Intellect Design Arena Ltd

NSE:INTELLECT

Earnings Call Analysis

Intellect's Revenue Grows with Strong CAGR and New Tech

Intellect Design Arena reported a 17% revenue growth this quarter over the previous year to INR 621 crores, with EBITDA up by 45%. Its half-yearly performance also saw a healthy uptick, with revenues and PAT growing by 18% and 43% respectively. This exceeded their initial growth projection of 15%, sitting closer to 18%. Over the past three years, the company has maintained a CAGR of 20%. A substantial sales funnel of over INR 7,500 crores indicates promising opportunities ahead. The company highlighted its global clout with products ranked in the leadership quadrant by top analysts and a portfolio featuring the world's top banks. Intellect is banking on its eMACH.ai platform, alongside partnerships with leading tech giants, to deliver cheaper and high-tech solutions that will drive future growth despite geopolitical uncertainties.

Overview of Intellect Design Arena's Performance

Intellect Design Arena Limited recently ended its quarterly financial discussion with a confident reflection on its performance and future. The company, which operates at the forefront of the Indian fintech sector, stands strong in the global competitive technology space, illustrating a consistent upward trajectory. The recent quarter saw revenue increase by 17% year-over-year, reaching INR 621 crores, while EBITDA surged by 45% for the same period. Halftime figures were also robust, with revenues growing by 18% and profit after tax (PAT) by a significant 43% compared with the previous year. These figures are indicative of Intellect's capability to not only predict but also exceed growth expectations, as they have maintained revenue of over INR 600 crores for three consecutive quarters, surpassing their projected 15% growth and nearing 18%.

Strategic Positioning and ROI

Intellect has sought to ramp up its marketing endeavors by doubling its efforts over the past six months, culminating in more than 700 customer and prospect meetings and participating in 20 events to foster brand awareness and technology outreach. The company's sales process, detailed in stages from P0 to P5, has resulted in an impressive funnel of over INR 7,500 crores in the opportunity stages of P3 to P5. Intellect has chosen not to disclose financial numbers at the lead stages of P0 to P2 to ensure precision in their reporting. Arun Jain, the Chairman and Managing Director, shed light on the company's 20% compound annual growth rate (CAGR) over the past three years—a testament to their business design and strategy. He specified the company's design growth principle, which encapsulates a customer-centric approach, product excellence meeting the demands of the top banks, and recognition by global technology analysts which has allowed premium pricing and a strong foothold in Europe and the Americas.

Financial Health and Growth Prospects

Diving into the specifics, Intellect's growth strategies have yielded impressive results, with their GTB business growing to INR 950 crores, GCB to INR 650 crores, and IntellectAI approaching INR 500 crores over the last 12 months. Looking ahead, Jain acknowledges the precarious global environment marked by geopolitical tensions but remains optimistic about the future. He encapsulates this sentiment with a forward-looking perspective for the next half-year and the coming three years, underlining the company's resolve to navigate and flourish amidst potential global disturbances.

Earnings Call Transcript 2024-Q2

[Praveen Malik, executive]

Greetings and welcome, everyone. Thank you for joining us today to discuss the Intellect Design Arena Limited financial results for the second quarter of the fiscal year 2023, '24, ending 30th September 2023. The investor presentation and press release has been sent to you and is also available on our website. Our leadership team is present on this call to discuss the results.

We have with us today Mr. Arun Jain, Chairman and Managing Director; Mr. Manish Maakan, CEO of iGTB; Mr. Rajesh Saxena, CEO of iGCB; Mr. Banesh Prabhu, CEO of IntellectAI; Ms. Vasudha Subramaniam, CFO. Besides, some other senior members of the Intellect management team are also present on the call.

Mr. Arun Jain will brief you on the results, followed by Q&A session, where your questions will be replied by the senior management team. [Operator Instructions]

On safe harbor, I would like to remind you that anything we say which refers to the outlook of the future is a forward-looking statement. This must be read in conjunction with the risk the company faces. With this, I request Arun to give his briefing. Arun?

[Arun Jain, executive]

Good evening. We will -- I wish to begin by thanking each investor for trusting the story of Indian fintech company participating in cutting-edge technology space, shoulder to shoulder with global competition. I'll cover my conversation in 3 frames and will take close to 15 minutes: Frame 1 current quarter and first half year of FY '24; Frame 2, patterns and trends from last 3 years data and the market what we are addressing; Frame 3, business outlook for next 6 months and coming years.

Let me start with the Frame 1. This quarter, Intellect revenue grew 17% over the same quarter last year to INR 621 crores, while EBITDA grew 45% over the same period. The half yearly revenue also grew healthily at 18% and PAT at 43% growth compared to last year. The company revenues are crossing INR 600 crore mark consistently for the past 3 quarters. All these results are in line with our confidence of growth at 15% level, which we were looking at it when we started the financial year. They are above 15%, close to 18% at this point of time.

During this quarter, contracting in respect of 2 deals amounting close to INR 30 crores in revenues got deferred and could not be concluded. As in the past quarters, there is an intangible cost of INR 12 crores towards RSU in quarterly results. So this is a cost which is getting booked which is intangible in nature.

We doubled our marketing activity during the last 6 months, having more than 700 meetings with relevant customers and prospects. We participated in almost 20 events in the last 6 months for getting a larger brand awareness, reaching the right kind of technology on eMACH.ai and generating the leads. So -- which we call P0 to P2, we have 6 stages of sales process. P0 to P2 is leads and lead process. P3, P4, P5 is the opportunity process. So what we published in the results of total funnel of over INR 7,500 crores is basically our opportunities, which is at P3, P4, P5. We don't publish lead-related financial numbers because at that time, we don't assign the financial numbers to it, and that's why we don't publish the number of P0, P1, P2. We have almost a similar amount of leads in P0, P1, P2 as much opportunities are there. And only where the proposals are submitted, that's what we publish as a funnel for us.

