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Intellect Design Arena Ltd
Earnings Call Analysis
Q1-2025 Analysis
Intellect Design Arena Ltd
In the first quarter of fiscal year 2025, the company reported total revenue of INR 605 crores, marking sustained performance above INR 600 crores for five consecutive quarters. Despite the challenging operational landscape, particularly with upcoming modifications in contract execution timelines, the company remains committed to reaching INR 700 crores per quarter in the foreseeable future. The license and annual maintenance contract (AMC) revenues contributed INR 125 crores and INR 121 crores, respectively, while a gross margin of 57% indicates solid cost management efforts.
The management highlighted an optimistic outlook with 11 new deal wins and a total of 152 deals over the trailing twelve months. Notably, they experienced a robust pipeline growth, boasting a pipeline value exceeding INR 8,500 crores. Furthermore, the successful launch of 12 digital transformation projects underscores the company's capability to deliver impactful solutions to its clients. With a focus on geographical expansion across North America, India, and the Middle East, they aim to capitalize on diverse market opportunities.
Management’s strategy emphasizes the importance of investing in technology and partnerships to strengthen market positioning. They anticipate potential margin expansion of up to 30% within the next 6 to 8 quarters as investments in the eMACH.ai platform bear fruit. Although costs are projected to remain around INR 480 crores in the near term, operational efficiencies from cloud and AI initiatives could provide a lucrative return on investment in the long run.
Despite slight revenue deceleration to 12% year-over-year when excluding GeM income, the management maintains a growth target of 15% for the current fiscal year. They are optimistic about recouping some of the missed high-value deals that were pushed into the next financial year due to client budget constraints. Additionally, management is confident that their strong pipeline will supplement growth efforts and help meet their targets.
The executives emphasized a strategic pivot towards developing AI-driven solutions and partnerships with leading consulting firms like Accenture and Deloitte. This focus aims to harness the growing demand for AI technologies within financial services. Currently, over 35 discussions involving AI initiatives are underway, showing that the company is actively positioned to leverage artificial intelligence to meet client needs effectively.
Management acknowledged the impact of external economic pressures, such as delayed budgets affecting contract execution timelines. Moreover, the competitive landscape in the U.S. warrants a measured approach to capital deployment and market penetration strategies. As the company invests in establishing a presence in North America, they understand the importance of evaluating how this will affect their short-term margin trajectories.
As the company navigates a robust growth trajectory, it remains firmly focused on strategic investments in technology and partnerships, while maintaining an eye on cost management. They are prepared to meet their growth targets while also establishing a foundation for sustainable long-term profitability, reflecting a balanced approach to investor expectations and operational realities.
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[Audio Gap] to discuss the Intellect Design Arena Limited Financial Results for the First Quarter of the Fiscal Year '24, '25, ending 30th June 2023. The investor presentation and press release has been sent to you and is also available on our website. Our leadership team is present on this call to discuss the results. We have with us today, Mr. Arun Jain, Chairman and Managing Director; Mr. Manish Maakan, CEO of iGTB; Mr. Rajesh Saxena, CEO of iGCB; Mr. Vishwanath Prabhu, CEO of IntellectAI; Ms. Vasudha Subramaniam, CFO. Besides some other senior members of the Intellect management team are present on the call.
Now I hand over Vasudha to take you through the financials and later, Mr. Arun Jain will give his comments on the same. This will be followed by Q&A session, where your questions will be replied by the senior management -- senior members of our management team. [Operator Instructions]
On safe harbor. I would like to remind you that anything which we say refers our outlook for the future is a forward-looking statement. This must be read in conjunction with the risks that the company faces. With this, I request Vasudha to give her briefing. Over to you, Vasudha.
Thank you, Praveen. Good evening, everyone. I'm happy to review the financial highlights of Q1 2025 with you. Our total revenue for the quarter was INR 605 crores, with license revenue recorded at INR 125 crores and AMC at INR 121 crores. We had a gross margin of 57 percentage. Our EBITDA was INR 121 crores, which is 20 percentage of our revenue. Our PAT was INR 74 crores and PBT was INR 98 crores.
During the quarter, we have collected INR 556 crores and our cash position as at the end of June ended at INR 813 crores. And during the quarter, we had won 11 deals and have Go-Live on 12 digital transformation project. Our DSO as of 30th June is 126 days, and excluding GeM, it is actually 101 days.
Moving on to the LTM metric on a comparative basis. Our total revenue over the last 12 months were INR 2,318 crores with license revenue at INR 458 crores and AMC at INR 463 crores. Our EBITDA crossed INR 500 crores, which is 22 percentage of revenue. Our collections during the period crossed INR 2,300 crores, and our PBT for the period was INR 418 crores. So during this period, we had 152 deals and we have Go-Live on 56 specific digital transformation projects.
