Intellect Design Arena Ltd

NSE:INTELLECT

Earnings Call Transcript 2024-Q4

[Praveen Malik, executive]

The Intellect Design Arena Limited Financial Results for the Fourth Quarter of the Fiscal Year 2023-'24 ending 31 March 2024, and also the full year of 2023-'24. 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 result. 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; and Ms. Vasudha Subramaniam, CFO. Besides, there are some other senior member of Intellect management team who are present in the call.

Now I hand over to Vasudha to take you through the financials, and later, Mr. Arun Jain will give his comments on the same. This could be followed by a Q&A session, where a question will be replied by the senior members of our management team. [Operator Instructions]

One safe harbor. I would like to remind you that anything which we say which refers to our outlook for the future is a forward-looking statement. This must be read in conjunction with the risk the company faces.

With this, I request Vasudha to give her briefing. Over to you, Vasudha.

[Vasudha Subramaniam, executive]

Thank you, Praveen. Good evening, everyone. It's a pleasure to be before you as we step into the tenth year of innovation, growth and resilience. Your continued support is invaluable as we navigate the dynamic landscape of fintech industry.

Well, let me delve into the numbers to share our progress in financial insights. Our Q4 revenue stood at INR 612 crores, and excluding GeM, our revenue was INR 603 crores. We made an EBITDA of INR 137 crores and INR 155 crores without GeM. Our margins for Q4 remain higher by INR 18 crores without GeM. Our days sales outstanding was 122 for Q4 and without GeM, we are in less than 100 days range on the DSO. On the cash front, we have collected INR 570 crores during the quarter and had a cash balance of INR 776 crores as of 31st March '24.

I would now like to take you through the full year metrics. We recorded a revenue of INR 2,513 crores for the year '23/'24, generating an EBITDA of INR 549 crores and a PAT of INR 334 crores. This PAT is without considering the one-off exceptional items relating to MAT credit, a write-off of INR 12.5 crores. Cash collection during the year had crossed INR 2,300 crores. We had 152 deals during the year and have gone live on 54 digital transformational projects.

Let me now share our last 12 months metrics, which gives a comprehensive view of trends and our sustained performance over a longer period. The growth in the LTM revenue compounded annually for 3 years is 19%. The year-on-year growth in LTM revenue was 12% and excluding GeM, it remained at 14%. Similarly, the 3-year CAGR for EBITDA was 15%. The year-on-year growth in LTM EBITDA was 22%, while it was 27% excluding GeM. It is important to note that our year-on-year growth in LTM of PBT was 27%, including GeM.

Over the year, as we closed our Q4, our funnel sizes improved from INR 7,000 crores in Q3 to INR 8,000 crores in Q4, and we see consistent growth in our big ticket deals which we call as Destiny Deals. During the year, we had deeply involved into a lot of events across the globe in Toronto, Amsterdam, London, Paris, Dubai, and Nairobi besides others. We commence the year '24/'25 having 300-plus global experts within Intellect coming together to converge on ideas and innovation -- we had a series of structured sessions as part of eMACH.ai summit. This helped us a lot in sharpening our thinking process and expanding the customer canvas, country canvas, product canvas, and distribution canvas.

With this, I'm handing over to our Chairman, who will provide a lot more insight on the business performance and growth GeM. Thank you.

[Arun Jain, executive]

So I think -- so the quarter what we are looking at it, actually eMACH.ai. So we are speaking about eMACH.ai from last 4 quarters is gaining the momentum because of first principle thinking what we have brought in as one of the most disruptive technology in the financial space. There still a lot of deals, which the pipeline is increasing, is translating into the revenue. So in a number we were designing the business for 20% growth, we achieved 14% without GeM. So there's a shortfall from that perspective on the expectation between 20% of what we have designed and this time, it's 14%, and that's where some of the delayed deals or carryforward deals are coming into picture.

But if you look at the pattern of new deal signup, which is accelerating, so one is on the past total number but total deals, which is -- win is, 8 deal wins in North America -- 8 deal wins in North America. So this is one important point. North America, last year when I was speaking on annual -- it's not Annual Day, it's annual business plan -- annual Board meeting. So annual Board meeting, I was speaking about that we have to emphasize on North America. As such, North America start giving some results in a single quarter, 8 deal wins, and out of which, 6 deal wins are in the AI business, it's a credible performance of North America. It has both areas, so one is 1 CBS deal, which is around digital contextual banking experience deals and AI deals. So there are 2 main line of business, which is eMACH.ai's driving the growth. One is digital growth and second is by AI growth, so composable and contextual growth. And both the places we are finding the outcome over there.

