. I have not looked at it, $30 million community bank deal on cloud. But is it ARR deal or 10-year deal?
The license component is close to this number. But of course, the total ARR, of course, could be much lower. And so basically my, my-
$30 million cannot be license number, yeah. $30 million is a huge number.
Yeah. So that is where it is. That is how it is-
Some confusion is there. The $30 million, 10-year deal, 5-year deal, time horizon, because that way, we can announce many deals which are $30 million deals when you are looking at it from duration of the time.
Yeah, yeah. My sense is this is a five-year, $30 million kind of a deal. But nevertheless, my question was more to understand from the perspective, is that, the larger size of the deal in your pipeline, are, are they incrementally coming from the cloud side of the, business, or it still continues to be on the on-prem side? And how, how, is your mix in your pipeline from a cloud or, or on-premise basis?
We set up 3, 6 platforms, which I mentioned to you earlier. We have a GeM as a platform, which we will be extending it from out of GeM and moving it to the other governments, international government and for corporate. So we are now, we can make more profitable venture out of the GeM platform we have. So our teams are working to make it buy-corp out of this particular product. Second platform is a lending platform. Third platform is a IDC. Yeah, this platform means they are on cloud, IDC platform. Then there's a platform of eMACH submissions, which we call eMACH platform. And then we have, two more platform, which, was there in the afternoon board presentation. So there are six platform. Each platform is growing consistently.
The big deals are now coming to on eMACH.ai platform, AI platform, which Banesh was referring to, those and IDC platform, both the platforms are getting into the deal size of $20 million over the five years or ten million dollar deal over the five year or ten year. So they are they range from five to ten year range deals, which can, which can range between $10 million to $30 million dollar range. So those are the deals which are there. This number, which is announced by a lot of companies, $30 million, $40 million cloud revenue, sometimes they are extending to seven year or extending to ten years. So that's the point you need to ask them and let us know.
Understood. That's it from my side. Thank you.
Thank you. Thank you, Rahul.
Thank you, Rahul. Next, we have Mr. Ravi Mehta from Deep Financial. Ravi, please unmute yourself and ask the question.
Yeah, hi. Thanks for the opportunity. Most of the questions got answered. Just one question, was the INR 30 crore deals that got deferred these were more of license-based or subscription-based or any color on those deals?
Let it remain as it is. These are INR 30 crore of the deal which has got postponed. We don't want to specifically mention, but they are mainly could have come to the margin.
Okay.
If you have question.
And probably I missed the opening comment in that there was some INR 12 crore of expenses that were booked in Q2 related to some. I think I could not gather that from-
ESOP. ESOP, basically, over the last, you, the intangible. Vasudha, you can explain.
Okay.
It, it's stock options.
Okay. So INR 12 crore of ESOP cost is booked in Q2.
Every year, every quarter, we book-
Quarter-over-quarter, it is more than INR 10 crore. So that's a regular cost that we have because we have given RSUs for a larger population in the company. And so as per the Indian accounting standards and as per the IFRS, we are supposed to book the ESOP cost in the P&L, so.
Sure, sure.
That's correct.
So what was it for Q2, if you can just?
INR 12 crore is the number.
Okay. Okay. Okay, and what was it like in previous quarter? Similar or...?
It'll be around the same number.
Ten crore.
10 crore, INR 11 crore-
Okay.
12 crore, around the same. Depending upon when the options are getting vested.
Sure. And just one non-bookkeeping question. Global DSOs had gone up, and actually, India DSOs have come down. It's the other way around. So, is this a temporary thing or
It is a one-off thing, I would say, for this quarter, because we received more collections from the India-based customers this time. So that is where you can see some dip in the India DS.
Okay. Okay. Yeah. Thank you, and wish you good luck.
Thank you.
Thanks, Ravi. Next, we have Mr. Vijay Kamath. Mr. Vijay Kamath? Can you ask your question, please? Mr. Vijay Kamath, you're there?
Okay. Who next, sir? Sorry.