You mentioned about that.
DSO, I have.
About GeM. We have excluded GeM from this.
Yes. So when I say comparable basis, like we have excluded GeM in this. Now talking about the composition of the currencies and the revenue, USD is at 37 percentage followed by INR which is represented by 26%; CAD 8 percentage; GBP 14 percentage; euro 6 percentage; and other constitute 9 percentage.
Now to give more color about the new deal wins for the quarter, we had 3 new deal wins in North America, one with Vancity, Canada's largest community credit unions; the second is on the insurance company; and the third is, again, on the wholesale insurance brokerage company. So we will hear more about it from the CEO.
And there were 3 new deal wins in India, Bangladesh. One on the Indian public sector insurance company. Second is the major one, which is a leading financial institution at a global investment management for jointly created a strategic alliance for the Wealth. And the third is the stock exchange in Bangladesh. In ANZ, we had a couple of new deals and in Middle East, in Jordan, we had one deal.
Talking about the [ hattrick ], we were ranked #1, by IBS and retail core banking, transaction banking and in retail lending. And this is, again, another [indiscernible] and the analysts have reviewed us and for debtors and talent and others. Talking about the pipeline, we have crossed INR 8,500 crores during the quarter, which is, in fact, more than [ INR 100 million ] for the quarter, I would say. And we have -- on the Destiny Deals, we have about 8 to 6 Destiny Deals with average size of about INR 52 crores. And the Destiny Deals are increasing from 73 in Q1 to 84 last quarter, 86 in this quarter.
Out of the 86 new deals, 23 deals are having a value of more than INR 500 crores and 28 are in the range of INR 30 crores to INR 50 crores and 35 are in the range of INR 20 crores to INR 30 crores. Let me hand it over to Arun to talk about the Purple Fabric.
Welcome to all of you. Fro I'll take slightly later the Purple Fabric. Let me just comment on the business results first. I think we will finish our quarter on INR 600 crores-plus revenue. These are fifth quarter in INR 600 crores when we cross INR 600 crores as a revenue. And I think our journey all the time in last few years are INR 100 crores each time, INR 500 crores, INR 600 crores.
Now on the journey, we are waiting for the INR 700 crores. So this period of INR 600 crores has resulted inclusive of GeM going away in Q3, but still we are able to sustain the water above the INR 600 crore number. Our focus is to get to INR 700 crores. So we are preparing the organization for INR 700 crores per quarter number. And that's what the entire eMACH.ai and Purple Fabric, which I was showing the slide will drive towards that.
In a journey of INR 600 crores to INR 700 crores, I would say, the wintering period for us has gone slightly longer. This quarter, we could have moved away from wintering season because one deal of INR 30 crores plus has been postponed in the last week of June. This deal was almost on -- it is signed by the MSA, but the deal has not been executed just because the bank financial budget limits are over, and they will be signing this deal in next financial year starting January, which is our Q4 quarter.
With that, we would have managed all the expectation of the investor from a quarter-to-quarter perspective. But overall, our traction is extremely, extremely high right now. As of now, our costs are also contained around INR 480 crores range, and that is the range which we'll be maintaining in next few quarters.
So the new revenue that is getting generated will translate into the -- 80% of it will translate into the margin of the organization. So that's a important point, which you mentioned all the time that how is the margin improvement will be happening on a specialized basis this quarter, maybe it is not for the right number because of the single deal of INR 30 crores, which would have come to the margin itself. If you add back the margin could have been better.
During this quarter, we won very significant deals. So sometimes you may not know the intensity of these deal wins when we win in Canada or when we in U.S. or when we win in Australia. And I would like to invite Rajesh to say, when we say Vancity deal, we published a press release. But what does it mean coming to entry into the Canadian market, a credit union market, which is run by over 40-year-old system, 30-year-old system to enter a new player in a market. So what went behind winning this deal? Because what is the futuristic view of winning such deals in kind of entity itself, Rajesh?
Yes. I hope you can hear me. So let me just talk a little bit about Vancity. Vancity is the largest community credit union based out of Vancouver, which is the Western zone of Canada, and it is the largest credit union in Canada. And this is a deal that we have been following through for the last 18 months. And this deal is very significant because, first of all, the deal is about our digital engagement platform for retail SME and subsequently also for the commercial bank.
So it's a complete digital experience transformation experience deal. And this is a deal which will be where we will be doing the full managed services on SEO Cloud. So that's the contours of the deal. But why is this deal significant is because in credit union space in Canada, there are a couple of vendors who are the provider for this digital engagement platform or lending platform at core banking platform and winning this deal from one of those existing providers who are actually sometime back tied up with back pace and that implementation failed for them is a very significant milestone for us.
