Aurionpro Solutions Ltd

NSE:AURIONPRO

Earnings Call Transcript 2023-Q4

[Operator]

Good day, and welcome to the investor call of Aurionpro Solutions to discuss the Q4 and FY '23 results. [Operator Instructions] Please note this conference call is being recorded. I now hand the conference over to Mr. Aashvi Shah from Adfactors PR. Thank you and over to you, ma'am.

[Aashvi Shah, executive]

Thank you, Vikram. Good afternoon, everyone. This is Aashvi Shah from Adfactors PR. We represent Investor Relations for Aurionpro Solutions Limited. On behalf of the company, I welcome you all to our earnings conference call for Q4 and FY '23. Today, on this call, we have with us from the management, Mr. Ashish Rai, Vice Chairman and Director; Mr. Vipul Parmar, Chief Financial Officer; and Mr. Ninad Kelkar, Company Secretary. We will begin the call with brief opening remarks from the management followed by a Q&A session. Please note that certain statements made during this call may be forward-looking in nature. Such forward-looking statements are subject to certain risks and uncertainties that could cause our actual results or projections to differ materially from those statements. Aurionpro Solutions will not be in any way responsible or any actions taken raised on such statements and undertakes no obligation to publicly update these forward-looking statements.I would now like to hand over the call to Mr. Ashish Rai for his opening remarks. Thank you, and over to you, sir.

[Ashish Rai, executive]

Thanks, Aashvi. Good afternoon, everyone, and welcome to this earnings call for Q4 and FY '23. We are, of course, very pleased to announce these results. FY '23 was, in many ways, a landmark year for us. in terms of execution on pretty much all aspects of our revamp strategy that we've communicated before, and we can't be more proud of the disciplined execution from all our businesses. We met or exceeded our targets on pretty much every operational parameter that we track actively. Both of our core divisions exceeded their operational targets for the year, which points to the exceptional execution from Aurionpro teams across the world. I'm sure by now you've received the investor deck that details our performance in the quarter, allow me to briefly summarize the key performance highlights. Revenue for the quarter stood at INR 191 crores, which is a growth of 39% on a year-on-year basis and 13% sequentially on a quarter-on-quarter basis, which is one of the strongest sequential growths we have for some time. EBITDA for Q4 FY '23 stood at INR 40 crore as compared to INR 30 crores in Q4 FY '22, which is a growth of 33% on a year-on-year basis and a 9% sequential Q-o-Q basis. EBITDA margins for the quarter stood at 21%.PAT for Q4 FY '23, which is the profit after tax stood at INR 27 crores, which is a growth of 23% on a year-on-year basis and 2% sequential. In FY '23, the company achieved its revenue target of INR 659 crores, which is a 31% growth year-on-year. EBITDA and profit after tax for FY '23 were higher 30% and 35%, respectively, on a year-over-year basis, right? Earnings per share for Q4 FY '20 stood at INR 11. And for FY '23, it stood at INR 42.69, which is an increase of 38% on a year-on-year basis.Let me move on to updating you on some of the key strategic priorities, especially around the channel and capacity, which are more immediate in terms of impact as well as the product build, which is more mid to long term in terms of impact, right? Over the last few quarters, we've highlighted our focus on building out the sales channel and expanding outside our established home markets, which is primarily Asia. We've gone about building this with a very sharp focus, and I'm pleased to report that we've made very strong progress in building out an exceptionally high-quality sales team across U.S., across India, Middle East as well as core Asia. So the channel is more or less fully built out as well as bringing onboard some incredible partnerships with tier 1 technology partners, which will greatly enhance our reach as well as impact globally.What makes FY '23 performance stand out for us and makes it even more special is that the teams achieved this while also meeting our long-term objectives of accelerating R&D to create next-generation platforms, while our core platforms are pretty much fully built out across banking as well as CIG. As we expand our markets, there is a level of incremental build that does consume material efforts. So in FY '23, we've surpassed pretty much every year in our history in terms of progressing on the product field and the new product launches.If I highlight a few of these, we launched a brand-new corporate digital banking product, AuroDigi, that's already won its first client, which is really, really encouraging for us. We launched SME platform Aurobees during the year, that's again seeing significant traction. We've made some announcements on this from time to time. We went live with the payment offerings, B2C live in India, B2B in Singapore. We had great additions to our solution sets in lending and transit as well. On the platform services in India, we launched a hybrid-cloud services offering that adds significant value to our existing platform offerings. So all-in-all, a very large number of launches, probably the most we've had in our history in a single year.We also made great progress in adding capacity across the enterprise. We've added 500 people in the second half of the year, 500-plus people in the second half of the year that allows us to progress our product build agenda aggressively. We also added manufacturing capacity for the hardware divisions to allow them to scale more aggressively in the current year. So if you take all of these together, these achievements now allow us to be ready for a phase of rapid as well as sustained growth through both increasing our market share in the home markets where we are already quite significant in terms of our presence as well as expansion in the identified growth market for each of the businesses.So as I look ahead to FY '24, we started the year with a pretty strong pipeline, thanks to both the direct sales channel as well as our partnerships now firing on all cylinders. We enter the year with a strong order book of about INR 820 crores. Most of the order book is sort of executable over the next 4 quarters. So that gives us very strong visibility into the next 4 quarters.We also feel very good about the execution machine walking into this year. We have driven strong growth for the last 2 years now. And while we needed a lot of work last year in terms of building out capacity, channel as well as the organizational framework to handle the growth, this year we are lot better placed in terms of both capacity and talent. We expect to maintain the growth trajectory going forward, and we expect FY '24 growth to be in the range of 30% to 35%, which is a slight uptick on our growth last year, right?Building a technology business that can create and preserve value over the long term needs one to have a durable defensive mode and an ability to adapt to the changes that we see in the industry from time to time. We feel even more strongly now than before that our chosen strategic framework centered around highly differentiated products and platforms, allows us the ability to react much better to the demand environment as it evolves, which in turn will allow us to, over the medium to long term, deliver significantly superior returns on capital compared to the industry. We want to be in the top 10% of the tech industry in terms of both growth as well as margins. We've done that over the last 2 years, and we will remain focused on continuing this relet the current year and far, far beyond.That's all from me now. For now, I hope this has given you a useful overview of the overall business context and our strategy and performance. I look forward to addressing any questions that you may have.