Now I would like to move to Frame 2 on the dialogue with you. After receiving smart questions from you about varying and unpredictable quarterly performance of Intellect in the past, our data analyst team plotted last 12-quarter data with trailing 12 months as pivot. Our CFO has shared her findings in this deck. The beauty is that on the basis of these numbers, Intellect has grown at 20% CAGR over a 3-year period, exactly 20%, which we guided the market that we have designed our business to be 20%. So we feel that how can it be working exactly 20% over the 3-year period, 22% for 2 years and 18% for 1 year.

The sustained and design growth is well above our industry growth rate. I call about 20% growth rate as the design growth since that's the constant message we are sharing with the investor community consistently. This design growth has 3 key principles and strategy on which this 20% growth confidence is there for the company.

Principle 1, extreme customer-focused business design. That is independently-designed business for corporate banking mix in the form of iGTB, retail banking and SME blending business grouped under iGCB, wealth and insurance business under IntellectAI. This strategy helped in building business growth and operational sales based on cutting-edge differentiated products for our customers.

Principle #2, design our products for most demanding banks to drive last 2% is 200% differentiation in the product. So when we work with a leader in the market like HSBC or JPMorgan Chase or HDFC Bank or RBI, we get that advantage of demanding requirement, and our product functionality becomes so much sharper than anybody else in the world. And we have advantage of working from West to East, from U.S. customer to the Singapore customer to Australia customer. That is stretched, so we are able to get the right patterns because of the customer profiling, what we have.

Today, 8 out of 12 products are in leadership quadrant of global technology analysts like Gartner, Celent, [ and IDC ]. This helps in premium pricing of products and enable to build business in Europe and Americas. Intellect customer portfolio has 7 out of top 10 bank in Europe, 8 of the top 10 banks in Middle East, 7 of the top 10 banks in India, 5 of the top 10 banks in North America and 5 of the top 10 banks in Asia and ANZ. And that's a remarkable marquee customer

[Technical Difficulty]

[Praveen Malik, executive]

probably rejoined maybe the network. Yes, Arun, you can go ahead.

[Arun Jain, executive]

The [indiscernible] strategy have been growing GTB to INR 950 crore business, GCB business grew to INR 650 crores, while IntellectAI business grew close to INR 500 crores during the last 12 months.

Coming to Frame 3. I'm hearing the -- our leadership outlook for next 6 months and for next 3 years. As of now, we must acknowledge the instability of global geopolitical environment, Israel-Palestine conflict as well as Russia-Ukraine conflict, [ India-Galwan canal ] conflict are all on the horizon. We, as a management team, take the cognizance of these conflicts and hope for our world to become more peaceful in coming years or coming months for our growth of the business.

But yet, we need to design the business for the future. And where are we getting our confidence level in spite of this geopolitical disturbances? We launched eMACH.ai platform with the most comprehensive micro services for financial industry to drive composable and contextual solutions in February '23. And this is the one platform which received so well because entire industry wants this, a desired direction of industry to move towards. And as of now, the separation of events, micro services, APIs, on-cloud, headless and bundled with AI, Intellect plays very significant role because there's no single player who has got all the 6 components coming together under one roof for giving a composable and contextual position.

This has led to big partnership with Microsoft Azure, Accenture, AWS, KPMG and IBM. We are working very closely with them for large digital transformation deals. Intellect technology start helping our customers by using Turmeric as a composable technologies. Effort cycle time has come down by 40%. So we can -- we are now able to propose full digital transformation at 40% lower cost than our competition.

Intellect has launched iGTB copilot along with Microsoft at international corporate banking event Sibos in Toronto, which has been very well received for its ability to drive decision support advice using generative AI. As of now, generative AI is being used for a lot of customer experience spaces, but over here, this was done for business decision purposes. We also launched generative AI based underwriting recommendation for P&C insurance on Intellect U.S. cloud. This also has received significant mileage because now the P&C process is completely autonomous from submitting documents for P&C insurance, which collects our document intelligence to underwriting, entire process to the recommendation -- up to the recommendation stage, and data processing is autonomous in nature.

Both Turmeric technology, which is -- which makes composable platforms and my -- IDX technology, which makes a contextual technology, drives the kind of a rich product positioning for retail banking, lending, wealth, global payments, global digital transaction banking, trade and supply chain finance and insurance, because they are the width of the product and depth and cutting-edge technologies is driving our growth.

For this year, we are confident of growing our revenue by 15% on an annualized basis and profit growth of more than 30%. So that's what our current outlook is looking at it, 15-plus percent in spite of the global or geopolitical environment. And if we are lucky, we can be closer to our design growth of 20%, but we are planning 15% growth for the yearly basis.

Thank you very much for listening to the 3 frames, and I will open the platform for your question and answers.

[Praveen Malik, executive]

Thank you, Arun. Now we can be moved to Q&A. [Operator Instructions]

First, we have Mr. Mohit Jain from Anand Rathi Securities. Mohit, you're there?

[Mohit Jain, analyst]

Yes, sir. So my question was related to this partnership that you just announced. So how is it going to help us, and the one which you announced about Sibos and Microsoft, so one is, how is it helping in our current set of products that we are selling?

And second, it appears to me, apart from this delay in the quarter, you're also looking at slightly slower growth for the year while our exposure to the troubled regions may not be that high. So just to clarify, are you seeing further weakness in banking? And second, this partnership with Microsoft. These are the 2 questions I have.

[Arun Jain, executive]

So first question, Manish, should you like to answer the partnership question to Mohit?

[Manish Maakan, executive]

Yes. Mohit, I think this is a very disruptive partnership along with Microsoft, iGTB copilot, which we launched at Sibos. This is a whole new way of deriving value from data which is sitting in the banks. And we're going to look at capitalizing our extensive domain expertise in commercial and corporate banking.

In our Phase I, we are introducing an array of about 50-plus AI use cases covering our existing stream of cash management, liquidity investment and payments, virtual account trade and supply chain finance.

So it does -- the -- first of all, the copilots are being designed to assist banks and corporate treasury role holders for better customer experience, cost and operation efficiency and risk management, in partnership with Microsoft. So first, it will help make our products look much more smarter, much more adaptable from what the market needs are. And second, it's a completely new revenue stream which we are building upon for taking it forward.