As Vancity is a leader in this space. And therefore, there is a lot of buzz in the credit union space that we have a couple of leads, which have come up after an onset of the Vancity. And we have now started going into the implied part of this. So this is -- this along with the footprint that we have from a GTV perspective in Canada makes us a full scale starting from credit union space, all the way to Tier 1 bank, a full space where we will have our product in the market. So that's about Vancity.
But let me talk specifically more about North America. I think a couple of quarters back, we had talked about at least from retail -- from a GCB perspective, we had talked about Europe as our strategic inroad. And I think over the last couple of quarters, we have demonstrated that we have been able to build a good momentum in our Europe market. And when we look at Europe, we are seeing a very good pipeline being developed in Europe, and you will see the results over the next couple of coming quarters.
After Europe, we decided that we will get into Canada from a GCB perspective, leveraging our GTB footprint, and that's what we've been doing for the last couple of quarters. I have spent -- I am actually in North America for the last 5 weeks, spending time predominately in U.S. We have just announced, some of you may have read, it. We have just announced that we have hired [ Janeen ], who is going to be leading our GCB business in U.S. market based out of North America and she and I spent a lot of time meeting prospects, consultants, partners, et cetera, to understand the contours of this market and deciding what will be our strategy to enter into U.S. market.
U.S. market, as you know, is a highly regulated market, tough market, but also from a TAB and a FAB perspective, very huge market. So we are very positive. We are looking forward to in the next couple of quarters into our U.S. market entry along with [ Janeen ], we are putting a team of people with [ Janeen ] some of them we are hiring from U.S. to get the U.S. experience. A few, we will be transferring from India. So we're putting a team of people to go after U.S. market, and we should see some momentum being buildup in U.S. market.
[ Janeen ] comes from a very strong domain expertise. She has worked with side tender at PLC bank. So we are looking forward to working with as we take our journey back. So that was a high-level commentary about how GCB is moved both from Europe as a strategy, went to Canada and now entering U.S. and you will hear in the next couple of quarters and years to come about our progress in U.S. market. Arun, back to you.
Thank you, Rajesh. Actually, last -- almost 90 days since we met on 9th of May, which we announced the result -- it's not even 90 days. I think all of us on the road. So most of the management team is on the road on various countries, obviously, which result in to travel costs to go up. But otherwise, we are -- I was on the road. I visited 8 countries during this period. Met close to 70 people from the customer side, from partner side, conducting multiple meetings in each countries, the event, which will happen in iGTB Oxford in London and then followed by Money 2020.
I think we've never been so busy in the last 8 years and generated close to 120 leads, almost 2 leads per day is coming up our way in post eMACH.ai in April. So when we had -- we did 300 people workshop in Chennai.
After that, with the picture which was shown in the beginning, the entire magic of eMACH.ai is surfacing. At this point in time, I just want to invite Manish to see how it's panning out for him in winning the deals in Australia, and these are all the difficult markets. Rajesh talked about U.S. market, Manish, over to you.
Thanks, Vasudha. Arun, thanks for giving the brief behind before this. Like I've been sharing in the previous quarter also our best-selling product on corporate treasury continues to help us win in the marketplace. There -- so we closed 2 more deals in Australia in this quarter, which is primarily to help banks to help the corporates should raise better deposits, get them better investment products and get them better managing their liquidity better.
So two big deals wins in Australia after a previous quarter, we had. Two deals, one in Australia and one in U.S. around liquidity. So liquidity our flagship product continues to help us create that deepening the gap between us and anyone else because everyone else tries to extend that out from a core banking that I can also imitate and do this. We build the real competency around this. And today, we've got about 54 banks worldwide, which leverage this capability to extend this -- bringing this efficiency to the balance sheet for the corporates as well as for the banks.
So that's been very successful. We also closed 2 deals on DTB in Middle East, both the product and the market are flagship for us. So we continue to win on DTB in Middle East. Like Arun said, the amount of time all of us were on the road. We've got across North America, a number of good opportunities which are maturing and open. Next 2 quarters, we will share a number of them. Unfortunately, one deal where we got signatures on the MSA, it's just the last signature where they had to postpone their budget spend from starting in September, the program which they were going to sign in due to start in September to now start in January, and they will sign in January. Everything was done on that. So that's a significant one like Arun said, INR 30 crores, which got deferred.
The deal is won. So we -- should show us in our Q4 from that perspective. In Europe, also, we've got good momentum in U.K. and France going right now. Australia opening up. And there's been a big focus on developing Asia equally. So what Arun said, two deals a quarter. Even Asia, which has not been very strong for us, was very good looking and has good potential for us in the coming couple of quarters where we will show good results from there. So across the board in all markets right now, activity is at an all-time high, the opportunities, what we call in a [indiscernible] number of these things are there. How across the next 2 quarters we bring that in, I think that's where the team is focused in.