[Operator]

[Operator Instructions] We'll take our first question from the line of Mitul Mehta from Lucky Investments.

[Mitul Mehta, analyst]

Congratulations on a great set of numbers. Just wanted to get some sense on your -- on both your businesses with respect to working capital. So if I clearly compare it with the working capital of last year to this year. This year, obviously, has been -- the working capital has slightly deteriorated. Last year, our cash flow conversion was significantly higher this year that has not come through. So can you please make us understand as to where this working capital is up. I mean, is it more in the banking products of the business or your infrastructure-business? If you -- I mean payment gateway business. So if you can just give us some color on your working capital. Secondly, sir, we've invested some capital into building manufacturing capacity and capability. Are we going to further invest in that area? And if yes, how much? Is it possible for you to also help us to understand the return on capital employed in both the businesses so that we can dissect a much better.

[Ashish Rai, executive]

Okay. I got that. So working capital, so it's essentially 2 things, right? So working capital broadly its inventory and its receivables, right? So, we've -- obviously, since we got into manufacturing the hardware side of the business, we are now carrying a bit of inventory, which will add to the working capital in the business. While corporate still is the receivables and receivables for us, so if you look at our DSOs, that's gone from something like 94 last year to about 110 that it stands on right now, it has been going up to about 115 September -- so it was 115 in September, it came down to 110 now. We'll see that come down another 5 or 10 days over the next 6 months. What is happening to the enterprise right now is because we are growing at a pretty fast pace, one, in some cases, we will use working capital as a competitive tool for the business, right? So, in some cases, we want to carry inventories. In some cases, we want to agree to longer repayment cycles because that's how -- it's kind of -- the product business typically would tend to get you that way. The other side to it is, we are starting off way more projects than we can finish, right? And that, again, given the kind of business that we've built up around essentially product deliveries and making customers live on the products, finishing projects is, again, very important. So we've been building capacity through the year. A lot of that has been built out. So we feel the first half of the year would be a lot better in terms of actually finishing our projects and hence getting the DSOs down.By and large, I would want to look at it this way, right? I think our ability to generate return on any capital employed by the enterprise is very, very high. We believe we can drive pretty much industry-leading returns on capital. So we don't really get too worried about working capital getting stretched from time to time, right? So it's not necessarily a bad thing if we can drive 25%, 30% returns or any capital employed. So we will probably see it come down by another 10 days in the next 6 months. But in our business, I think one has to be prepared for DSOs staying at 90 to 100 day level at least, right? And then time to time, we'll use it as a competitive tool as we said, right? So that's basically on working capital. I can through the call, maybe explain more if someone has another angle to it.On the second question, so you're right, we made investments in 2 firms over the last couple of years, SC Soft in Singapore and Toshi, which is ATAS Aurionpro Toshi Automatic Systems now out in India. And both of them, the way to look at it is this: We are building out in our heads, the most integrated end-to-end stack in the transit value chain when it comes to transit payments, right? So we don't want to sit in the box, it says we make software or we make a payment stack or we make the validators or we make the case. We essentially span the whole value chain, which gives us immense competitive power price, right? So hence, the reason to invest in manufacturing.The return on capital that you'll get from it will come from the transit businesses that we have across, right? So basically, we believe we will be able to drive very, very high margins from the transit business in steady state. I mean right now, we're rapidly growing, but at some point in time over the next few years, the business acquired scale and a lot more steady. And then we believe it will match the 25% ask we have across the enterprise from all the businesses, the ROC ask, we believe the transit business as a whole will make that. So manufacturing is a critical part of that change. It allows us to be a lot more competitive and the overall business will rise to 25% ROC.The last part, are we going to invest in scaling up capacity? We announced a little while back expansion in Malaysia. So we announced this tie-up with contract manufacturers out in Malaysia, which allows us scale that capacity on the validators side. It's already kicked in. We did our first deliveries over the last couple of months. And that really allows us the ability to scale significantly compared to where we were. We set up out in India as well. We will continue to expand because we do see that growing at a rate far faster than overall volume growth rates, although it's a small business right now, right? So that -- I hope I've covered all the points and through the call, if there is any follow-up, I'm happy to take those.

