Ladies and gentlemen, good day, and welcome to the Q3 FY 2022 earnings conference call of Tanla Platforms Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Ritu Mehta. Thank you, and over to you.
Hello, everyone. I'm Ritu Mehta, and I lead the investor relations for Tanla Platforms. On behalf of everyone at Tanla, I would like you to welcome to our Q3 earnings call. Joining with us today are Uday Reddy, our Founder, Chairman, and CEO. Deepak Goyal, Executive Director and Chief Business Officer, and Aravind Viswanathan, our CFO. Uday Reddy, our Founder, Chairman, and CEO, will share perspectives on business imperatives and strategic progress made by Tanla. After his opening remarks, we will be happy to engage with participants and address their questions. Before I hand it over to Uday, let me draw your attention to the fact that today's discussion may feature statements that are forward-looking in nature. All statements other than statements of historical fact could be deemed forward-looking in nature. Such statements are inherently subject to risk and uncertainty, some of which cannot be predicted or quantified.
A detailed disclosure in this regard is mentioned in the results presentation that is uploaded on our website. Now over to Uday.
Thank you, Ritu. Good afternoon, everyone, and a very warm welcome to our earnings call. Wish you all a very, very happy new year. I hope you had a chance to read our results and also read my letter. I would like to cover certain important takeaways before we get into Q&A today. The first area is around margin expansion. This is a metric that I personally track most closely. Our gross margins have increased from 19.3% in Q3 FY 2020 to 29.5% in Q3 FY 2022, and this is something commendable. Most of the platform companies typically operate at a more than 50% gross margin. Our platform business operates at a very high gross margins and contributes 23% of our total gross margins.
Our aspiration is to shift our gross margin profile in line with global platform companies as we scale up our platform business led by Wisely. The second update is on Trubloq, our blockchain platform, which handled 88 billion transactions in Q3 compared to 77 billion transactions in Q2, a growth of 15%. In December alone, we handled roughly 1 billion transactions with a daily average of 1 billion transactions. I don't think any blockchain platform globally has handled this level of scale on a consistent basis. Going forward, we think consent management will be the next big opportunity here. This will scale up in the next six months, and we are all well-placed to capitalize on this opportunity. The third update is on Wisely. This has been a good quarter for Wisely.
As you know, we signed an exclusive multi-year partnership with Vodafone Idea, and I think this is one of the largest deals in the CPaaS industry globally. We'll go beta live in February, and our commercial launch will be on first of March. This is a moment of truth for Wisely. Within 60 days post go live, we will come out with case studies on how Wisely has helped global enterprises and VI. This will provide us an opportunity to showcase Wisely to global enterprises and global telcos and set us on our way for our global expansion. I had talked about two exclusive partnerships in Wisely last time. Our other exclusive partnership is in the beta phase and has taken a bit longer than expected as we are doing extensive testing.
We are very excited by the potential of this partnership and expected to announce this in February. Partnerships is a very integral to our strategy around Wisely. We will force multiply Wisely with a strong industry and partner ecosystem. The ecosystem is going to become more strategic and more powerful, and I'm personally driving this. Let me reiterate what I have told before. We are not here to acquire any companies for numbers, or we are not here to raise any capital. We are here to build a strong, sustainable business by investing in platforms and solutions. We are probably the only CPaaS player globally who have not made any acquisitions in the last 24 months. We are open to look at small bolt-on acquisitions which will complement our Wisely platform.
We have not raised any capital post our public offering and built our business through our internal accruals. Our capital allocation will be focused on platforms and products, brand, talent, and customer success. We'll be very disciplined on this. We have targeted approach with the focus on large opportunities, and our investments are directed towards building products to expand our total addressable market. The GTM investments around strategic customers, brands, and investment in best-in-class talent. I'm very excited by the opportunity I see in front of me. We have set a high-powered team to maximize the opportunity in front of us. I firmly believe the coming year will be the year of Wisely. I'm excited about my team and the company, and I cannot wait to deliver on our dreams for all of you. With this, I'm opening the floor for Q&A.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may please press star then one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star then two. All participants are requested to use handsets while asking a question. Anyone who wishes to ask questions, please press star then one. The first question is from the line of Manish Poddar from Nippon India AIF. Please go ahead. Mr. Poddar, we can't hear you. You are requested to unmute your line from your side, please.
Hello.
Yes, now we can hear you. Thank you.
Sorry for this. Just two questions. One is, you know, would you be able to help me, what is your market share in Trubloq now?
Poddar, Uday here. I think it should be upwards of 63%.
Any idea when DLT will be rolled out for voice versus messages right now?
The TRAI, I think if my information is right, they have yet to decide on the voice, but it will be in the near future.
There is yet no timeline on this?
Sorry?
There is no timeline on this yet?