[Arun Jain, executive]

On second question, Mohit, the revenue growth we are looking at it can be better than this. But as of now, I think 30% margin growth, where the IT companies are looking at much lower numbers, look to be better. But let's see how it pans out. It can be better than this.

[Mohit Jain, analyst]

And sir, as the follow-up, like are we building in that GeM impact also as a part of slow transition? Or do you think that is not in the second half of the year and we should look at it from FY '25 standpoint?

[Arun Jain, executive]

We are not too sure about that. But on a margin level, we are taking into account. On the revenue side, maybe I'm not taking into account what will happen after December. But on the profit side, we are confident of meeting 30% growth.

[Mohit Jain, analyst]

In the current guidance, we are bidding in current level of GeM revenues until March, right?

[Arun Jain, executive]

No, no, no. I'm taking irrespective of GeM revenue or not, 30% margin growth will be there.

[Mohit Jain, analyst]

Okay. So whether it goes or stays, the point is that your guidance takes into account the potential volatility due to GeM?

[Arun Jain, executive]

Yes. So the margin -- the revenue line will change, but not the profit line. I mean directly saying what the margin we make.

[Praveen Malik, executive]

Next, we have Mr. Nishid Shah from Ambika.

[Nishid Shah, analyst]

First of all, congratulations to the entire team for very good set of numbers on a half yearly and on a year-on-year basis. I think, Arun, sometime back, you had mentioned that Intellect should be evaluated on a year-to-year basis and not on a quarterly basis, not on a sequential basis given the delays in the approvals and the global environment. So I appreciate that.

Can you give more details on the -- 2 questions, one, some details on the delay in the closure of 2 deals. What is the value and are we likely to see a [ lot of ] this quarter? And second question is on the U.S. geography. How is the partnership progressing with Microsoft? We have been talking about it for the last 4, 5 quarters, and with Accenture also, where are we seeing traction with Microsoft or are we seeing traction with both Microsoft and Accenture? Those are my 2 questions.

[Arun Jain, executive]

Okay. So first question was on your growth, which is last -- like LTM basis, we would be monitoring on an yearly LTM basis. Quarter-to-quarter, we cannot do it. So again, I want to emphasize that quarter-on-quarter doesn't make sense. We published this time this number from September 20 on Slide #12. We have a INR 1,402 crores revenue. We moved from INR 1,402 crores revenue and INR 2,441 crores revenue in last 12 quarters.

And there's a consistent growth quarter-on-quarter. There's no drop in the quarter on LTM basis. There's a drop in the quarter normally happens, but on LTM basis, there's no single quarter where the drop is there on LTM basis. So that's the one point I want to ensure, that we will look at it and please look at -- advise the investor to monitor the product companies on an LTM basis rather than monitoring the product company on a quarterly basis.

Responding to U.S. geography growth, we have very good leads in insurance business in U.S. Banesh, if you want to highlight what is happening in underwriting area, in insurance, working -- that is we are working with AWS closely with them, and they are also bringing some leads beside our own leads that are coming in the U.S. market?

[Vishwanath Prabhu, executive]

Yes. So I think the partnership with AWS, as you know, the insurance business in North America is completely hosted on the AWS platform. And all our clients and presently, we have quite a few SOWs that are in the process of getting contract closures, I think the important thing here is AWS works very closely with us now in identifying potential underwriting insurance opportunities. We sort of got an underwriting ecosystem that fully operates on AWS.

So we've added the generative AI components in. I think generative AI component is helping the underwriters use the data more efficiently along with their own underwriting standards to take decisions. So I think AWS doesn't have a similar product anywhere in the world. And when they looked at our product, they said this is probably the best in class that is available, and they are actually in the process right now of [indiscernible] to offer it to more and more insurance [indiscernible]. So that is a few good outcome that we have with AWS right now.

[Arun Jain, executive]

And Nishid, this is a very, very positive area where the revenue doesn't get booked, it's the cloud revenue. It's a lagging indicator. We are giving this revenues what Banesh is doing. We are working with 7 deals right now where POCs -- they are in POC stage because the AI adoption requires POC build up. And we upfront invest in POC rather than the implementation, which is critical in other product lines. Like in core banking, we do implementation afterwards. While on this line, we do a POC before the actual sale happens. We have current investment and say there are 7 such POCs are happening, for which 3 are in contracting stage and 4 will come to the contracting stage likely to happen. And each deal has a ARR potential of more than $2 million each deal.

[Nishid Shah, analyst]

Are any of the deal closure in the next quarter or 2?

[Arun Jain, executive]

Yes, yes. That's what we are expecting.

[Nishid Shah, analyst]

And how much is the value of those deals. You said -- I think you said INR 50 crores.

[Arun Jain, executive]

INR 30 crores I mentioned, INR 30 crore deals should be signed in this quarter.

[Nishid Shah, analyst]

INR 30 crores. Thank for the clarification.

[Praveen Malik, executive]

Next, we have Mr. Anil Sarin from Centrum. Anil?

[Anil Sarin, analyst]

Arun, the whole team, great progress being made. In fact, I want to congratulate you on your annual report also. You have dedicated, I think, about 40 pages. I think all the SBU heads have gone into great detail, taken a lot of pains to explain for lay people like myself and I quite enjoy it. And after reading, I was able to understand and appreciate the technology that you bring to the table. So a great job over there.

And basically, I mean it just underscores the superiority that your products have. Now we have to wait and see -- it's already happening, but we have to wait and see how, at a larger scale, I mean given the scope, the depth and the width that you already enjoy, I think good numbers should be expected in the coming times.

If I just add this INR 30 crores back, then the margins even for the second quarter shoot up to a decent number. So my question, I think only Mohit and Nishid have already asked, I guess, it will be a repetition. But I mean given that at the halfway mark, if I just take the liberty of adding back that INR 30 crores. Given that at the halfway mark, you are tracking so well, for the second half, there has to be a material decline in the growth rate to sort of come up to the 16% revenue growth outlook which you have. So are you anticipating a kind of a slowdown of that nature?