Then there's one large deal in Europe on core banking, which is very, very important after OTP. The momentum of core banking is going -- continuing in Europe. We announced OTP last quarter. This quarter, another bank, VakifBank was announced. And then 2 deal wins in Middle East and Africa, which is around DTB platform, which is again continuing the momentum of GTB as a leadership. There are 3 deals in India, which is around -- one is around DTB. All 3 are DTB deals as of now. And there was 1 or 2 deals which got postponed for next quarter. So there are 3 deals, which is all 3 deals are DTB deals, other last quarter win.

Then there are 2 deal wins in APAC and ANZ, so 1 deal in Vietnam and second deal is in ANZ. They are 2 large deals, which are signed up in APAC. Firstly, very balanced. The beauty of the model of expanding into so many countries is to create a basic foundation on which we can grow the business year-on-year. And some of the deals which is announced, we have shared this time the size of their asset size in their deals to indicate the size of the bank so they are choosing the right enterprise-grade software.

During the Board meeting, we were having a lot of presentation on security, risk management, and enterprise geared software in a new world because there are a lot of moving parts which are there on security, on the cloud, on the open sourcing. The biggest challenge is to ensure that it's safe for the bank to run on that platform and technology becomes a critical edge over there. So we are finding people who are running part of legacy systems are getting some regulatory notices because of the weakness of the basic architecture where the leakages of the data happens because of that structure.

Today, we have -- these deal wins are based on -- almost there are 42 elements in cloud management alone. There are close to 40-plus element in the security elements alone. So a lot of time when we -- you ask that question whether fintech can compete with us or what is the role of UL fintech, I think the cost of managing continuous open banking platform in terms of the Level 1, Level 2, Level 3 security has gone up so high. The bank risks are multiplying, though it's giving easiness for operating but managing the risk becomes substantially large. And these deals which is being -- I am talking about 16 deals, they have gone through the scrutiny of almost close to 150 architects before they have signed a deal with us. So this space is becoming, on one side, we say fintech is the competition. On the other side, we are finding fintech is becoming more difficult for winning the enterprise gate deal, and they are getting pocketed into the small area for driving the business growth.

Going to the next slide, the transformative open -- so this is a Gartner debtors and private bankers. So I think this entire is report on composition technology. Intellect is getting a big traction with all the analysts, the whole -- it's not about just the product what they are looking at it. They're looking the architectural, the strength of the product, decomposition of microservices, decomposition of API and the zip coding of API so that it can be reused so we don't create the forest of APIs within the banking system, which is resulting into the pipeline of the Intellect is going up quarter-on-quarter. We started the year with INR 7,000 crores. We are ending the year with INR 8,200 crores.

Number of deals, if you look at it, has moved from 70 Destiny deals to 84 Destiny deals. And the details of the deals are there. In the next slide, deal win that accounting is over here. I'm not getting into each one of them. But this quarter, one important point is the -- greater than INR 50 crore deal, we have 3 wins in that area of greater than INR 50 crore deals in this quarter. We lost 1 large deal because of political environment between India and Canada. The rest of the deals are okay as far as -- the right traction is there.

Company is paying INR 3.50 per share as a dividend, which is 70% compared to the last year it was INR 2.50 per share. This time, Board decided to have a INR 3.50 per share for that. Expanding the procurement space in GeM, what we have learned, we have moved to applying my AI technologies and composable technologies, iTurmeric and AI, I combine them together and launched from banking system to large corporates and governments where they are in need of a procurement system, where the major competition is Ariba, which is quite expensive for the many markets. And we could be able to build in just 6 months' time, the team has able to build up corporate procurement exchange, government procurement exchange, and account payable exchange into 3 products which have come up. They are AI-based products and digital-based products.

We already are signing 2 deals in CPX space in this month. We are expecting to sign 2 deals in CPX space and 1 deal in APX space. We have started evaluating at 2 places in GPX, 2 proposals are there in GPX space, which is government procurement. So the team, which was released from GeM now getting into proper profitable business. Whatever the learning we got it, where you've all seen the number of GeM and without GeM, it's getting to the profitable business whenever we'll be signing the deals over there. They may have an investment period of another 2, 3 quarters. But after that, it may result into a good traction.

Other important point, which I want to work on is this next picture, which you are seeing eMACH Summit. This is the power of Intellect, 300 people, 300 leaders from 31 countries, 2 boot camps, 1 purpose, it's the largest congregation. For 9 days, this leadership team started beginning the year with a new agenda of eMACH.ai to become the disruptive platform for the world. Every one of the leader has gone through the 2 boot camps of 3 days each. One is on AI, the Purple Fabric, and second boot camp is on iTurmeric. The workshop was organized on 3 spaces called Organizing the Thinking Space, Expanding the Performing Space, and Impacting the Business Outcome. So 300 people when we brought them together, we need to come into a common thinking space where we're looking at it, how do we create the disruption in the world, then you expand by simplification of the process and systems, expanding the performance base by frameworks and then impacting the business outcome.