No, there is no timeline as yet, to my knowledge, yes.
Okay. Just, one more-
The platform is built for both SMS and voice, and the minute we get a sign-off from the regulators and the operators, we switch on that component, that module.
Okay. Just one more. Can you explain, you know, the slide where you are saying EBITDA to CFO conversion is lower this quarter? Could you probably, you know, help me understand what are the reasons for this?
Sure. Manish, let me take that. This is Aravind. See, if you look at it, you know, our free cash flow to net income conversion is lower in Q3, but if I take a YTD basis, we are still at about 95% of net income as free cash flow. What really happened, Manish, is that we had much stronger cash flow in Q2, because, you know, we had a price change in our ILD business. Now, what happened is the higher price payouts to the telcos happened in Q3, but we were able to collect from many of the global enterprises in Q2 itself at the higher price.
What really happened was that, you know, we had a disproportionately high cash flow of INR 222 crores free cash flow on a net income of about INR 136 crores, and there has been a little bit of compensation of that, normalization of that in Q3. If you look at on a YTD basis, we are at 95% free cash flow, as a conversion of PAT. I think going forward, you will see that normalize. This was more of an anomaly, because of the price change which happened and the difference in payment terms with respect to, you know, customers vis-à-vis suppliers.
Okay. Just one last one, sir. You know, what is the thought with the cash on books, given that, you know, you're looking at the smaller bolt-on acquisitions, you know, and you're generating cash flows every quarter. Let's say, you know, cash flow is let's say 90-95% of quarterly run rate and you're doing INR 200 crores per quarter, what is the thought process with the cash on books?
Manish, as I mentioned in my speech, we're going to spend the money on the products and platforms, and the brand building and the customer success, and also we're trying to build talent line. These are the four areas that we're going to build. That's number one. I mean, we have been returning the cash to investors the last 24 months, and it may continue in future also.
No, I'm just trying to understand from a relative quantum per se, you know. Just to understand better because your buyback was roughly INR 65-70 crore last year. You know, why not do a larger amount? Just want to get your thought process. You know, what sort of cash on books are you comfortable with is what I'm trying to understand.
No, we have not decided anything about buyback in the board meeting. As and when we discuss, definitely be announced to the market, Manish. I would like to leave it here.
Okay. No worries. All the best. Thanks.
Thanks.
Thank you. The next question is from the line of Abhimanyu Kasliwal from Choice International. Please go ahead.
Good evening. Am I audible?
Yes. Yes, you are audible, Abhimanyu. Please.
Okay. Hello, sir. It's very nice to talk to you after our past conversations. Well, the question on everyone's mind was just asked before me, which was the return of cash. You have reiterated that you do not plan to have a buyback as of now and may have dividend payments in the future, but nothing concrete. In that case, I wanted to get a better understanding of your growth plans within India and internationally, because you do not want to make any non-organic acquisitions. At the same time, where will the next level of growth come from? Are we looking at something within the nation? Are we looking at international markets? Are we looking at new products besides Trubloq and Wisely and Gamooga and what we already know of?
What is the new fuel, we can say, for the growth machine, which is Tanla?
It's a good question, [Non-English content] , this is Uday here. Couple of areas. One is, as you know that we are the market leaders in India and the India market is growing quite quickly. That's number one. One can expect a reasonable growth from India. That's number one, right? Number two, we can expect. Sorry, go ahead.
Speaking of a number two in the Indian growth, I mean, we have the rule of 60 going on right now, which we almost touch. I think we're 58% this time. Do you have any numbers which you can give us for the next quarter and the next year for the growth we can expect in India?
No, we will not make any forward-looking statements here. All I can say is our growth is going to come from India. The growth is going to come from the new platforms. The growth is going to come from new solutions. The growth is going to come from the new customers globally. This is where we're going to focus now.
Okay, sir. For the international growth, just a last follow-on question. What is the situation where we can understand that some kind of international growth is coming? I mean, we're aware from a subsidiary which is there outside India and the heavy dollar bank deposit we have that we do have some kind of foreign payments coming in from foreign clients. Do we have any plans to move into different nations and see some kind of growth from there, growth in margins maybe or growth in revenues or something like that, sir?
I'll give you a couple of things, right? One is, most of our current revenues are coming from India. That's the first statement, right? The second one is the dollar revenues that you're talking about are all India-bound revenues. Okay? For example, someone like Facebook, someone like Google, someone like Amazon is paying to the Indian telcos or Indian platform providers like us. They're all India-bound business. Okay? For us to enter into a dollar revenue business, the telcos and the enterprises would like to enter into agreement with a company outside India. That's how we end up having the subsidiary. That's number two, right?