[Arun Jain, executive]

Anil, we are not booking slowdown. I think the problem with the investor is and they have a very -- you have a very mathematical mind and you've put a quick calculation. Our businesses are not as mathematical as possible, and to look at it, we are not looking at any slowdown, but we be cautious -- cautiously optimistic, I would say, Anil, than saying we are slowing down. And we want to just say, in current environment, 15% to 18% growth is a good number. So, let's look at it that way.

And if you are lucky to have, I mentioned, our design growth number is 20%. I mentioned from the last 4 years, we are not changing any paradigm on it. But a success of 20%, it happened in -- for last 3 years is 20%; for 2 years, it's 22%. So this is, once you are doing it. we will achieve 20% for the next 3 years. So we are looking -- that is the number, I think, Anil, you should be looking at, that any company can grow 20% top line for 3 years? If they can -- we can grow 20% year-on-year, our profit will grow 40% year-on-year. Our ratio of revenue to profit is 2x.

[Anil Sarin, analyst]

Right, right, right. In fact, on that point, one can comment that -- so you have multiple products and you have multiple geographies. There are not too many companies like that, that I'm aware of, which have -- they're so entrenched, so entrenched all over the world. So I think war is not a problem for people like you. You are so spread out, so spread out, and I don't think that -- but obviously, time will tell.

And I think you already answered that question that as you scale up, the EBITDA margins need to -- need to, meaning it will -- it's a function of operating leverage. As you start delivering the deals, it should head towards much higher than what it currently is. Am I on the right track?

[Arun Jain, executive]

That's right, Anil. Given 2 design principles, 20% growth, 30% EBITDA. Now, 30% EBITDA, I don't want to promise it. Last time, I said 30% EBITDA, everybody jumped on it, why it is it 18%, why it this 21%.

The business is designed around 2 principles. That includes 30% EBITDA. When 30% EBITDA will come in? It's not about -- I cannot predict that kind of a number. But the business has been designed for that kind of a cost structure and the operating leverage level, and that's why we moved to the product business.

[Anil Sarin, analyst]

So in your annual report comment, also the Chairman's letter, you had mentioned that now is the time for partnerships. So today, we have 4 partners. What is the outlook that is -- what do you expect? Like how deep can we go with each partner? And how many partners would you realistically need to achieve your targets and goals?

[Arun Jain, executive]

These are very important. These 5 partnerships which I'm mentioning, Microsoft, AWS, IBM, Accenture, KPMG, they are all big partnerships. We may have a smaller partnerships around -- we have 30 other smaller partnership at country level which we are not mentioning about it here. Those are basically country-specific partners which solve our problem at a local level.

This is a good network. We may require 1 or 2 more, but to meet this expectation of them because when they bring the deal, they are heavy deals. Manish was mentioning that Microsoft and they bring that deal, they are bringing digital transformation deal to us, and those deals would be $30 million deal, $40 million deal, $50 million deal. [indiscernible] amount of pre-sale time and effort. So I think we are comfortable right now on this partnership that we can nurture them. That's our focus on next 6 months.

[Anil Sarin, analyst]

Today, you have the proud position of being the fastest-growing IT company. So please keep it up. We are cheering for you.

[Praveen Malik, executive]

Now we have Mr. [ Mukul Varma ] from [ Varma ] Associates. Mukul?

[Unknown Analyst]

Am I audible?

[Praveen Malik, executive]

Yes, yes, Mukul, please go ahead.

[Unknown Analyst]

Yes. My question is that you had mentioned that you had won one deal against Thought Machine in Europe. So just wanted inputs on how we are doing against Thought Machine in Europe?

[Arun Jain, executive]

Thank you. Mukul. Rajesh, would you like to respond?

[Rajesh Saxena, executive]

Sure. So I think when -- not only Europe, if I look at U.K., Europe, Tier 1 clients as well as regional banks, what we are seeing is that when these banks are looking at core transformation, they start with a long list. And then typically, we would -- in most of the cases, we will end up with 3 players who are in the last 3. One would be Temenos, one would be Thought Machine, and Intellect.

So -- and when we look at Temenos, they are coming from a rich functional stack, country models; Thought Machine will come from a technology perspective. And we are actually in a sweet spot wherein we bring the latest technology stack with the domain functionality. So that's what we are seeing versus Thought Machine. To your specific question, head-to-head, if you look at it, we are winning as many, if not more deals versus Thought Machine. Of course, Thought Machine sees many more deals than we are seeing because they spend a lot more money on marketing. So from that perspective, we are looking at also Arun talked about our marketing events, our branding and how we are building our presence in many markets.

So this is what we are seeing from a deal win perspective, I was in Sibos and recently in Money20/20 in Las Vegas, where we end up meeting a lot of customers, prospects. And many of these customers are saying, when we talk to them about Thought Machine and their experiences, they're talking about Thought Machine as having a strong framework, but it requires heavy work from an implementation and customization perspective. So total cost of operations as well as time to market are key challenges that Thought Machine is seeing because they are still in the process of building the domain that we already have.

[Unknown Analyst]

Okay. Great. And one thing to add is like we announced certain deals during the quarter, which [indiscernible] for some brands, but when it comes to results time, there are always more deals won than the ones we have announced during the quarter. So is it anything stopping us from announcing every deal? Or these are smaller deals or we don't have permission, or how do you look at that?

[Arun Jain, executive]

Typically, we need to take a permission for announcing the deals. That's why we sometimes gets delayed and there is a mismatch between our announcing and -- for quarterly is that we have to announce anyway. But we are not publishing the name of those deals. That's the reason, Mukul.

[Unknown Analyst]

Okay. So is there a possibility that we could still announce it as we win it without naming the bank? Just to have a perspective of how much we are doing as [indiscernible], is it possible?

[Arun Jain, executive]

Sure, sure. We'll just take a legal opinion on it and then accordingly act on it.

[Praveen Malik, executive]

Next, we have Mr. [ Ramaswamy K.V. ] from [indiscernible]

[Unknown Analyst]

Arun-ji, congratulations on a great quarter. In my opinion, it was a great quarter because I come from a product background. My question is only twofold. One is, how was autonomous AI being used and what is the potential in the next 2 years? And point number 2 is, how will the EBITDA growth pan out over 20% in the next 2 years?