[Operator]

Mr. Mehta, do you have any further questions?

[Mitul Mehta, analyst]

Yes, I have one question. Can you please allow me to talk?

[Operator]

Yes. Please go ahead, sir.

[Mitul Mehta, analyst]

So sir, let's say, this year, we ended our sales at INR 650 crores. Can you give us a breakup between the 2 business, the transit payment business? I mean, of course, that includes the manufacturing business also.

[Ashish Rai, executive]

Yes. So we published that. So look, I think the split is roughly 52% is banking and fintech and 48% is what we call Technology Innovation Group, which embeds the manufacturing asset, the transit assets as the smart mobility, smart city assets in India as well as the hybrid cloud and data center businesses. So it's essentially INR 340 crores or so for banking and about INR 315 crores for TIG.

[Mitul Mehta, analyst]

I'm assuming that both the businesses would be having similar margins.

[Ashish Rai, executive]

No, not really. So banking is, let's say, about 4 or 5 points more than TIG.

[Mitul Mehta, analyst]

The Technology Innovation margin would be approximately, let's say, 80%, 90% or higher?

[Ashish Rai, executive]

I would -- so look, I think in the range of, let's say, 15% to 16% on TIG and in the range of -- so certainly above 20% in the case of banking and fintech. So closer to 25% or so.

[Mitul Mehta, analyst]

I just wanted to understand your strategy going forward. Clearly, the technology innovation business seems to be a capital-intensive business. So how are you sort of directionally will be investing in your business. Would you be investing a lot more in your technology innovation business or you pretty more or less hit the sort of in terms of manufacturing capacity.

[Ashish Rai, executive]

Look, it's not a capital intensive business. I would sort of differ on that, right? I think it will consume capital at a little bit of an elevated rate while we are growing rapidly, right? But in a steady state, if you look at the transit businesses that we run, right, especially now we are going a lot more global. So earlier we were doing contracts in India, now we are out in the U.S., some pretty nice contracts way out in Central America, way out in Latin America. So we are competing and winning globally, the business is extremely profitable. So we believe from a capital intensity standpoint and given the fact that we can have the inventories of to contract manufacturers and stuff, we can run it in a fairly capital-efficient fashion and still drive pretty good margins. The thing about TIG right now is there's elements of business in India, which has elongated payment cycles and probably a little bit lower margin. But over time, you'll see the mix changing TIG essentially the group in which we incubate a lot of different businesses. So there is always a few mature businesses and then -- which can become sort of independent divisions by themselves over time. And then there are small businesses where we are investing capital initially. And as they mature, it could really not be a problem.I think one thing to understand about Aurionpro is, by and large, we expense all our R&D spend, right? So we're not really capitalizing our assets. If we were capitalizing it, you'll see profitability probably 10 -- 9 to 10 points better than what it actually is. So we went in Q4 R&D about 8.5%, but it's going up. So it's -- the thing to look at it is because we don't capitalize on the expense on R&D from time to time, some businesses appear to have a different economic profile than what we think they will be long term when they're stabilized. So we believe transit is a very strong business. We believe we can drive good margins on the hybrid cloud services, on the data center design business as well. And I don't think it's seriously capital intensive.

[Mitul Mehta, analyst]

Is there any retention money, which is stuck in the TIG business?

[Ashish Rai, executive]

So we have something of the range of INR 30-odd crores stuck as retention money. Stuck as in - yes, retention money.

[Operator]

We take next question from the line of Vivek Gautam from GS Investments.

[Unknown Analyst]

Congratulation on good set of numbers. So our company has been listed for quite some time now and -- but the improvement in performance hasn't been happening for the last few quarters. So what has been the change -- what is the change which will happen which is responsible for it and how is the future looking like in terms of opportunity size for us? And how is the competition scenario for us, who are our major competitors in both the segments we are operating in?