Number 3 is in terms of global expansion. We are pretty clear unless and till we come out with a case study from the Indian enterprises and Indian telcos on Wisely. We are not in a great hurry to look at international expansion. The good news is the platform is being deployed at VIL. Beta is going to be launched in February. Commercial launch is on first of March. One can expect a case study by end of May. That's what my intent is. Once we have the case study and we have an opportunity to go to global telcos and global enterprises. That's what the plan. I don't want to expand to the global market for sake of it, right?
Okay, sir. One follow-up question. VIL, because it is one of the larger telcos, but at the same time it's not doing so well. Can we expect some kind of numbers in terms of what VIL business we are looking at and what telco business we can see, we can hope to target in the coming quarters? I mean, if it's something very token or is it something which has got high growth prospects in terms of revenue, in terms of margins? If you could just give us some light, sir.
I cannot really comment on VIL per se, but all I can say is it's pretty large deal for Tanla, it is pretty large deal for Wisely, and it is a testing bed for Wisely. I'm sure we will generate a decent revenues and the margins on this Wisely platform with the VIL deployment. Let's why don't we wait till end of May, we will come out with the case study.
Okay. Thank you so much, sir. Always a pleasure talking to you.
Thank you.
Thank you. The next question is from the line of Tejas Shah from Unique Stock Brokers. Please go ahead.
Hi. Can you update us on the Dubai thing? Is it deployed or is it still pending?
Tejas, the DLT platform, which we call it as Trubloq in India, right? That's being kind of deployed, but all the modules are not gone live in the Middle East as yet. As I mentioned last time also, it is a license deal. It is not on a revenue share basis. That's not going to really move our revenues or margins going forward. It's good to have an international reference for our blockchain platform, but one cannot expect beyond that.
Okay, great. Thank you.
Thank you. The next question is from the line of Amit Chandra from HDFC Securities. Please go ahead.
Yeah, sir, thanks for the opportunity. My first question is on the, you know, performance of the top 20 customers. Earlier, the growth was largely driven by the, you know, volume growth in the top 20 customers. In this quarter, we are seeing, you know, a 5%-6% decline there. Is it because of, you know, wallet share, you know, wallet share loss in some of the top customers? Or is it because of exit or like churn we are seeing in the top, you know, top 20 customers? Because, as we mentioned earlier that we have very high stickiness in our top 10, top 20 customers.
You know, what is affecting that and how do we ensure that the top 20 customers, you know, like will be there, you know, contributing in terms of the volume, right? Also, second on the Trubloq, we have seen 25% growth in the volumes, but the revenue has not grown in, like you know, in accordance to that. Is there any, you know, change in pricing or, you know, change in mix that we're seeing in the Trubloq? And the third question is on the enterprise. What is driving the enterprise, like margins, gross margins? And is there any impact of high price increase to like revenue growth in this quarter also?
Amit, maybe I will take the first question, right?
Okay.
Hand it over to Deepak, right? First point is our top 20 has not declined, Amit, right? Our top 20 as a contribution has declined, but the top 20 customers have still grown 28% YoY, right? You know, it's not that they have declined. See the good part, we've been talking about this consistently from the time we presented this data for the first time in our Analyst Day, where we said last year our top 20 kind of contributed 70%, right? Our objective is twofold. One, reduce concentration, but not by necessarily making these customers de-grow, but kind of expanding our base, right? That's kind of playing out very well because on one hand, you have top 20 customers at the largest set of customers which are still growing 28% YoY.
Since we are growing faster as a company, you know, their contribution and our dependence on that is coming down, right? That is really what is happening. It is part of our. It is by design that we wanted to, and we've been consistently saying that. We kind of approaching it where we are growing, at the same time reducing the concentration also, right? I'll ask Deepak to add on in terms of, you know, what he is seeing in terms of spending from our top clients. Definitely we are managing to do both, where we are growing them, but also reducing the dependency.
Okay, sir, how frequent is the change in the top 20 client profile? Has there any been exit of a large client in top 20 or some, you know, like, you know, kind of you know, like wallet share loss in some of the top clients to competition?
Deepak, you may want to take that.
Yeah. We haven't lost any customers, you know. I would say top 50 or even top 100 last 10 years. Okay. I would like to make that statement. Our customers are very much intact and they are giving us, you know, consistent business. Yes, it happens sometimes that, you know, maybe 1 or 2 customers here and there that, you know, the wallet share may swing. Okay. You know, but that's part of the business. As far as, you know, customers are very much intact, and our top 20 customers are growing really well.
Okay. On the second question on the, you know, Trubloq, the market share is coming down and, you know, the volume growth is not reflecting in revenue growth.
I don't think that will be a fair comment, because, you know, you are looking at the overall platform business and concluding that, right? I think there are multiple components to this, right? There are different price points for different categories of enterprises from a Trubloq perspective. I think you still see the, you know, Trubloq is still probably only 50% of our platform business, right, in that sense. There is still a lot of growth in Trubloq, and it is in line with the volume in many ways from a revenue perspective, right? That is the answer as far as that is concerned.