[Arun Jain, executive]

Sure. The first question is about autonomous AI. And I think this is my favorite question. The investment we made in 2016, 3 years ahead of time, was understanding unstructured data. Just I'll take a few more seconds to explain you what is unstructured data.

Oracle, we store the DBMS, which is the relational data model which we store in Oracle. Now our financial solution has more documents, more paper than the structured data from bill of entry, to domain [ L ], bill of lading and your balance sheets and the cash flow statement. Now these documents are to convert this unstructured data and creating a document intelligence is a science of its own.

Now a lot of small, small fintechs have come up who are taking one use case of one type of document, like [indiscernible] will take few use cases for underwriting space. Someone -- somebody else will come. We will take a few underwriting cases for -- which we'll take up in trading space or in supply chain finance space. So they take document by document.

The difference what we have done at Intellect level is we created a platform first when a lot of questions were being asked in 2018, why your investments are so high and Pranav was asking -- a lot of questions was asked to Pranav that how is your no results are there. And I remember Bombay Technology Day or Investor Day, we got questioned too much on that, why you are investing so much.

Now today, we have created a platform for document intelligence management system. This is like a DIMS equivalent to DBMS of past time. So next 10 years, to us, DIMS will be as big as space as DBMS of Oracle in the last 30 years of the space, which is about how do you create an unstructured document intelligence into the system. Now once [indiscernible] -- sorry, you want to say something?

[Unknown Analyst]

No, no, I say it makes sense, yes.

[Arun Jain, executive]

So that DIMS space, which is -- we have the full product suite on DIMS space. We had a session, how do you move design thinking for cognitive enterprises and cognitive banks recently in Chennai where 20 banks of India participated in that 2-day event to understand how we can apply DIMS for helping the banks to wire their operational data -- operational documents to a data in an autonomous way. So that's a whole science of autonomous.

We have completed this journey which Manish was referring to in the U.S. for one use case, which is the P&C underwriting space, for submitting close to 200 different type of documents have been extracted and intelligence has been built using -- and enriched and validated up to the generative AI in autonomous, where recommendation nodes comes to the underwriter in a matter of day instead of a matter of weeks.

And that is where we are giving speed, cost save, accuracy, trusted data and recommendation, which is no single company as of now is cracking this issue at a holistic level. So if a bank has to use for their 20 different type of documents. And one of the deals which we won in Europe in this quarter is our key client SJP, you all know St. James Place, who is the largest wealth manager. They have chosen the DIMS tool for using for the entire wealth management portfolio. How the wealth management portfolio, the recommendation, the portfolio recommendation, they want to automate at least 20 use cases using DIMS.

So that's the power of our tool on DIMS which we are very, very hopeful. There's a company called Instabase which is in the same space. If you want to go to their site, Instabase site, that will give you the kind of a flavor for you to look at it, what space we are in.

[Unknown Analyst]

One question. Therefore, that comes early year. Will the cost peter out over the next 2, 3 years?

[Arun Jain, executive]

Cost, what is the question?

[Unknown Analyst]

So in autonomous AI, as we go forward and evolve, will the costs peter out or reduce over the next 2, 3 years? And therefore, the margins will get bigger?

[Arun Jain, executive]

That's right. So it's a -- this is a proposition we are making to the banks that if they want to buy [ IDX965.ai ], so DIMS, their costs can come down by 15 -- operational costs can come down to 15% to 20%.

[Unknown Analyst]

15% to 20%. That's a lot.

[Arun Jain, executive]

That's a lot. It's a lot. As of now, one single use case for this client in U.K., when I was meeting its CIO, he says that I saved GBP 6 million for him by just one use case on AI.

[Vishwanath Prabhu, executive]

I think the space around operations transformation is very large. The target market around operations transformation for all its financial institutions is extremely large. And I think that the DIMS platform takes those documents and changes the way the operational process happens through an autonomous capability and bringing in AI right through the process. Whether it's underwriting, whether it's portfolio management, we've sort of tried to help for both underwriting from the U.S. insurance P&C side as well as we've tried to help the relationship manager or the financial adviser from a wealth management side, and there is a similar set of things across our various business lines at Intellect that actually focuses on how DIMS can help operations transformation.

And actually, we'll take out a lot of operations cost. As you know, any analyst and research will say that a lot of operational costs will get impacted because of AI. And I think DIMS is sort of at the heart of it here.

[Unknown Analyst]

Okay. Great. And second part is EBITDA, about will be?

[Arun Jain, executive]

EBITDA percentage will improve. The 20% will improve quarter-on-quarter. It's a matter of time. We invest -- we were around 25%, 26% EBITDA. We invested -- 2 years back, we took -- taken a call that we want to invest 6% from our own margins to the next-generation cloud transformation. 3 quarters, our revenue -- our margins declined. Fourth quarters, they start coming back.

We told 9 months' time, we'll stick to the 9 months' time where the shortfall has come in. So I think I love the investor like you who are trying to understand, but there are a lot of the Street investor doesn't understand that up and down, how does it happen?

[Unknown Analyst]

That is because of a lack of understanding of product versus services. So that is bound to happen.

[Arun Jain, executive]

So it's okay. It doesn't matter for a long-term investor like you. It's just a matter of time. But we are committing to -- whatever we are committing 9 months' time, 20% to, -- so all the numbers that we are submitting, I think I must say that wisdom of the management team at Intellect is able to justify that and live up to the expectation of what we are seeing. But initially...

[Unknown Analyst]

One small thing can I add? Can I ask a third one?

So will this also impact us positively versus Thought Machine? Because Thought Machine initial costs are fairly high, whereas our costs would presumably be lower initially.

[Arun Jain, executive]

Yes, there's a different equation for Thought Machine. They are investing more, while we are in a -- we are one of a very few companies in the world who are making such a hefty profit in this journey of cloud and AI. And as of now, no product company will make profit -- nobody is expecting profit from them.

[Praveen Malik, executive]

Next, we have Mr. Divyesh Mehta, 3P Investment. Divyesh?