I think next is not there. Then we have Mr. Vipul Kumar Shah from Sumangal Investments. Mr. Vipul Kumar Shah? Please unmute, Vipul Kumar.
Yeah, hi. Thank you for the opportunity. So, sir, when you are talking about digital transformation, so, these mainstream IT companies are also undertaking these digital transformation projects. So how you do it differently, if you can briefly explain in a layman's language, it will be very helpful. You may have done it on other calls also, but, I'm logging on this call after a long time. So if you could, if you can explain it, it will be really helpful for me, sir.
Yeah. So most of the investment in IT business has grown in last four years or post-COVID, is to make the enterprise digital. So digital enterprise is a very standard vocabulary which all of us use. The difference we do is we have a building block for making digital, means we have a intellectual property of microservices through which we can compose a solution for a bank versus writing a solution for the bank. We don't do any coding. We do the wiring of the microservices to make a digital transformation, which is 2-3 times faster, and is more accurate in delivering the final transformation results to the bank. So that's what, as a product company, if you observed, are growing now, and service company will reduce because people want to now to get a ready-made solution.
We are in ready-made space, and the services company, which is called digital, they are in custom-made digital. So I think in layman language, ma'am, that's what we can be looking at it.
Sir, your growth should be manpower agnostic, no?
That's right. That's right.
But-
That's why our margins, that's why, that's why the operating leverage is there.
Okay. Okay, sir. Thank you very much. Thank you.
Thank you, Vipul Kumarji.
Next, we have Mr. Rajiv Venkatesh. The last question. Mr. Rajiv Venkatesh, you are there?
Yes, sir, I'm there. Are you able to hear me?
Yeah, yeah. Please go ahead.
Yeah. Thanks, Arun. I have a couple of questions. First of all, congrats on the good set of numbers in this current environment. I want to know a couple of things. One is, with the cash generation, what we are doing, how much will go for R&D spend and for reinvesting for next two-three years? And what would be the new verticals of growth you are currently looking at? I understand that DIMS, things are all already built in, so trying to understand where will be the next leg of growth. And the second question will be, would be like, a few quarters back, you had informed on the core banking transformations.
Are we getting any projects being moved out from Finacle or Flexcube or T24 for better product mix what we have with the better capabilities on our side and/or any POCs going on? I feel this will have a snowball effect with regard to the revenues over a period of time. So what are your thoughts on that?
First of all, I think, cash position, whatever is there, we are fortunate enough that we don't have a significant. Since we are growing organically, we may use the cash for getting into some countries for inorganic customer acquisition. We are just exploring, but not a big acquisition, but acquisition to get a footprint in a country where we can use eMACH.ai to drive the, they may have a old legacy platform where we can use that money to do that. So that's the one thought process of a growth engine. We are not going to get into new spaces. As of now, we have sufficient number of spaces to drive. Number of products are properly, we are managing the same number from last four years, so we are not increasing anything over there.
So we want to run this sustained manner and grow consistently over there. So that's the answer to your first question. What was the second question?
Second question is, like, few quarters back, you had informed on the core banking transformations.
Yeah.
Are we getting any-
That's what we announced earlier. So we, that's what Rajesh Saxena has mentioned about the deal against Thought Machine. Thought Machine is a core banking transformation, and he's saying that we are fighting the battle in Europe and other part of the world against it. We won two core banking transformation deal during the quarter. But these deals came from Australia region. This quarter, we announced two deals in Australia region for core banking transformation. And last quarter, we announced OTP Bank, which is the largest Hungarian bank, for core banking transformation.
So, Arun, if I can just add, I think, in the first quarter, we announced a couple of core banking deals. One of those or two of those deals were actually, when a bank has moved from Oracle to us. I think that was the specific question. So we-
Thank you.
Thank you.
Okay. Arun, there's no question anymore. Thank you, everybody, for joining the call today. In case you have any further question, please do write to us, and that will be replied, or we may have a call also. Thank you so much. Now you can, you can log off. Thank you. Thank you, everyone.