I would also like to add one more thing here. You know, if you see, we said, you know, Trubloq is deployed at BSNL, at VIL. We have major part of Airtel, you know. It also depends on what these operators are, you know, receiving the volumes. Let's say if the volume is higher on these operators vis-à-vis other operators where Trubloq is not there, so you would see higher number of transactions here, right? You know, that would also change the numbers little bit.
Okay. On the market share, is it you know, just to follow up on the market share, you know, it has been coming down. Is it you know, some competition that you're seeing in this space? Because who are the other players who are in you know, in this space and what kind of competitive scenario you're seeing here?
You know, to be honest, we've not seen market share drop, Amit. You know, we were 62%, you know.
He's talking generally.
Sorry.
He's talking about Trubloq.
Trubloq. Okay. I know that we had talked about 70% in one quarter, but that was the Q1 where,
Where they have included certain number of
Where they have included internal traffic.
Yeah.
Which subsequently was stopped from a scrubbing perspective. That was more of an anomaly in Q3 of last year, where we showed 70%. Because one of the telcos kind of used an internal transaction web scrub, which kind of stopped. After that, we've been upwards of 60% or in fact, if anything, we've increased from 62% to 63% over the past nine months, is what I would say from a Trubloq perspective, Amit.
Okay. Like, who are the other, like, you know, 40% traffic, who's handling?
I think IBM has deployed with Airtel and Tech Mahindra is deployed with Jio. Between two of them, they had around 35% something like that. Yes.
Okay, sir. Thanks. Sir, you know, my, you know, like, last question on the enterprise side. What is driving the enterprise margins? Also, you know, is there any element of ILD price increase this quarter?
Maybe I will take that, right, Amit. The big driver on enterprise margins is in terms of shifting business mix and the fact that, you know, we had lot of festival-driven campaigns that in both ILD and NLD, which is always more profitable, right? That has really helped us. From a price increase perspective, you know, I don't think there was anything delta between Q2 and Q3. More or less we covered. The price increase happened in beginning of Q2, so there was not a big delta as far as price increase is concerned from a margin lever perspective. But I would say it was more due to change in business mix, coupled with the fact that we had lot of festive promotional campaign volumes, which helped us.
Okay, sir. Sir, you know, lastly on the cash flow generation. Obviously it has come down, but as we have explained in the presentation also, that is because of ILD price increase. But what is the sustainable OCF to EBITDA level that you are, you know, aiming at? Because if I see last two years, it has been above 100%. Is it fair to assume that it will remain in that range? In terms of our working capital management, is it going to be at the same level or we are seeing some improvement there?
I would say if CF to PAT, you know, we would like to be as close to 100% as possible. Would always be the intent. EBITDA to operating cash flow may be difficult to be 100% because there is a tax outflow which we have to account for. I would say that is how we are looking at it.
Okay, sir. Thanks and all the best.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference call, please limit your questions to two per participant. For any further questions, you may come back for a follow-up. Who'd like to ask questions, please press star then one. The next question is from the line of Anil Sarin from Centrum Wealth. Please go ahead.
Good evening, top management of Tanla. Please accept my congratulations on once again coming out with such outstanding numbers. That's a job very well done. I want to draw your attention to today's letter where there is a mention of, you know, how India is adopting digital modes of communication and how that is good for Tanla. Could you just help me out by drawing a linkage between like, as India becomes more and more digital, how does it help Tanla either through Trubloq, Wisely or I have one more question after this, but I would wait for the answer of this one before asking the next question.
Sure. I'll request Deepak to give you a view on the trend in terms of what's happening with the enterprises as they adopt digitalization.
Sure.
If you see the trends are very encouraging. If you look at it, you know, all the large customers of ours, you know, they have already adopted digital ways of communicating with their customers. Now they're adding more channels to it. Earlier it used to be SMS and then email and voice, and now WhatsApp is also penetrating into, you know, into this. Each channel is complementary to each other. The beauty of this is that, you know, they are not eating into each other's, you know, revenues or values.
I mean, if you look at it, now WhatsApp and, you know, WhatsApp is basically a platform for conversational messaging wherein, you know, which was not, I would say, that easily doable with the SMS or even with voice, which can happen with WhatsApp. Wherein, you know, simple conversation, you can eliminate seats on the call center. Basically that's going to impact the call center business, and it's going to save huge revenues or huge costs for the enterprises. You know, the whole thing would move to, let's say, WhatsApp or any other such conversational messaging, you know, platforms.
That is what one trend I can tell you, which is, you know, doing very well. If you see, I mean, India is one country where we have a lot of startups.