[Ashish Rai, executive]

Okay. Vivek, good question. So yes, we've been listed since 2005, or so, we've been listed quite a bit of time. Um, we have evolved over time as an enterprise. I think what's more relevant to answering your question is we started a strategic pivot about 3 years back as an enterprise, where we revamped our strategy and what we are focusing on is becoming a global IP-led products and platforms vendor, right, which is sort of focused on a few chosen segments. I'll probably come to that. But first, why build out a global product and platforms vendor. Our core [indiscernible] one, we don't want to be a commoditized IT services vendor over the long term because we feel margins in that business will over time go down, whether it's because of structural cost issues, whether it's because of AI, whether it's something else, we don't believe we want to be a commoditized services vendor. So we said we want to be centered around IP and build our own. The second is when we say we want to build out the product business, we said we don't want to be a single product business. So we don't want to be a one-trick pony because that exposes our shareholders and the business to a lot of lumpiness in revenue streams, cyclical sort of demand. So we said we want to have multiple IP assets, right? So we want to be diverse.Third, we said we don't want to be in a single sector. And hence, we said what are the adjacent sectors we can be presented, right? So that sort of brought in to say, okay, you are centers around products, you are multiproduct. Second, you are across multiple sectors. So for example, we use the same payment stack, but transit is slightly different in terms of economic behavior compared to our banking, right? So we went that way. So that is what brought to our ambition to become a global product player. Where are we in terms of banking? We've got absolute tier 1 assets, again, lending as well as transaction banking, where you probably saw startups with tech leaders' quadrant product on the lending side and not -- there's basically no vendor, no software product from India who is in the leaders -- or even Asia, who's in the leaders' quadrant, we are the only one.And similarly, on the transit side, we believe we are building out one of the most integrated end-to-end stack, what proves us Tier 1. California, for example, total competitive, global RFP, and we are 1 of the 3 dealers in that, and we're already rolling out in 6 California cities. So if I can win there, we can win very much anywhere. So I think a lot of proof points as to why we believe we are absolutely in terms of IP, right?So essentially in the segments that we chose, one, the segment should have a very long demand runway, which is corporate loan origination, which is transit review, et cetera, right? Second, we say the leadership in the space should be contested enough for us to go for a global leadership position. So it should be fragmented enough, contested enough for us to go for it. Third, it should be a segment in which we can build out a tier 1 IP assets like I explained on the lending side, right? So as long as it means of conditions, we go in and we try build business outright. So that's essentially what the play has been on the strategy side.Who do we compete with? Banking. We compete with probably the largest global vendors. In some cases, we collaborate with them. In some cases, we compete with them, which is the likes of [indiscernible] Finastra, FIS. On the transit side, again, we compete with most of the biggest players in global, we have [indiscernible], a lot of players like. But we also collaborate very actively with them. So for example, we collaborate very actively with Finastra. We collaborate very actively with Mastercard. We've -- so we play on the global field. We are fairly small in very, very large spaces, right? But we have absolutely top class products to go out and compete, right? So we feel good about where we are, and we believe.So the last point probably is what I'll close with is your point in the last 2, 3 quarters, we are doing well. Actually, we put the strategy in place almost 3 years back. It takes us time to do the product bill, it takes us time. Product is not an easy business. Services is a very linear business. I hire 1,000 people, I can get 1,000 people of revenue. Product takes capital to build. It takes time to succeed. It's harder. But still, we have, I believe, at least 10 or 11 quarters of consecutive 25% to 30% growth, and we feel we can continue this for a fairly long time. I hope that answers.

[Unknown Analyst]

Yes. Due to the slowdown in bank in the U.S. market and how is the opportunity in the second segment of transaction banking, actually India and outside?

[Ashish Rai, executive]

I did not get the question fully. Can you repeat that?

[Unknown Analyst]

Yes. My question was about the slowdown in the public small banks in the U.S. getting impacted due to the recent banking crisis. Is it impacting us in anyway? That was the #2. And #3 was about the opportunity for our transaction banking, metro station, rapid rate transportation and other ticketing solutions we are offering, how is the opportunity size over there, sir?

[Ashish Rai, executive]

Okay. So I'll take the first one. So we -- look, the banking -- so I don't know whether it is a banking crisis a lot, right? But there is a high interest rate environment in the Western world. There is a lot of talk around recession. We hear as much about recession as you hear about decision. If it happens, it happens. We believe, in general, we don't sell to small and midsized banks, right? So we sell -- so the product we have is around corporate loan origination, which only the largest banks need. We believe a high interest rate environment is generally a good thing for corporate loan book in general corporate banks, right? So what we see at least so far is the large banks that we serve doing pretty well, able to drive margins. And what also is happening is in a high interest rate environment, typically the investment bank side slows down. So there is less fee income, there's less M&A transactions. And banks seem to invest even more on the corporate loan side because I think that's the side of the bank that is making money, right? So, so far from what we have seen, we only see an increased demand. We don't necessarily see any reduction in demand. Our pipelines are the strongest they've ever been. So we'll see if there is a worldwide global recession or even a big one in the Western world, it probably affects everyone, but we would believe, we have the ability to outperform the industry, no matter what comes. So I think that's #1.Second part to it, I think there were several products mentioned. So probably, it is hard to address the target size market by market. So I'll come back to what I was saying on the previous question. We selected segments where we believe the addressable market is very large. If you look at each of our products, even products, which are the leading products in Asia, right? So if you say lending is actually pretty big in core Asia, on a global basis, we probably have less than a 4% to 5% market share, in some cases, even less than 2% market share.So we happen to sit in a very unique spot where the segment sizes are all double-digit billions, very, very large. Second, we have a very, very competitive product stack. Third, we have very small market share, right? So if you have a very small market share and a very competitive product, logically, you should be able to expand for a very, very long time. And I think that's what we believe will happen as we go forward, right? So segments very large, market share very small, product proven to be competitive on a global level in many cases; where it is not, we are working towards making them globally competitive, right? So we would believe the product sets we are left with right now, we would fancy our chances in terms of continuing to grow fairly strongly in each of those segments.