Yes. So coming to the next area IntellectAI. I think this Purple Fabric, you must be reading on the LinkedIn. I'm posting some message every day. So I've reached up to 4 messages, PF Imagine, Purple Fabric Imagine, Purple Fabric. Purple Fabric DIMS, Purple Fabric Expert Agents, Purple Fabric Triad and the two more are left.
So in this slide, which are saying is that AI, which is a hot product and so much generate AI is there. Our teams, our research team had looked at this problem very differently. They looked at each persona, what is required for product manager to look at in AI?
What CIO looking for AI? What operations managers are looking for AI? And what compliance managers are looking for AI? So based on all the 4 personas, we designed that one of the most comprehensive AI product in the marketplace where we signed up with all the [indiscernible] consulting firms over there from Accenture to EY, KPMG, Deloitte, PwC.
The beauty of this product is, it is a comprehensive enterprise connected intelligence platform, and it is using a different set of technologies. And it is giving a choice to the customer to look at it, what kind of an LLM model one wants to use. Now Manish will tell you how many workshops and boot camps we have done in the last 90 days from May to now almost every day, there are 2 or 3 boot camps or webinars happening, which is driving a huge amount of regeneration. So over to Manish on carrying forward this conversation.
Thanks, Arun. I think Arun explained the overall Purple Fabric. IntellectAI has been actually working a lot on AI initiatives for a long time right now. I think what we've actually done is we are now able to implement AI using all the large language models, the LLMs. And the LLMs are evolving just about every couple of weeks, we see upgrades taking place by all the LLMs providers.
I think what our platform provides for a financial institution is the ability to govern AI initiatives. There's billions of money -- billions of dollars worth of money that is being put in AI by most of the financial institutions. Actually, all companies across the board are spending an enormous amount of money on AI. I think while it's on a hype cycle, I think where realistically, the time has come for a significant change to transforming operations and financial institutions using AI. I think the traction is significant. And we did about over a dozen different type of boot camps.
Some of them are multiple discussions with certain clients. And I think we're building a very deep pipeline of actually helping the clients implement AI initiatives with governance, with control on data, with control on security. And at the same time, the different people and different personas in an organization can actually make a difference to how they can capture business outcomes from different AI use cases that we are putting together. We have over 55 documented AI use cases, another 80-odd that we are looking at right now.
Now if I look at the quarter, so our AI platform, which is at the heart of our insurance business. So Purple Fabric is what we are sort of position the name of this platform. Purple Fabric, along with eMACH.ai for insurance. Last quarter, we did 4 deals. This quarter -- in this first quarter, we have done 2 deals. Two more deals are signed, but they just then make the cutoff of 31st of March.
I must remind you that all of these deals are using a combination of eMACH and AI. And also, all of them are subscription deals. So from a financial perspective, you will have to see that these are longer-term subscription type of calculations on the financials. I'm also happy to say that our wealth and capital markets business, I think Vasudha touched on 2 deals, but I just talk a little bit more about it. This is an existing client that's actually doing the first implementation in bangladesh of a commodity derivative exchange, for which we are providing our, -- we have a brokerage platform called Capital Alpha. We are actually implementing that for a very large commodity exchange setup in Bangladesh.
The second is very exciting. It's the largest company in India, a joint venture with one of the largest asset managers around the world. The asset manager manages over [ $10 trillion ] in assets under management. I think we are seeing phenomenal increase in wealth generation across the world, and more and more people are actually talking to us about how we can implement our eMACH wealth solution.
Along with what we used to call embedded AI, but it uses a combination of Purple Fabric and the eMACH suite that we have to implement these wealth and capital market mandates that we won. We won 3 out of 1. I think the contracts in progress. There's been confirmation that we are [indiscernible]. One of them is the largest investment manager in Saudi. The other one is the largest private bank -- one of the largest private banks in India, not the largest, but one of the largest.
And Also, we won the mandate of one of the largest global multinationals that's wanting to scale up their wealth business. So I think the wealth and capital markets has a fantastic pipeline to look at. The eMACH resonate, the AI embedded resonate. And I think over a period of time, that combination of eMACH AI, which is eMACH.ai positioning us -- position for a future.
Thank you Manish. So I talked about it in the last 2 years back, when are you looking partners and distribution strategy. I think this year, we started the journey with making our applications partner ready, and partner eMACH.ai plays a critical role in being partner-ready system. So what -- from an investor perspective, what does the eMACH.ai means?
Why we are so excited internally and why we want to -- so how to simplify the language of eMACH.ai is an element for typical investor. For technology, it's huge excitement because of the open finance platform. So today the world open finance platform, which is the first principle thinking. We call it first principle thinking means we asked a question why the bank exists, which is because event happened in the life of any of the retail customers. So if we design a system, which is based on the first principle thinking from events in the life of a retail customer or a wealth customer or a SME customer or a corporate customer, and then look at it the services bank provides, which gets connected to other application, which is through APIs on a cloud and make it personalized, headless and provide intelligence to it.