Every month we are seeing this lot of startups are coming in. I mean, they are on the very first day itself, you know, they are adopting these, you know, digital channels to communicate with their end customers.
Okay. Okay, great. No, thank you so much. My next question was, there was also a mention and there were some screenshots of scrubbing and consent. Could you enlighten us about what does it mean for revenue? What does it mean for customer stickiness, this scrubbing and consent?
Anil, scrubbing is basically what our DLT platform does, right? It looks at every message and kind of sees whether it is aligned to the template and the headers. That's really what kind of went live in September of last year, September of 2020. That's really what our Trubloq platform does, right? Consent registration is a very new module that just kind of took off in September. Like Uday mentioned in his opening remarks, you know, we think consent management is a very big opportunity. We think that, you know, it'll kind of crystallize over the next six months, and we are closely tracking it and looking forward to, you know, capitalizing on that. That is what I would say as far as that is concerned.
Okay. Thank you. My absolutely last question is on Trubloq. You know, you mentioned. I'm not talking about market share, I'm talking the Trubloq portion of your revenue is a certain portion. However, there is also this TRAI regulation, which says that all messages have to be encrypted. So how is it that Trubloq is not 100% of your messages? Are there some non-encrypted messages also that are going on the networks?
No. Anil, Uday here. No, nowhere TRAI says that all the messages have to be encrypted. Okay? What they have mentioned is each and every message in India have to go through blockchain platform. Okay? Having said that, they have given exemption to government of India, but otherwise each and every message has to be scrubbed. Nowhere they mentioned about scrubbing. Sorry, the encryption.
Okay. As the government organizations gradually come online, then greater and greater percentage of your messaging revenue would come from Trubloq. Is that the right way of looking at it?
No. The more you see the traffic growing in India, the more traffic comes to Trubloq.
Sure. An allied question to that is that people just mentioned that look we are with a few networks and we are not on a few other networks such as Jio. If Jio increases its market share sharply higher from where it is now, that would affect the market share that Trubloq has. Is that a fair comment?
No. It's not really true, Anil. Like, it has nothing to do with subscriber size. It all depends on the telcos concentration on the CPaaS business. For example, BSNL, where the subscriber base is minuscule, but they're doing massive volumes in India right now. The subscriber base has nothing to do with the business opportunity.
I see. No, thank you so much for clarifying. Thank you for that.
Thanks. Thanks, Anil.
Thank you. Participants, we would request you to please limit your questions to two per participant. For any further questions, you may come back for a follow-up. The next question is from the line of Balaji Subramanian from IIFL. Please go ahead.
Hi, Uday. Congrats on a good set of numbers, and thanks for taking my questions. I have a couple of questions. The first one is, what has changed the Wisely international rollout strategy? Because last time you had mentioned that you are engaging a top consulting firm to advise on the international GTM. But now you just mentioned that the Vodafone Idea case study would be pitched, and that would be used to kind of, you know, build out the international rollout of Wisely over time. What timeframe are you looking before you roll out Wisely internationally? My second question is, you know, more on, you know, what is the typical gross margin that you make on non-SMS channels, but especially WhatsApp messages.
You did mention that you are aspiring to reach 50%+ gross margin that many global platform players report. You know, how will something like WhatsApp enable you to kind of make that journey? That's largely from my side. Thank you.
Thanks, Balaji. The first point is, yes, we have appointed a consulting firm to advise us on Wisely GTM, which does include both India and overseas and global expansion. We got the GTM plan from them last week. They have given us a complete GTM plan, including proposition and pricing. In fact, they are the ones who are helping us to even roll out with BNL as we speak. It's a part of the strategy. We have not changed any strategy. It is in line with our strategy. We don't want to go to global markets without having at least one successful case study in India, right? That's where we are waiting for that.
Meanwhile, we are already engaged with the global tech telcos and very large enterprises. We're just eagerly waiting for these customers' success case study from BIA, which is going to come by end of May. That's number one, right? Number two, for us to push the margins, the gross margins from where we are right now to 50% over a period of time, it takes a bit of time. I'm not saying it will happen in the next one year or so. If you look at our gross margins on our platforms, are upwards of 80% broadly, okay? The more revenues, more margins we earn on platforms, automatically, like, you know, the.
We will have our margins. Our blended margins will move towards that to our aspiration level. That Wisely definitely will help us generate good margins, gross margins for us. Once we start adding the Wisely gross margin, margins to our blended, our total gross margins, I'm sure the blended margins will change.
Okay. Thanks a lot today for the detailed answer. All the best.
Thank you. The next question is from the line of Neeraj Gangwar from Nive Investment and Management Advisors. Please go ahead.
Hello. Can you hear me?
Yes, yes, Neeraj. Yes, please go ahead.