[Operator]

We take the next question from the line of Hiten Boricha from Sequent Investments.

[Hiten Boricha, analyst]

Yes. So I have a couple of questions. First question is on the order book, you mentioned we have around INR 800 crore, INR 820-odd crores order book for FY '24, which will be executable for next 4 quarters. So can you share some color and what kind of order inflow or inquiry on orders we are getting for next year FY '25? My second question is on the division. You mentioned we are looking for a growth of around 30%, 35%. So if you can help with to which division is going to contribute more banking or the TIG? And the third question is you also mentioned something on capacity addition in hardware. So some more comments on that.

[Ashish Rai, executive]

Okay. Hiten, so order book, INR 820 crores as it stood end of March, we believe at least about INR 700-odd crores from it should be executable over the next 4 quarters. It obviously depends on capacity and how we plan our projects. The rest of what we are projecting we will deliver next year will have to come from the sell and deliver that we do within the year, right? So that's essentially how the order book pans out. How does it look for FY '25? FY '25 is -- so we'll probably spill over INR 120 crores, INR 130 crores from the current order book when we go into that year, but most of it will be sold this year. From a pipeline standpoint, we feel we are in a very, very good position. The pipelines have been, they're probably 40% bigger than they were, let's say, 6 months back. So it's actually climbed up quite significantly. I don't think that's necessarily a reflection of just the demand. We have added a lot of salespeople in U.S. in India, in Middle East, in Southeast Asia as well as we've signed up some very, very interesting partnerships, which will give us a leg-up in terms of demand generation, right? So the pipelines are the strongest they've ever been by a mile. I think that should bode well for FY '25 in terms of what we convert. And maybe middle of the year, we'll come in and provide an update on that.The growth of 30% to 35%, how does this spread between divisions? What -- so what happened last year was we had banking at about INR 340 crores. The banking -- increased at about INR 40 crores, and it grew about 15%. TIG finished at about INR 315 crores or so, and it grew at 55%, right? So obviously, TIG has grown very, very strongly. Banking last year was -- banking is very, very software-driven, product-driven and banking was busy building capacity as well as launching new products.We expect to see the benefit of those new product launches as well as the build out capacity in terms of execution to come to us this year. So what I would expect or what we would expect is, TIG to moderate in growth. So not grow at 55%, but grow kind of materially lesser and banking to step up in growth. So both of them more or less converge in the middle. And that's how we'll get to the 30% to 35%. So that's the growth.About capacity manufacturing, so we've announced -- we've added somewhat to the capacity in Ghaziabad in terms of how efficiently we run it, a little bit of machinery and addition in terms of shift work, et cetera. And we will continue to scale that capacity a little bit more because the demand is just staggering. So we'll work on it. On the validator side out in Singapore and Malaysia, we've signed an agreement, which we announced a few months back with a contract manufacturer. We've got the capacity tied up. We got 0 concerns about being able to scale up for the next few years actually with that capacity. So I think we are fairly sorted there.

[Hiten Boricha, analyst]

Yes. Okay. But on the capacity side, can you share -- can you quantify the amount? What was our CapEx in FY '23? And what are we going to spend in '24?

[Ashish Rai, executive]

So capacity -- multiple parts of CapEx. So one is these are acquisitions, right? So first, I think between SC Soft in Singapore and Toshi plus the CapEx, you're talking at something in the range of INR 50 crores, which includes both the inorganic investments that we put as well as the CapEx behind those.

[Hiten Boricha, analyst]

And the number for '24, sir?

[Ashish Rai, executive]

'24, we are not really planning anything materially incremental. So we need to close off the SC Soft 10%. So we now own 90% to we need to finish that off, and we've got some incremental investment in Toshi. So I would say in the range of INR 30 crores is what we should expect.

[Hiten Boricha, analyst]

Okay. Just a clarification question, sir, may I.

[Ashish Rai, executive]

Yes.

[Hiten Boricha, analyst]

Yes. So you have mentioned the margins in IT is 15%, 16% and banking division is more or less around 20%. Is it the EBITDA margin we are talking about or the CapEx margin? And the second, you mentioned you had some comment on ROC. I missed that comment. Can you please repeat it, sir?