[Divyesh Mehta, analyst]

Hello, am I audible, sir?

[Praveen Malik, executive]

Yes, yes. Please go ahead.

[Divyesh Mehta, analyst]

So I appreciate the investments which Intellect has done over a period of time in the products. I think the next leg of what you have started in terms of SI partnerships will be crucial to unlock values of the platform and investments you have made in different products. The last time I recall, you had IBM as a partner. This time, I think I've heard a few more incremental names.

So if you can share where we're heading in terms of more names? Also, do these partnerships, wherever we are going in joint JTM, are they adding into the funnel size? Then I'll ask my next questions.

[Manish Maakan, executive]

No, I think partnership, I think if you look at our Phase 1 of the journey was about ensuring our products are right. As we build the brand, we really wanted to own the brand, build extensibility on SDKs and take it forward. I think that phase of journey with, like Arun called out, we've now got the world's largest banks as our core customers in every market. That's given us confidence of the ruggedness, robustness, resilience of the products. And we've built now the extensibility where the partners can take it forward.

My early experience with these partnerships are the deal values are going at least 3x to 4x more than what we were initially selling it ourselves. So this is the right path, right journey. I would say next 12 to 18 months, we should start giving different kind of results for us, both in terms of quantum. There's an extended distribution and there are a surrogate branding along with each one of them is happening for us.

They have MSAs. They have signed contracts, sometimes getting into new large Tier 1 banks. They allow us last minute procurements phase that we don't want to take a new vendor in. I think through this route, we are able to kind of manage some of them.

So let's keep fingers crossed this is the right path. A number of people have done it before and this helps grow, so we're on the same trajectory. We've chosen select few, we've got very close relationships right at the top. We're getting the right support. Sibos, I was quite overwhelmed with the kind of support we got from these partners. So there were more reroutes from them versus any fresh walk-ins that were coming at us too also.

[Divyesh Mehta, analyst]

So in the same aspect, when you look at SI partnerships, the 3, 4 which you have already added are already large enough. In this sense, can we look at SI partnerships in the perspective? That an SI partnership, if any product company has an SI partnership, in some sense, it is easier to win deals and even larger deals because banks are somewhat more comforted, because the SI partners have a domain knowledge, they can somewhat implement better and so the USP is largely [indiscernible] comfort on the implementation?

[Manish Maakan, executive]

I'll just slightly correct what you said. What they're bringing is they understand in banks, how the banks implement that knowledge of the new bank. Pre methodology, all of that they bring in. A strong domain along with each one of them really helps the bank create a success -- a mutual joint success. And with now eMACH.ai, the capabilities eMACH.ai platform offers, extensibility of the platform, I think it's a win-win for banks themselves who want to do it themselves or bring in system integrators to do that. And this will bring us a higher share of license revenue or subscription revenue, where margins are going to be always higher.

[Divyesh Mehta, analyst]

Okay. And just one last question I'd like to speak on. So as we have increase our marketing efforts, is there any long-term trend where the SG&A cost line will take in terms of percentage of revenue? Are we expecting it to go higher versus previous years because of higher intensity of marketing efforts?

[Arun Jain, executive]

I think it will be 26% of -- our SG&A cost is close to 26% as of now. I think they are remaining at the same level from last year. So it shift by 0.5%, 0.5% here and there. not so much. And that means we are maintained. It's not going to go up, maybe coming down when the high number of revenue comes in. When we are moving towards a bucket from $75 million to -- currently, we have a $75 million bucket. So if you observe our patterns at $55 million, $60 million, $65 million, $70 million, now we are at $75 million, $76 million number, $78 million.

[Divyesh Mehta, analyst]

[indiscernible] it has remained the same.

[Arun Jain, executive]

Yes. for 3, 4 quarter number remains the same, then we move to $80 million, $85 million, then we move to $90 million, $95 million. But $100 million level, percentage may come down.

[Manish Maakan, executive]

I think if we're selling to 4 or 5 companies now, it takes that 1 year to get a large number of their partners to know us better. And after that, the multiplier effect comes in. Then the dominoes fall and then our distribution gets multiplied truly from that perspective.

[Divyesh Mehta, analyst]

In this case, we have observed that a lot of companies or the SI partners have -- we have x number of Temenos expert who has like a certification or something. So eventually, will we also have some kind of certification for the SI partners? Is this in the works? Or if you can throw some more light?

[Manish Maakan, executive]

Yes, it is in works with Accenture right now to build COEs from where they can take this and take it forward.

[Arun Jain, executive]

Last quarter, one deal was won with them.

[Manish Maakan, executive]

We won a large deal along with Accenture in Asia, and they're jointly investing in it to create COE. I have another deal running in France along with them. So that starts building the confidence.

[Praveen Malik, executive]

Next, we have, I think -- [ Darshil Vora ] is not there, looks like. Darshil, you there? No, Darshil is not there.

Next, we have Mr. [ Vivek Kumar ] from [ Deshpal ]. Vivek? Are you there, Vivek? Mr. [ Vivek Kumar ] from [ Deshpal ]?

[Unknown Analyst]

Sir, am I audible now?

[Praveen Malik, executive]

Yes, yes. Please go ahead.

[Unknown Analyst]

Two questions. One is, given the annual report that we have now in Intellect 3 and you are seeing accelerated growth across your products, and too, with SI partnerships and with AWS and Azure, when do you think we'll get back to -- I'm not asking growth guidance in terms of guidance in terms of next 2, 3 years, but when will we cross that 20% growth very comfortably? When do you think these things will start playing out, because now that we are -- you have been writing this in the annual report?

And also, now that we are going to distribution, you said last time that our only strategy now is 3D distribution, distribution, distribution, so when you -- when you're being cautiously optimistic, is it -- are you seeing serious slowdown in terms of deal times, closure times? Or you're just being cautiously optimistic because of the things happening around? So just one thing -- one question on this.