Thank you for giving this opportunity and congratulations on excellent set of numbers. For a very good presentation which has been going on for the past 3-4 months, 3-4 quarters. Most of the questions are answered. Now, only one question is left. What I am seeing that trade payables are approximately equal to cost of service for last 3-4 quarters, which was not the case until September 2020. What is the reason behind this? For example, trade payables in the current quarter is INR 662 crores. Our cost of service is also at INR 620 crores. Is there any change in this particular portion?
No, no. There is no change in portion, right? I don't think, you know, you will. You know, in a growth engine, right, you will always find that, you know, your trade payables will go in line with business, right? There is some amount of correlation to cost of sales. You know, there are also different mix, right? Because when you look at an integrated thing, when platform business is growing, your cost of service does not go in line with platform business in that sense. It will be difficult to correlate along those lines, Neeraj.
Okay. Thank you.
Thanks, Neeraj.
Thank you. The next question is from the line of Milind Karmarkar from Dalal & Broacha. Please go ahead.
Hi. Thank you for taking my questions, and congratulations on great set of numbers. Actually, I had a very basic question. Basically, what I wanted to know was that with the implementation of Wisely and Trubloq on some of the telcos. Because I keep getting. I understand many of us keep getting these SMSs which look like that they are from, say, State Bank of India saying that, you know, "Your account will be frozen. You just need to send us your PAN number or Aadhaar card number and the problem will be solved." Now, obviously, these are phishing messages. Just wanted to understand that whether Wisely and Trubloq together will help stop these messages. That's what my question was.
All other questions have been answered.
Hi, Milind. It's not a basic question, it's a good question. The messages that we are receiving, I also receive on my handset, more or less, every day. Yeah, as you rightly said, these are almost all phishing messages. They're not using A2P messaging route, which means they're not going through our routes. Okay?
Okay.
What they do is they are using SIM farms. Okay? They go to market, they buy the SIM cards from the store, and they start sending the messages from that SIM card, which doesn't go through Trubloq or any of the DLT platform in India, because that comes under peer-to-peer messages. They are supposed to use those SIM cards for a personal purpose, but they're misusing for this kind of messages. The regulators are looking at these messages very closely, and they are clamping these numbers on a daily basis. In fact, we are developing a platform which is likely to kind of control these kind of messages going forward.
Including the regulators, Government of India and we are working towards that. It doesn't go through our platforms as you say.
Okay. Thank you very much. Got it.
Thank you.
The next question is from the line of Rikshit Naredi from Naredi Investments. Please go ahead.
Hello.
Yes.
My first question is regarding domestic and travel segment. Can you please tell us the expected market size and expected growth as per your best estimate?
As per my best estimate, we are at what billion dollars?
Yeah.
Little more than $1 billion?
Little more than $1 billion.
Little more than $1 billion TAM in India. Probably Deepak is the right person to comment on the growth. Deepak, you want to comment on that?
What we are seeing is there's a growth of about 18%-20%. You know, year-on-year growth is what we are witnessing right now.
Right. Okay. My second question is, please give me more color on co-selling agreement with Microsoft.
Yes, we have the co-selling agreement with Microsoft. Wherever we go, including India, we sell along with Microsoft and Wisely is on Azure stack. In fact, the platform that we're deploying with VIL is on Microsoft Azure cloud.
Okay.
It is a joint effort, yes.
Okay, my last small question is, what will be the revenue mix between platform and enterprise business in next two to three years?
I don't want to give any forward-looking statement, but as we speak, it's around 23%. 23% of our gross margin comes from platforms as we speak.
Mm-hmm.
I think our aspiration is to push it as much as possible in the next two years. That's what we're working. That's where we are investing for the last two years. If you look at last two years, we have really covered a lot of ground in terms of the platforms business. I personally believe that it will cover a lot of ground in the next two years.
Okay. Right. Thank you so much.
Thank you.
Thank you. The next question is from the line of Nirmal Bari from Sameeksha Capital. Please go ahead.
Yes, sir. Thanks for the opportunity. I have a couple of questions. The first one is, I'm not very conversant with the technology aspect of this. In between, you said that this CPaaS has nothing to do with the number of subscribers for the of that telecom operator and that BSNL is doing a lot of CPaaS. For this DLT platform, at what point does the message needs to be scrubbed? As in, is it the receiver, as in, the receiving telecom operator that needs to scrub the message before it goes to the customer's handset? Or does it happen at the point of where it is being sent?
That's a good question, Mr. Nirmal. Like, you know, you're talking about origination and termination. Okay? What the TRAI says is, whoever is originating the message is responsible to scrub through DLT. For example, BSNL is scrubbing. BSNL is originating the message and terminating with Airtel. Okay? It is the responsibility of BSNL to ensure that it is scrubbed in the DLT platform before they hand out the message to Airtel through interconnect. It is the originating operator who is responsible to scrub.