[Ashish Rai, executive]

So EBITDA, that's EBITDA margin, right? And essentially it was banking is 5 points above enterprise, TIG is 5 points below enterprise, right? The idea is for TIG to climb up, but it's a business that's growing at 55%. And because we expense pretty much most of the product builds and all, it's hard to really get the margins up if we keep growing at 55%. So as the growth moderates, the margin levels will go up. The second part on ROC, I'm not quite sure what it was. Essentially, our expectation on ROC is to drive 25% and above. So that is the ask, right? Any capital that any business wants to use in the business, we demand a 25% at least. But in cases, it's higher, right? As we get bigger, our ask on what ROI we need on any incremental capital that we reinvest back in the business, it's only getting more stringent for FY '24, right? But last year, we were keeping the threshold at 25%.

[Operator]

We take the next question from the line of Deepak Poddar from Sapphire Capital.

[Deepak Poddar, analyst]

Many congratulations for the good set of numbers. Sir, just I wanted to understand on the margin front, I mean, we spoke in length about the growth in coming years. But what sort of margins we are looking at in such growth environment?

[Ashish Rai, executive]

Look, our target remains at 21% to 22% on EBITDA and 15% to 16% on profit after tax, right? At that level, we believe we would be probably the top 10% players in the industry. That's what the goal is. So we'll be among the most profitable shops in Indian tech at least, and that's where we plan to stay. The thing to note about our EBITDA numbers compared to since 99% of Indian tech is services, so probably it's relevant, is that we also do R&D and the plan is to do 9% to 10% next year around that, right? And which -- most of it, unless there is some specific reason, we would not capitalize, right? So the actual EBITDA, if you were capitalizing would probably be far, far higher than it, right? But -- and that is the nature of our product business. It tends to be pretty good on EBITDA as they stabilize. So our plan right now, while we expense most of our R&D to 21% to 22% on EBITDA and 15% to 16% on Pat.

[Deepak Poddar, analyst]

Correct. Understood. And but R&D spend 9% to 10% of revenue, is that what we envisage in coming years to continue?

[Ashish Rai, executive]

It probably will not continue, right? But I think it's not a normal in the industry to get to. So we were probably at about 7.5%, 8%. I think it will climb up. The other thing is that for most of our products, the opportunities in front of us are so large that we will need to invest capital to capitalize on those opportunities, right? And by and large, we want to stay away from doing any major capitalization creating sort of intangibles on the balance sheet, right? So it can climb up quite a bit. The goal for us is to keep the EBITDA there and the excess that we get route that into our EBIT. So keep EBITDA still at 21% to 22%.

[Deepak Poddar, analyst]

Okay. But because I thought generally because of your operating leverage, your margins can be much higher right at the net level even at the EBITDA level than what we are currently doing or what we envisage?

[Ashish Rai, executive]

It could be -- so if you really wanted to say, let's stop all R&D expense and let's just run the revenue streams as they run, of course, you can drive much bigger margins. But I mean, for us, we feel at our current levels, we are already one of the most profitable shops around from a return on capital standpoint, from a return for shareholder standpoint, I believe that is the right spot for us. And we use the incremental that over the 21%, 22% to keep funding R&D. I think the -- so what happens is, unless you're capitalizing, right, no accounting report captures the value of IP, right? So what is the goal, right? When you're looking at the capital allocation decision, the idea is what will drive the most long-term intrinsic value for the business, for the shareholder, right? And for that, one is obviously, we grow faster than the industry, which we are doing industry going at 10%, we grow at 30-plus. That is very cold. We drive better margins than the industry, industry probably at 16%, 17% EBITDA we drive 22%, that's good. The third part is no accounting report captures in terms of long-term addition to intrinsic value is the value of the IP, which we are generating, right? And I think that is really, really important for us to generate really long-term sort of additions to intrinsic value per share of the enterprise, right? I think that's what we drive. So I don't think I would want to ever get to work as the over 1% or 2% R&D. I don't think it really makes sense from a long-term sort of shareholder standpoint. Hope that makes sense.

[Deepak Poddar, analyst]

Fair enough. Yes, yes. That makes absolute sense. And sir, my second question is on the inorganic -- is there any plans of inorganic acquisition or expansion in the near term or medium term?

[Ashish Rai, executive]

No, look, we will always be open to the idea of inorganic acquisitions as we've shown in the past. For us, there is basically 2 things that drive that decision. So how we're running the business is we're not trying to sit in a box that says software or that says hardware, or that says, IT services, right? We are saying, we are a tech vendor who occupies the whole value chain, right? So we will try and we sit on as many points of the value chain as we can, whether it's around service, around hardware around software. And that is what allows us to drive sort of industry-leading margins, right? So in that sense, 2 things important to us. On the value chain, if there is an adjacency or there's an opportunity to do backward integration, we will go and do an acquisition. Usually, that acquisition will be -- so we will not acquire for revenue. We will not really acquire for clients. We will acquire for backward integrating into the value chain, enhancing the value that we have, right? So which is like the SC Soft acquisition, right? It allowed us to get in on the electronic hardware validator side of the business. And we keep backward integrating that as well, we are sort of -- we keep building more and more of our parts and inside the validators and do less and less of outsourcing, right?So that is essentially the hardware R&D side. Similarly, Toshi, we acquired because it allowed us to play on the vending machines, the gates and stuff like that, right? So if we find an adjacency, if we find opportunities to backward integrate and occupy more points of the value chain, we will go into an acquisition, Expect more of a tuck-in kind of acquisitions rather than a big bang, we buy for revenue kind of thing. We don't believe that's a good use of our shareholders' wealth.