[Arun Jain, executive]

Yes. I think 20% is a very good number. What I'm saying is that 20% growth will give us a margin growth of 30%, 35% year-on-year. That same means your margins are doubling in 3 years. At 30% level, our margins will be 2.2x at 30% growth in 3 years. I think that's a very good number to look at it. If we are able to get INR 1,000 crores kind of profit margin after 3 years, that will be a great number for all of us as an investor and as a company.

[Unknown Analyst]

So you're confident of the 20% growth over the 3 years is -- can I take that as a message?

[Arun Jain, executive]

For [ 2030 year's end ], we are seeing if we are growing 20% of revenue, 30% on the bottom line, it is natural because of operating leverage.

[Manish Maakan, executive]

Our track record is also last 3 years CAGR, which Vasudha published, is of 20% plus.

[Unknown Analyst]

Yes. Yes, sir. No, no, I was just asking, are you seeing any serious [indiscernible] on the deal closure time or you're just being cautiously optimistic because of the environment? I just wanted that part. I understand that in the long run, you're confident of 20%. So that was the thing.

[Arun Jain, executive]

I think 6 months, unfortunately, we can't predict the future, that's the only thing.

[Unknown Analyst]

Okay. Let me go to second question.

[Unknown Executive]

Contracting, so many issues are there.

[Unknown Analyst]

So Arun-ji, second question is given the breadth of the kind -- the number of products we have on the opportunity size that each product can address if you talk about whether the AA or all the 3 things combined, don't you think at some stage, we need to get some J curve in some products and we should cross above 50% growth.

I'm not asking time, neither time lines. But just by inversion of basic logic that each product is addressing such a huge opportunity size and each -- as each product starts maturing, don't you think there should be a time in the company where some companies start growing at much above 20% growth rates? Or am I missing something?

[Arun Jain, executive]

I think the point is that a portfolio approach, one needs to understand very few product companies grow at 20% on a CAGR basis. If you look at the ACI worldwide, Temenos -- Temenos is growing at a CAGR of 2.5% in last 3 years. So -- and they will grow by acquisitions.

If we are growing about 20% organically year-on-year, is a phenomenal number from a product company perspective and that too profitably, not taking the money from the investor and keeping, buying the revenues. So that's a fairly good number.

And earlier also, I mentioned in one of the calls we get inspired from HDFC Bank. They are slow and steady. In 10 years' time, somebody can reach somewhere. So HDFC Bank has set that model thinking process in my mind that let's not push too much beyond 20%, but be consistent.

[Manish Maakan, executive]

And the fourth largest market cap now in the world in banking.

[Unknown Analyst]

No, no. I was just thinking from like given the opportunity size, someday, it should be above 20% is my understanding.

[Arun Jain, executive]

Thank you very much for your wishes. We would love to have it.

[Praveen Malik, executive]

Next, we have Mr. Shailesh Gandhi from Mehta Vakil & Company. Shailesh? You're there?

[Arun Jain, executive]

Praveen, how many questions are there more?

[Praveen Malik, executive]

Maybe some -- 4 more are there.

[Arun Jain, executive]

Okay. Just keep up to 4.

[Praveen Malik, executive]

I think Shailesh is not there, it looks like. We can take the next. Next, we have Mr. Rahul Jain from Dolat Capital.

[Rahul Jain, analyst]

Hope I'm audible?

[Praveen Malik, executive]

Yes, yes, Rahul. Please go ahead.

[Rahul Jain, analyst]

Yes. Just wanted to understand your sense in terms of how the cloud deal market is shaping up. Because in the recent-most quarter, we have seen Oracle announcing a $30 million-plus size of a cloud deal, which I think is one of the largest cloud deal by -- on the banking software basis. So any perspective on cloud kind of a deal and what we are seeing from an [ all ] pipeline perspective?

[Arun Jain, executive]

I'm not getting the reference. Which is a$30 million a deal?

[Rahul Jain, analyst]

So this is a large community bank cloud-based deal announced by OFSS in the recent-most quarter.

[Arun Jain, executive]

Okay. I have not looked at ia $30 million community bank deal on cloud. Was it ARR deal or 10-year deal?

[Rahul Jain, analyst]

The license component is close to this number. But of course, the total ARR, of course, could be much lower. And so basically, my...

[Arun Jain, executive]

$30 million cannot be the license number. $30 million is a huge number.

[Rahul Jain, analyst]

Yes. So that is where it is. That is how it is.

[Arun Jain, executive]

Some confusion is there, because $30 million 10-year deal, 5-year deal, time horizon, because that's where we can announce many deals which are [indiscernible] when we are looking at it from duration of the time.

[Rahul Jain, analyst]

Yes, yes. My sense is this is a 5-year, $30 million kind of a deal. But nevertheless, my question was more to understand from the perspective is that the larger size of the deal in your pipeline, are they incrementally coming from the cloud side of the business? Or it still continues to be on the on-prem side? And how is your mix in your pipeline from a cloud or on-premise basis?

[Arun Jain, executive]

We set up 6 platforms, which I mentioned to you earlier. We have GeM as a platform, which we will be extending it from out of GeM and moving it to the other departments, international government and for corporate. So we are now -- we can make more profitable venture out of the GeM platform we had.

So our teams are working to make it [indiscernible] path out of this particular product. Second platform is a lending platform. Third platform is an IDC. These platform means they are on cloud, IDC platform. and there is a platform of Magic Submission, which we call Magic platform. And then we have 2 more platforms which was there in the Optimum Board presentation.

So there are 6 platform. Each platform is growing consistently. The big deals are now coming to our Magic platform, AI platform which Banesh was referring to. Both -- and IDC platform, both the platforms are getting into the deal size of $20 million over the 5 years or $10 million deal over the 5-year, 10-year.

So they are -- they range from 5 to 10 year range here which can -- this kind of range, between $10 million to $30 million range. So those are the deals which are there. This number which is announced by a lot of companies, $30 million, $40 million cloud revenue, sometime they are extending to 7-year or extending to 10 years. So that's a point you need to ask them and let us know.

[Rahul Jain, analyst]

Understood. That's it from myself.

[Praveen Malik, executive]

Next, we have Mr. Ravi Mehta from Deep Financial. Ravi?