What would be the rough market share in terms of origination of messages between the four key players in India? If you can give some data on that.
I'm not allowed to do that. We have some NDAs here. I'm afraid I cannot give you on behalf of the telcos.
Okay. Then, second question that I had was on the gross margin, right. This year our enterprise business gross margin grew by 73%. Would it be fair to assume that that was largely on account of the price hike that happened in Q2? Because that is where the bump up in enterprise gross margin came.
Nirmal, I don't think that will be the right conclusion because, you know, that is both a cost increase and a price increase, right? It's not just a price increase because your... What has really happened there is that telco costs have gone up, right? We've kind of gone ahead with our customers and got our price increase to ensure that we have maintained our margins, right. The price increase would have definitely given us incremental absolute margins, but not impacting the margin percentage, right. I think we've improved our margins due to mix of business, obviously the improvement in terms of our platform as a contribution. Those are the big levers from a margin perspective. Price increase is not, does not help in terms of margin percentages, Nirmal.
Yeah, that platform-related gross margin part should have been reflected in the platform business, right? Or it doesn't-
We're talking on an integrated basis. If you're talking only enterprise, then you are right. The price increase would not have an impact on the margin percentage per se.
Going forward, unless there's another price hike or anything, the enterprise business should, the gross margin should largely grow in line with the volumes, and then the platform business will be the incremental driver for gross margin. Would that be a correct way to look at it?
Yeah, yeah. If you hear what Uday said in terms of our longer-term aspirations, clearly the bigger thrust from a gross margin expansion perspective will come on the back of increasing the platform business share contribution. You're absolutely right on that, Nirmal Bari.
Okay. Thank you. I'll fall back in the group.
Thank you.
Thank you. The next question is on the line of Deepak Chaukhani from Trade Capital. Please go ahead.
Hello, sir. Great performance on all fronts. Just one question I have. Just trying to understand the Vi partnership. Is it only for messages terminating in India or within India, or is it like a global partnership wherein it covers all the countries where Vi operates here?
No. Hi, Deepak. It's since it is VIL, it operates only in India. I think my information says that Vodafone has nothing to do with VIL other than holding their shares, so they operate only in India. This partnership is mainly for India. It is mainly for India.
Okay. Thank you, sir. Just a related question. Since it's going to be launched on first of March, probably Q4 will account for some of the revenues from this partnership.
Yes. For the month of March, I think we should be able to book the revenues. That's what our plan. Yes.
Okay, sir. Thank you so much.
Thank you.
Thank you.
Thank you.
The next question is from the line of Sharad Kohli, an investor. Please go ahead.
Hi. Hi, guys. Most of my questions have been answered. I was just trying to understand the total addressable market post this announcement with VIL, right? I know I don't wanna take names here, but obviously one of your competitors had an exclusive agreement with Idea, right? I'm just trying to figure out that with this new partnership that you have with VIL, is it fair to assume that, and I don't know the duration of this contract, but is it fair to assume that all the business, whether it's for Vodafone or Idea, now flows through Wisely or does VIL still have the ability to sign separate deals with other players in the market?
Hi, Sharad. Uday here. Good question. VIL, I mean, once Wisely goes live on first of March, 100% of the traffic has to will go through Wisely. It meaning to say that it is an exclusive partnership. That's number one. Number two, it is a multi-year deal. I would like to leave it there.
Okay. Just one question, Uday. Just so that I can plug into my model here. I don't know if you know this, but what is the split roughly between Vodafone and Idea in terms of the traffic?
I think it's kind of probably 55-45. 55 is Vodafone and 45 is Idea. That's what my information says. Probably 50-50, but it's yes it's kind of 50-50.
Okay. If I understand this math correctly, that means that incrementally, once you go fully live, starting March, that 45%, and maybe there's a little bit give and take here, but for the bulk, that 45% which one of your competitors or a few of your competitors had with Idea, that 45% now totally comes to Tanla, meaning that your total addressable market is basically doubled. Is that fair to assume?
Sharad, all I'm saying is 100% of the SMS ILD traffic, both which does include 100% of Vodafone and 100% of Idea traffic goes through Wisely platform. Yes, your assumption is right.
Okay. That's all I wanted to know. 'Cause it's just to understand what is the incremental growth that we can calculate because of VIL. Thank you.
Sure. Thanks.
Thank you. The next question is from the line of Kushagra Bhattar from Old Bridge Capital. Please go ahead.
Hi. Thank you for the opportunity, and congrats for good numbers. Couple of questions. First to start with, on revenue breakup. So in your press release, you had mentioned something called BFSI Wholesale and Government, right? So if you can provide some breakup between those. And a related question is, when you say contribution from the newer channels and there was some festive impact for the enterprise business, could you share some breakup from on revenues from these new OTT channels? And how sustainable are the enterprises margins which you recorded in 3Q?