It removes a lot of complexity, which is bank has built over a period of time, they can wire the entire application based on customer desirability and that's why Rajesh, when we selected in Canada because they found the digital experience is -- if it is based on first principle thinking, we are mapping customer desirability to the business outcome, so which we call it, organizing the thinking space, expanding the performance space and impacting the business outcome.
So this is where we are able to put 329 decompose all banking business in just a one single book where all the elements of the banking has been put on to the single banking chart. Now this -- once we put this stat in front of the customer, he has a choice to put that entire chart, where what his needs. So we are not selling the full products, we are selling what he needs. And if we need portfolio management in only in wealth management system, he can say portfolio management is required. I can do it. If he requires only a relationship manager office because he has an existing [ avaloq ] install and he wants RM office, we can give him RM office. Or this can be extended to the existing system and coexistence is possible in existing application.
That's what we are able to disrupt. And that makes my GSI, the global system integrator, very interested in our technology. And we have conducted almost one session every week for each of our global SI on eMACH.ai because then they can use my specific micro services, set of micro services to include in their value proposition, which they are offering to their current customers by doing and accelerate their journey. So when the budgets are less, they can expand that space substantially because there are 329 micro services, there is a 500-plus events and 1,700 APIs.
Along with that, we built up iTurmeric, which I explained earlier. It is a completely cordless platform for composability and solving four key issues of transformation. For any transformation, you need integration, you need UX, you need workflow, you need data. Now all of it is wired and come from a single platform, reducing the cycle time for delivery to half as well as number of defects to less than 10% to just almost 80% effects are not there because of the codeless platform and planning with Purple Fabric to build intelligence agents along with the operational process. It's a truly partner ready technology.
We took some longer time to get to partner ready into the 2022, you were asking a question, why don't you go to partner ready? We wanted to ensure that we have the right toolkit, right methods to get into a partnership model. The new leads, which have come, normally, we used to add some 50 lease per quarter. This time, we add 120 leads in a single quarter because of -- most of them additional leads come from our partnership network. We have close to INR 600 crores funnel with the partners, which we are working on. So the -- and some of the detailed conversations are happening where partners have getting certified themselves on Turmeric or Purple Fabric and going together in a few deals over this period of time.
We are seeing this is a very disruptive technology. An opportunity going forward is significantly large. And because of that, though the first quarter result is not in line with the expectation of industry we got INR 30 crores slip on the contract, but 15% growth, what we talked about it last quarter, we are fully intact on that number. So that's what the current state of business is.
So at this point of time, I just want to leave for question-answer. I have seen more than 200 people joining this investor conference. So we can have a good conversation based on understanding of what we are doing in eMACH.ai in this technology space.
Thanks, Arun. [Operator Instructions] Now first, we have Mr. [ Sameet Dosani ]
Can you hear me?
Yes, Sameet. Please go ahead.
Yes. So a couple of questions. One is, Rajesh, on the U.S. business, you're trying to foray in the U.S. and the geography. If you can just highlight like which are the areas that we are targeting? And how is the competitive intensity like -- because it's very difficult to sell software business -- banking software in the U.S., we've seen in other players. So how -- what is the competitive intensity? And when do you think there will be initial signs of some progress here? And whether it will require any investment on your part?
The second question is for Vasudha. When you look at your funnel and deal wins that have been phenomenal. But when I, look at your last 12 months revenue growth, obviously, excluding GeM also has seen some deceleration, right? You have come down to 12%. So do you think this can accelerate given your deal wins and whether you hold your investment guidance on revenue?
And the third is on Gen AI very simply. If you can just indicate the number of projects, like in some way, can you give us like some metric to quantitatively track that this is the number of projects that you have worked on versus last quarter, this was the number of projects we have done so we can price that. So these are three drag questions.
Sure. I can take the first question. So I think from a U.S. perspective, as you rightly said, first of all, it's a very good question. I think as you rightly said, U.S. is a competitive market. It is also a highly regulated market where you could have federal requirement, state-level requirements, et cetera. So you need to make sure that your platforms are certified and attested.
However, having said that, the market opportunity is very large. And what our market study has indicated to us is that there is a lot of legacy and what we bring to the table, eMACH.ai can really disrupt the U.S. market if we get our act together. So the opportunity is huge. And -- so that's the landscape. Starting from a strategy perspective, I would say that's a competitive information. So I wouldn't like to discuss it on this call. But enough to say that we are in the process of identifying what would be the segment and what are the key products that we will take it to that segment and discussing the internally debating the GTM strategy for that.