[Deepak Poddar, analyst]

Understood. Understood. And sir, you've spoke in length about your transit platform, right? Currently, what percentage of revenues from this platform?

[Ashish Rai, executive]

So I think we don't declare that. We'll probably start doing that soon, at least acquired scale. I would say -- so TIG overall is now almost 50% of the enterprise and transit is a significant share of that, right? I am hesitant to give you an exact number, but it's acquired quite a bit of scale. And probably in 3 to 6 months, we'll probably consider whether we want to start reporting it separately.

[Operator]

We take the next question from the line of Umesh Matkar from Sushil Finance.

[Umesh Matkar, analyst]

Congratulations on good set of results. You mentioned that banking to pick up growth this year. And also as are you ending at entering into new markets like U.S. and also which products have you launched in the banking segment?

[Ashish Rai, executive]

Okay. So we are banking, we definitely are planning for banking and fintech overall to grow for us much more significantly in FY '24. Where will it grow? So one is we have taken the product out to more markets. We've got a bigger sales in Southeast Asia. We were getting to a bigger channel in Middle East, and we are entering selective things in the U.S. U.S., for sure, even with the current order book will grow quite materially in FY '24 because I think some time back, maybe 3 or 4 months back, we announced a $18 million deal in the U.S., which will significantly convert to revenue in the year and that adds on top of the current business, which is going on. Southeast Asia, we are seeing very, very interesting deals in the pipeline, and we are close to winning a few of those, and that will again add to the business. The question about products, so we continue to sell loan origination, collateral management, limit management. We added corporate digital banking as a new product a few months back, we already have acquired our client on that product. I think that is very relevant for the market right now. We also have co-developed a product with Finastra, which is the #1 trade finance solution provider in the world.And there, again, we see significant traction in the pipeline there, and that would probably -- over the next few years, that will go global because it goes directly to the client base of that large vendor where our sort of licenses gets sold. So I think that, again, will scale up. So yes, so there is a lot of demand on the banking side that will translate over the next 12, 24 months, right? So we do expect that setup to grow very, very strongly.

[Umesh Matkar, analyst]

Yes. And TIG has witnessed a strong growth of 63% year-on-year. What led to a healthy growth? And also is data center included in it? And what would be its contribution in this segment?

[Ashish Rai, executive]

Yes. So look, I think we are -- so TIG, the main lines, which have been growing is transit. It's the data center and cloud side of the business and our smart city side is more or less stable, probably even slid down a little bit. So we don't really declare explicit prices. So I would not give numbers, but the segments which have grown -- so data center data center and cloud, we built up probably on the most [indiscernible] teams in the industry that is really driving growth for us. It's certainly growing higher than the Aurionpro's rate of growth, probably higher than the TIG's rate of growth, the same thing with Transit and smart city is sliding down a bit, right? So I think overall, 2 segments 2 parts of the TID business growing very, very strongly.

[Umesh Matkar, analyst]

Yes. And my last question would be smart city projects, they have witnessed a small slowdown in past few months or so. So are you expecting a pickup considering the election in next year?

[Ashish Rai, executive]

Look, to be honest, that's one of the segments which we're not really planning any significant growth in that business. It's an important business for us in terms of capability that we build that we can use elsewhere in the enterprise. It's important for us to really go into deals which are really interesting from us -- for us from both a margin standpoint as well as client relationship standpoint. So we'll continue -- we will continue to do interesting things in the business. We're not expecting a significant ramp-up in demand or our ability to service it for this year.

[Operator]

We take the next question from the line of Nirav [Timadia] who is an investor.

[Unknown Analyst]

A couple of questions. One is around the borrowings, right? So this year, we did borrow some additional funds. I see the debt going up. So what is the plan to make the company completely debt-free or do you see the borrowing going up this year? That's my first question. And second question is around the -- some of the projects where we invested heavily, like Noida Metro, Nagpur Metro, when do you think they would be able to contribute significantly.