Sure. Maybe let me take that, Kushagra, right? We've not broken down in terms of exact quantification of each of these segments, Kushagra. But what we can tell you is just from the industry sector which has driven growth, clearly BFSI has been very, very strong, right? Led by the banks. That's been a big driver for growth and the other segments that we kind of talked about, right? When you look at other channels, they are very small, but they are growing substantially, right? They're growing substantially, and definitely they are, in today's terms, more profitable. Although they are a little subscale, they are profitable today, right? And therefore, that is helping us from a focus.
You know, I don't know if you remember maybe two quarters back, right, we had made this statement saying that, you know, we are going to focus significantly on OTT channels, and I think we've been doing that for the past six months, right? I can give you a lot of color in terms of what we are doing in that space, but we've still not called out specific numbers as far as those are concerned. Probably we'll do it after it reaches a certain amount of scale. If you want to know anything specific, I can ask Deepak to give you a view in terms of, you know, how enterprises are kind of looking at OTT channels and where there is opportunity as far as we are seeing it there. Deepak? Deepak [Non-English content] ?
Deepak's line just dropped. I'll call him again. Yeah, we have
Yeah.
Mr. Goyal on the line now.
Yeah, Deepak, I'm not sure if you heard me, but the idea what Kushagra was asking in terms of some of the OTT channels, you know?
Right.
How sustainable they are and what is the contribution. I thought maybe you can give a color in terms of how enterprises are seeing the OTT channels and the use cases that we are seeing there.
Absolutely. You know, as I mentioned earlier about, let's say if you take an example of WhatsApp, we are building very deep, you know, we are doing deep penetrations and deep integrations with the enterprise customers. Wherein, you know, this is all the revenues are based on the conversations, you know, between the enterprise and the customer over, let's say for example, WhatsApp. Here what happens is, you know, once the integration is done, we have built the use cases. They're highly sustainable because as I mentioned earlier, you know, it is like a always on channel for the enterprise and as well as for the customer.
Because customer can anytime, you know, can do a query, you know, ask whatever question they want to ask, they want to request anything, they even want to do any commerce, they want to place an order, all that can happen over a conversation. So, you know, and we are building more and more such use cases for a particular customer. I mean, you know, and that's what we keep doing. When you are into that kind of business, definitely, you know, you command a premium, you know, and the margins are high.
Okay. The sense is, all these channels are expected to grow, so the margins are more or less sustainable?
Yeah, absolutely. I mean, who would not like or want that, you know, instead of somebody making a call to the call center and keep waiting there and an enterprise. On one side, customer is inconvenienced, on the other side, enterprise customer, you know, they are paying INR 20 or INR 30 or maybe INR 40 per call rather than, you know, the whole thing is just getting done over a, you know, conversation over a WhatsApp or any other OTT channel.
Sure. Second question is on, you know, in your remarks, opening remarks, you mentioned investments on brand building and customer success, right? Can you elaborate a bit more on, you know, when you say brand building, what kind of investments you are making? And when you say customer success, what sort of investments goes from your side on that part? And how, if you can give some quantification as well, versus your current investments today in both these areas. Yeah.
These investments are not going to be very large. It's going to be very, very small. In fact, we have created a customer success department last year, and we are recruiting a lot of people in the customer success department, where they don't chase any revenues. They always work for customer success. That is an investment for us. But again, in terms of the brand also, we need to build the brand with customers, partners, regulators, and employees. That's where we are going to focus on going forward. We are looking at various possibilities of building the brand within this ecosystem.
We'll be more visible going forward with all the good work that we have been doing in India to our partners and customers and so on and so forth. That's what I'm trying to say. It's not gonna be a lot of money. It's very small money, but our focus is going to be on the four areas, as I told you earlier.
Okay, sure. Last one from my side. When you say working capital will normalize, right, what sort of levels you are indicating towards both in terms of debtors and creditors? Also a question on if you can call out how much was the volume growth in last nine months. It'll be helpful. Thanks.
I'll answer the first one. See, what we are talking about is, you know, try and be close to free cash flow at close to 100% of PAT, right? PAT is always the kind of goalpost that we go towards, right? Volume growth, I think largely will be, we're not calling out specifically volume growth. Kushagra has not called out volumes. You know, it's been strong. It's largely been in line with revenue growth in terms of the domestic business.
Okay. Okay, sure. Thanks, and all the best.
Thanks.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Ritu Mehta for closing comments.
Thank you, everyone. That was the last question for today. In case we could not take your questions due to time constraint, please feel free to reach out to investor relations team. Thank you. Have a good evening.
Thank you very much. Ladies and gentlemen, on behalf of Tanla Platforms Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.