So over the next couple of quarters, we should have that in place, and we will go into the market. It's also important for us to put a team of people. So there is some amount of investments that we are making from a U.S. team perspective. I also said we will be transferring some of our people from India. So there is some amount of investment, which we will doing both in terms of team as well as in terms of baking up platform ready for the U.S. market.
And just a little bit more color around U.S. market. What we are seeing is that some of the Indian, our competitors or peers are able to enter this market. So with that, add our architecture and the eMACH.ai that we bring to the table. We believe that if we get our act together, we could really disrupt the market.
Let me take up the second part of the question, and Arun might add on. Yes, true, it is like 12 percentage in the first quarter. And as we said, this is the first quarter and we always want us to be measured on a yearly basis, not on a quarterly basis. And we still stick on to the guidance of 15 percentage, excluding GeM, and that we are highly hopeful that it will happen.
And it so happened that like Manish mentioned, there were a couple of deals for which the contract was signed off, of course, the cutoff date for which we could not accrue the revenue in Q1. And it so happened and there are some other deals with the high value that we could not accrue this quarter and which got deferred. So we are still hopeful of the strong pipeline that we emphasize and that we'll be able to meet up to the guidance.
So I'm just tracking the last 12 months revenue, not Q-on-Q. So I think that is the [ etric ]. I'm sure that it was one has to track.
Okay. And Gen AI level, any...
How many projects are you working on?
So just to get this right, right? So we track our pipeline in a platform across all our product lines. Our Purple Fabric pipeline today has almost got -- when I last look at it has got about 35 discussions in progress. Remember, AI is at a very early stage. So we have a very long pipeline building for -- we call it Purple Fabric, as you've just heard from Arun. And I think that pipeline will be we looked at -- we will obviously have a pipeline like any other pipeline discussion we would have. We have a Gen AI, it's not just a Gen AI, it's more than just Gen AI.
So 35 projects currently, how much was it like 6 months ago, any points?
35 discussions are in progress with various clients and many of the...
Six months back how much was the number is something that we can just can mention that?
Platform has only just been done. So I would say this pipeline has been built over the last 4 to 5 months where we actually have used Purple Fabric to be able to get people to use Gene AI. We've been working on the LLMs for many years. We're investing in it, but LLMs has made a difference in which AI is managed.
Got it. Got it. And sorry, last, if I'm allowed a follow-up, so this investment in U.S. whether that impactable margin improvement trajectory or that it was already built in, if you can comment on that Vasudha.
That's what we are currently discussing. Let me be in a Board meeting also what kind of the new numbers to be put, if additional investment is required or not. We are seeing based on the more traction and winning we can able to articulate how many additional sales peoples will be required. So it's not about technology investment, the more investment will be required in go-to-market investments.
Okay. The other thing it will be higher gross margins like will it initially have some lower margins that's doing business you think?
Obviously, it'll be lower margin in the beginning, Purple Fabric requires investments. So definitely, we can't say it will -- and the revenue will not be front-loaded. The revenues are backloaded in Purple Fabric where subscription-based revenues are there. So that is one point which is to be clarified.
Next we have Mr. Rahul Jain from Dolat Capital.
So basically, I have a couple of questions. One question is that what time observing from last couple of quarters is that the growth in our implementation revenue has not been pretty much catching up the growth that we are observing on the license revenue?
So is there any specific reason why this trajectory has gone down to 6%, 7%? Or does it include any L1, L2 services related to GeM for which probably it has a circulation impact there?
Yes. So I think that's not a -- with the codeless platform, our implementation revenue will expect it to come down. So we don't want to generate -- because that's not the most profitable business for us. Implementation business, we are doing it. We want to get it done with the partners or we want -- so that's an intentional approach, which is being looked at it from a perspective of creating more efficiency. And this growth of implementation may not be that high, and we would like to push license and SaaS revenue more.
And so when you say that also because the partners are so, is there a number that we could say that the number of data that is going to third-party versus implementation versus, let's say, years back or 2 years back, any data that we would share.
It's too early right now. As of now, we are not saying that we have won too many deals with the partner. We have won 2, 3 deals we are working with our partners. So that data is not sufficient to be shared when it is ready, we'll share with you.
And during the quarter, what we have also observed as the software expenses have I mean the main cost of services have basically increased during the quarter. Is it more because of the lot many things that you spoke about a lot of action that you did, but eventually did not culminated into revenue or these are general investment that has went into the quarter?
And SG cost has gone up. So we acknowledge that SG cost has gone up for 2 reasons. One is a generative AI, some of the investments have gone and the consumption of the cloud has been baked into this. Some of the bundled costs with a cloud costs also got embedded into it. These are 2 areas which is there. And the third -- INR 30 crores investment, the deal which was there almost to close, which was postponed by the financial constraint of our clients, but the initial work has been set up for that. There are three reasons for RSG cost to go up.