[Ravi Mehta, analyst]

Most of the questions got answered. Just one question, was the INR 30 crore deals that got deferred, these were more of license-based or subscription-based, or any color on those deals?

[Arun Jain, executive]

Let's let it remain as it is. [indiscernible] deal which has got postponed. We don't want to specifically mention, but they are many could have come to the margin.

[Ravi Mehta, analyst]

And probably I missed the opening commentary that there was some INR 12 crores of expenses that were booked in Q2 related to some -- I think I could not [ gather that ].

[Arun Jain, executive]

ESOP basically, the -- over the last few -- it is the intangible [indiscernible]

[Vasudha Subramaniam, executive]

Stock options.

[Ravi Mehta, analyst]

Okay. So INR 12 crores of the ESOP cost is booked in Q2?

[Arun Jain, executive]

Every quarter.

[Vasudha Subramaniam, executive]

Quarter-on-quarter, it is more than INR 10 crores. So that's a regular cost that we have because we have given RSUs for a larger population in the company. And so as per the Indian accounting standards and as per IFRS, we are supposed to book the ESOP costs in the P&L.

[Ravi Mehta, analyst]

Sure, sure. What was it for Q2, if you can just...

[Vasudha Subramaniam, executive]

INR 12 crores is the number for Q2.

[Ravi Mehta, analyst]

Okay. And what was it like in previous quarter? Similar or...

[Vasudha Subramaniam, executive]

It will be around the same number.

[Arun Jain, executive]

INR 10 crores.

[Vasudha Subramaniam, executive]

INR 10 crores, INR 11 crores, INR 12 crores, they are the same depending upon when the options are getting vested.

[Ravi Mehta, analyst]

Sure. And just one on bookkeeping question. Global DSO days had gone up and actually India DSOs have come down. It's the other way around. So is this a temporary thing, or...

[Vasudha Subramaniam, executive]

It is a one-off thing, I would say, for this quarter because we received more collections from the India-based customers this time. So that is where you can see some dip in the India peers.

[Praveen Malik, executive]

Next, we have Mr. [ Vijay Kamat ]. Mr. [ Vijay Kamat ]? I think he is not there. Then we have Mr. [ Vipun Kumar Shah ], [indiscernible] Investment. Mr. [ Vipul Kumar Shah ]?

[Unknown Analyst]

Whence we are talking about digital transformation, so this mainstream IT companies are also undertaking this digital transformation projects. So how you do it differently? If you can briefly explain in a layman's language, it will be very helpful. You may have done it on other calls also, but I'm logging on this call after a long time. So if you can explain it, it will be really helpful for me, sir.

[Arun Jain, executive]

Most of the investment in IT business have grown in last 4 years or post COVID is to meet the enterprise digital. So digital enterprise is a very standard vocabulary which all of us use.

The difference we do is we have a building block for making digital means. We have an intellectual property of micro services through which we can compose a solution for a bank versus the writing a solution of the bank. So we don't do any coding. We do the wiring of the micro services to make a digital transformation, which is 2x to 3x faster and is more accurate in delivering the final transformational results for the bank.

So that's what, as a product company, if you observed, are growing now and service company will reduce because people want to now to get a ready-made solution. We are in ready-made space and the services company we call digital they are in custom-made digital. So I think, in layman language, that's what we can be looking at it.

[Unknown Analyst]

Then, sir, your growth would be manpower agnostic, no?

[Arun Jain, executive]

That's right, that's right. That's why our margins -- that's why the operating leverage is there.

[Praveen Malik, executive]

Next, we have Mr. [ Rajeev Venkatesh ], the last question. Mr. [ Rajeev Venkatesh ], you are there?

[Unknown Analyst]

Yes, sir, I'm there. Are you able to hear me?

[Praveen Malik, executive]

Yes, yes. Please go ahead.

[Unknown Analyst]

Arun, I have a couple of questions. First of all congrats on a good set of numbers in this current environment. I want to know a couple of things. One is with the cash generation, what we are doing, how much will go for R&D spend and for reinvesting for next 2 to 3 years? And what would be the new verticals of growth you are currently looking at? I understand that DIMS things are already built in. So trying to understand, where will be the next link of growth?

And the second question would be like a few quarters back, you had informed on the core banking transformations. Are we getting any projects being moved out from Finacle or FLEXCUBE or T24 for better product mix, what we have with better capabilities on our side? And are any POCs going on? I feel this will have a snowball effect with regard to revenues over a period of time. So what are your thoughts on that?

[Arun Jain, executive]

First of all, I think our cash position, whatever is there, we are fortunate enough that we don't have any significant -- or since we are growing organically we may use that cash for getting into some countries for inorganic customer acquisition. We are just exploring, but not a big acquisition, but an acquisition to get a footprint in a country where we can use eMACH.ai to drive. They may have a whole legacy platform where we can use that money to do that.

So that's a one thought process of a growth engine. We are not going to get into new spaces. As of now, we have [indiscernible] number of spaces to drive a number of products out properly. We are managing the same number for the last 4 years. So we are not increasing anything over there. So we want to run this sustained manner and grow consistently over there. So that's answer to your first question.

What was the second question?

[Unknown Analyst]

Second question is a few quarters back, when informed on the core banking transformation.

[Arun Jain, executive]

That's what Rajesh has mentioned about the deal against Thought Machine. Thought Machine is core banking transformation, and he is saying that we are fighting the battle in Europe and other part of the world against it.

So we won 2 core banking transformation deals during the quarter. But these deals came from Australia region. They are not -- this quarter, we announced 2 deals in Australia region for core banking transformation. And last quarter, we announced OTP Bank, which is the largest Hungarian bank, for core banking transformation.

[Rajesh Saxena, executive]

So Arun, if I can just add, I think in the first quarter, we announced a couple of core banking deals. One of those -- or 2 of those deals were actually when a bank has moved from Oracle to us. I think that was the specific question.

[Praveen Malik, executive]

Okay. Arun, there is not still a question anymore.

Thank you, everybody, for joining the call today. In case you have any further questions, please do write to us.

That will be replied or we'll have a call out. Thank you so much. Now you can log off. Thank you. Thanks to the management team.