[Ashish Rai, executive]

Okay. So look, borrowing, we don't really have a big plan to go 0 debt. We think the borrowing level in the business is pretty low, depending on which metric you like using coverage ratios are great, your debt to equity is probably at 0.1. So the long-term borrowing in the business will -- it remains stable. I think it was probably 52 last year, it's only 48 now or 47, 48. So it is not significant. There is obviously a slight uptick in the short-term borrowings, which is essentially vendor financing for projects which we are executing on, which will taper off. It's a point in time thing. It's essentially 0, 3, 4, 5 months kind of thing when we are in the middle of some specific projects, and those are short-term vendor financing borrowing. In general, the leverage level of the business is like really low. I don't think there is really much thought that we would give to when the long-term thing retires and goes to 0. It will probably happen by itself over 2, 3 years, but it's not really a big concern for us.On the Noida-Nagpur side, I think those contracts are doing fine. They are running, they're contributing to revenue. We've done upgrades, we've expanded those as well. So overall, the transit business in India has grown manyfold from the earlier Nagpur-Noida contract base. So those contracts continue to run very well. We expanded on to UP Transport, Haryana Transport, Kanpur Metro.Since the global business has expanded, and we do see us being very competitive at a global level, we want to be very selective in terms of new business that we take on in India on the transit side. So we will continue to remain one of the most competitive people in the field. We will continue to win share, but we will participate in deals where we feel it aligns with the metrics that the organization expects and we'll continue to scale the business globally in U.S., in Latin America, in Central America, where we've seen a lot of traction.

[Operator]

We'll take the next question from the line of Tejas Boricha from NVS Brokerage.

[Unknown Analyst]

Congratulations for the upcoming number. Sir, my question is regarding the growth prospect as whether how will be a company in future in the IT software and IT services have seen sale of software services have grown double than sale of equipment and product licenses. What are the plans to expand into these both segments? And our gross profit is around 29%, and PAT margin is about 16%. It is equivalent to or similar as of the last year. So may I know that what kind of future perspective --

[Ashish Rai, executive]

I'm not sure if I got the full question, but look, margin levels, we expect to keep at the level -- we are very happy with the level we are at. We -- from time to time, we may need to move the R&D expense line a little bit here and there. So it may move a point in either direction, but we feel very happy with the margin level. So that's something we would want to keep. Growth in the business, we will want to continue accelerating as we go. So, like I was saying in response to one of the earlier questions, we have built up a great set of product assets. We have -- we are either already there or we have a very clear plan to get to building product sets, which are globally competitive one of the top products in the world, right? And when you combine that with having very small market shares in very large segments, we believe we can continue to power growth in the business quite rapidly as we grow, whether that's in banking, whether it's in transit, whether that's in some of the services business. So I think so that's essentially the growth plan. And we've got a talent to sort of back it up in terms of we really know what it looks like when we say the leading products in the world, we say this is what it looks like. This is how -- if I'm not there already, this is how I'll get there, right? So that's essentially the plan. And then we go and compete. We see a lot of success going there.On the -- there was another side to your question that I'm forgetting.

[Unknown Analyst]

Yeah, as we can see that the mutual prospects of the company is amount to grow, but I can see the working capital changes that our receivables are 3x higher than the were trade papers which are quite as high as compared to last year. So how will be manageable with the working capital as we are growing in the sector?

[Ashish Rai, executive]

Yes. So look, receivables. So you're right. Last year, we were at about 94 DSO. Now the DSO, we finished at about 110. So that is clearly higher than last year. I would say part of it is clearly attributable to growth in the business. What will happening is when you are really running at breakneck speed, you are starting more projects than you can finish. We've had issues in terms of collecting payments. What we have done is, over the last quarter or 2, the capacity has really come up. where we've been, obviously, finishing off the projects. So you'll see that the effect of that. Second, we will be a lot more selective in terms of -- as we are growing bigger, we're getting a lot more selective in terms of the business that we pick up, right? So I won't expect that 110 to come down to 100 or so over the next 6 months. And then we will revisit and see where we want to get to. One thing I would want to be very sort of, if you transfer in the [indiscernible] we will, I think, given the current nature of the business stay at a 90 to 100-day level, no matter how efficiently everything is running. That is the nature of our business, and we are very comfortable with that level. We believe the kind of returns we can drive on any capital employed in the enterprise are high enough for us to stay with elongated line. But the thing is, ultimately, it's a question of return. A little bit more capital employed in the business is not going to a concern, if you can drive 25% returns on it, right? Because I can't think of many alternative users to that capital that will save 25% return, right? So if we are doing a very high-margin business, if we are winning, we are very comfortable with a 90 to 100 day level. From time to time, it will jump up depending on our capacity to execute well.

[Operator]

Ladies and gentlemen, in the interest of time, that was the last question. I now hand the conference over to Mr. Ashish Rai for closing comments.

[Ashish Rai, executive]

Over to you, sir. Okay. So thank you, everyone, for joining the call. We are very happy with how we executed last year, and we intend to stay focused on executing with a very, very high level of discipline as we go. And we'll make sure we took some feedback on some of the information areas, which are of interest and we probably don't disclose right now. We'll go back and consider that and see whether we want to start disclosing some additional things which are of use and we'll stay focused on executing. Thank you, everyone.

[Operator]

Thank you, sir. Ladies and gentlemen, on behalf of Aurionpro Solutions Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.