Right. And any input on the ideal tax rate that you are expecting for this year and next year, that would be helpful?
We can take it at 24 percentage, Rahul.
For FY '25?
Yes.
[Operator Instructions] Next, we have Mr. Mehul Panjwani from [indiscernible]
Am I audible, sir?
Yes.
This is actually not a question, but a request to the entire management team because we are doing so much high-end work and we have very promising products, and we are focused on disrupting quite a lot of traditional banking technology.
So my request is that as shareholders, we should know what is it that -- how are we -- what is it there in a product that is going to disrupt the market? Because just in your introduction, you mentioned that we are here to disrupt the American banking software market. So my request is that if we can have a couple of hours of session,where we only talk about technology and not financials so that we know where our company is going. Because right now, it is very because for layman and it is very difficult to understand that -- because anybody can claim that, okay, I'm going to build disruptive product.
But whether we are really disrupting the -- I mean -- see, because I've been following this company for a long time, and I have been trying to understand a lot, and I also have a technology background. I was working in the IT industry but still, I'm not able to figure out anything. I just go by whatever I Google and whatever I can make sense out of. But if you can -- if you have two hours of sessions for our fellow shareholders, whoever is interested and you can demonstrate that, okay, this is what traditionally banks do, and this is what our software will do for them, then we also can be our champions for network et cetera, but more importantly, to understand our products.
Okay. Thank you for this advice. We should do it, Malik. We should organization a 2-hour session for the people. There are two sessions. I -- would like to have 2 sessions, one on eMACH session and another is on Purple Fabric session, 2-hour on Purple Fabric, 2-hour on this in next one month.
If you want to really experience the power of Purple Fabric, in 2 days' time, we can -- we have conducted a session on boot camps, where you can put the application wiring for a use case by a salesperson, it's not even technology person. If salesperson would be able to build up a Purple Fabric Expert Agent in 2 days of boot camp, so that's a simplification of the disruption.
So if for certain people, we are organizing a boot camp in Purple Fabric on 29th and 30th August. But for the individuals, that is for the company, but we'll organize a boot camp. So sometimes we can see if you register and want to willing to look at it, time to be spent up 2 days of understanding what AI is going to disrupt the market or what does it mean.
Definitely, sir, I would be really looking forward and eager to attend this kind of a boot camp because everybody is talking about AI, but I don't know, a handful of companies will be really doing actual AI work.
That's right. Because there's so much noise there, how to find a voice from the noise is a challenge for most of the investor.
Absolutely, absolutely. Yes. Okay. So I look forward to 2-hour sessions first and then obviously also boot camp as well. So I will be -- I will request Mr. Malik as well to send a mail out after the meeting.
Next, we have Mr. Vivekkumar from BestPals.
Am I audible?
Yes Vivek, please go on.
So take a 3, 4 years, I know I'm asking a quantitative question, but okay, leave this year, if I take a 3, 4 years, we will go back to our 20% because you've been investing in a lot of eMACH.ai before, if you come from your Investor Day 1, 2, which is exactly where you explained how the company is going to pan out and what you're going to do with your product. And you are across products, across continents, across countries, and across like you are into insurance, like you have AI and different business verticals. So when will -- can we count on 20% growth to be taken on a 3-, 4-year period? But therefore the quantitive...
And definitely, I think 15% we are looking this year, and 20% is designed for, up and down will happen. And they could be 25%. They could be 15%, there could be 20%. So 20% is that [ automation ] is designed for and designed for long term 20%, not onetime 20%. That's why these investments are required in a technology company like us, a multiproduct company, multi-geography company because of ensuring that can we sustain this growth over the next 5 years or not. Otherwise, we'll end up in acquiring the companies and aggregating the companies. That's not what we want to. It's a pure organic company.
Second one is on your partnerships and if you can go deeper, like you have explained clearly on 3 verticals by the 3 vertical heads. So similarly, on partnership already shaping up because we have started on how is the distribution.
You remember in the last 2 con calls you were saying was our next 1, 2 year is about distribution, distribution, distribution. So if you can tell us more about how we are shaping up and how confident and...
The confidence is now we have -- distribution partners start chasing us. Earlier, we are chasing them. So that reverse flow has happened, it started to happen. If we need to demonstrate to them that there is a money for them. If we make $1 -- if they can make $2 from us that they are in the game. Our technologies are not able to help them making $2, so we need to demonstrate to them that in next few years, they can build up their own practices of $10 million, $20 million, $30 million, $40 million practices around eMACH.ai.
And that's a process of building confidence we are going through. And that's the way Rajesh is traveling, Manish is traveling, I'm traveling and meeting each partner, there senior executive, there CEOs, there business head of the country to explain what eMACH.ai is and how it is disruptive. The question Mehul asked same question, we need to explain face-to-face. It cannot be explained on Zoom call.
So that's what we are in the process of doing it. And that process will continue for another 2 more quarters, and then we get into some few deals to execute. One deal we executed with one of the large partner. It is going live in Philippines, so which is a very good success story. Obviously, one success story of winning the deal and making the client successful, it speaks a lot of volume and partnership game.
But in first 2 quarter of the year, we'll be having much more better...
Then the acceleration will happen only after 3, 4 quarter where we'll see the acceleration.
[Operator Instructions] Next, we have [ Mr. J prakash pareek ]. It looks like J prakash pareek is on mute here.
Mehul has asked to ask a question again. Yes Mehul please ask your question if you want to ask some more question I believe.
Arun sir, one question to -- from the follow-up on earlier question you were answering. So who are the partners -- how many partners do we have? And can you just share some details about who are the partners?
We have all the 5 partners, Accenture, PwC, EY, KPMG, Deloitte in consulting partners, in global system integration. We are working with SCL [ Proforged ], Tech Mahindra, EverPro, LMP IT, Hexaware, Persistent.
Okay. So one follow-up question on this. Sir, which -- the deals which we have won are through which partner, so far because we have won many few deals, right, that's what I understand.
We just want to keep it confidential. That may disrupt the confidentiality question with the partner.
Okay. And any particular reason why we do not have TCS as end processer partner? Is it because they have their own banking products?
That's right. That's right.
Okay. Praveen, almost on time. You are there? Praveen, what happened?
He seems to have logged off.
Please go ahead asking the question. Unmute yourself [ Mr. Rapin Ibrahim ]
I would ask this question that the revenue of 15%, which is mentioned is based on the reported numbers of last year or after adjusting the government contract?
After adjusting the government contract.
Arun, there's no new mister to ask any questions. Mr. Vivekkumar wants to ask one more, can we?
Yes, sure. Just one more. We have another 4 minutes to go.
Yes. Okay. Vivek, you can ask the question again.
Yes. Sir, just continuing on the partnerships. So if we think that they pay off on what percentage of our deals will be through partnership in 2 to 3 years, like our 4 years, whatever, I don't know because like then we feel that this is done and we are -- we have succeeded in our distribution and what percentage of deals would...
Close to 20% dealership go to the partners.
So we have only 2 minutes. So I have one more question. Can I ask, sir?
Yes, two minutes, but one more question is there.
Sure, sure. Maybe we can continue.
So a few quarters back, you said there are 3 white movements. This bar and GCB digital -- the core banking and insurance and use -- people spoke about the last 2, but the initial basking any update from Mahesh G?
We did 1 deal in U.S. last quarter with a fairly large top 20 U.S. bank. So that it worked well.
So you have [ 20 ] in the U.S. market.
It's focus on [indiscernible] U.S. market, mainly Manish bask, we have launched initially in U.S. market because that's more technology in every market.
Thanks, Vivek. Arun we have a last question from Mr. Rohit Balakrishnan from ithought PMS.
So very encouraging to hear the commentary that you are -- that what you're seeing in terms of your needs and the kind of traction that you're getting from -- I mean, not immediately, not in this year or not in this quarter or next 2, 3 quarters. But let's say 2, 3 years out, all what you've been trying to do, I think as you're trying to invest ahead of the curve. But given the business model, as you have also mentioned in the past, that incremental margins are going to be very high at some point in time. .
So I just wanted to understand I mean, how far are we from that inflection point where 20%, 22% margins where we can get beyond that and get to maybe closer to 30% or even 30% and beyond because many of the companies that are there in this space, even in India listed, they have those kind of margins. And you've also talked about that these kind of margins are not like not unachievable. So just wanted to hear your perspective, how far are we from that -- those kind of margins?
We cannot specify the because it's a continuous investment in this area. But the question is margin as of now, our market share is more important than margin share right now. But the business model which you are seeing and looking at competitors, the potential of the margin as soon as we cut down the investment can be 40%. So that's not a big issue to bring the margin is 40%. But the question is whether we want to cut down those investments or we want to take a global leadership and keep on investing. So that's a only point of concern.
If the partnership network, what we are trying to build, it starts paying off. This time period can be shorter. If these 12 partners, which we identified, if they start producing results quarter-on-quarter, it can come to 30% plus, we can get it much quicker in next 6 to 8 quarters, we can get into that kind of a number. But it's -- as time pans out, I think we expect it should hit 30% in 6 to 8 quarters as a management team, but market sensibilities, we need to see how the time pans out.
We don't have any further questions, the time is also over. So thank you very much, everybody, for participating in the call. In case you have any follow-up questions, please do write to us. Thank you very much, and thanks the management team also. Thank you very much. You can log off now.