As I mentioned, there are 2 boot camps and main summit, so 3 days, 3 days, 3 days. Over here, iTurmeric, eMACH composable technology boot camp. And it was very, very interesting that my salespeople in the field -- yes, somebody with some feedback. So in both the sessions, it's a hands-on session, where the ease of the platform got worked out by simplifying the system so much that a sales bank, head of the U.K. and sales side of Australia were able to build up a loan repayment API in a U.S. screen on themselves after 2 days of workshops. So that was the proof of pudding that how these 2 platforms, Purple Fabric platform and iTurmeric can reduce the cycle time and the efforts for disrupting the market.

Next. The eMACH.ai world is changing the paradigm from product-centric organization to consumer desirability products from coding to composing and from enterprise siloed knowledge to enterprise connected intelligence. We are able -- we are contributing in 4 different ways. We are participating in a deal which is transforming the enterprise in core banking space, in lending space, in wealth space, in payment space, in DTB space, in cards-based treasury, create supply chain finance, custody, GPX. So this could be a complete deal of transformation.

Using AI, we are using to transform operations for the bank. We are transforming experience using relationship manager office, corporate SME, retail, banking exchange, which is a contractual exchange, CBX, or we are able to expand capability of the bank by helping them for 1 origination platform, customer onboarding platform, virtual accounting platform, accounts payable platform, and corporate procurement platform. So these are 4 different ways my sales team is going in leveraging our systems.

There are 3 levers of growth. We are leveraging around customer canvas. Today, we have a rich set of top 50 accounts on which we have focused attention to grow those accounts. They are the leaders in their own geography. We are seeing Magnificent 7 and Expand 18 and Focus 36 are the 3 agenda points which we are driving on customer canvas. Then we are deepening country coverage. Whenever we are present, we have chosen 11 countries where we want to deepen our country coverage, while rest of the countries, we want to work through the partners.

And then specifically choose a right product proposition and grow across country and across customers. So this year, the focus is clients go more products. So GCP products should go to DTB clients and vice versa or AI should go to all the GCP and DTB products. So that's our approach for growth opportunities. This is a few glimpses of the eMACH Summit, which we had for 3 days.

We spent a lot of time, I spent a lot of time and we spent a lot of time in global event in launching eMACH.ai. You might have seen in the LinkedIn, we had in Dubai, Paris, London, Design Thinking Residential program, Dhaka. And we are going country by country. I'm traveling to London again next week and then to New York and then to Canada. So every week, there is an agenda for launching this. There's a large traction on global events on Sibos, iGTB Oxford, Money 20/20, GTR. So the big traction on spend, creating awareness of eMACH.ai.

Next, sustainability agenda. So we are looking sustainability as a core value. Last year, we published the first report of sustainability report. This year, the sustainability agenda is moving at the next level. Our campus is purely 100%, what do you say, there is no -- zero discharge from the campus for the -- in last 1 year. There's no single wastage item is going out of the campus as a waste, and all are recycled or reused including water, food waste or any other waste.

And there are almost 15 initiatives in sustainability, which are happening from social transformation to employee, sustainability awareness to employee participating. So we had a Sustainability Week in February where 5,000 employees taken a pledge of sustainability in a formal manner. So sustainability is one of the -- we are using GRI framework and BRSR framework for doing the sustainability, which is the next slide.

So exciting times. So a lot of exciting time for all of us. And I think Banesh, Manish and Rajesh, all 3 CEOs are on the call to -- fortunately, Manish is traveling to Chennai this time so he can be present from the Chennai headquarters.

We can now open the platform for question and answers. Praveen, you can open up for question and answer.

[Praveen Malik, executive]

[Operator Instructions] First, we have Mr. Vivek Turaga from BestPals.

[Venkatakesava Vivekkumar Turaga, analyst]

Sir, you were saying [indiscernible] exiting in your press release. So if you can tell us about the next year's growth in terms of -- because during the last -- from the time you listed till today, one thing that has been consistently right is your sales guidance, even though margins because of the investments or something like GeM going early or something like Ukraine war coming. So even though margins are cloudy, you have to invest in eMACH.ai. Even though margins impact didn't go according to our trajectory. Sales, at least over every 2, 3 years, your sales guidance was perfectly on the TSO. If you can guide us -- because you said this is Intellect 3.0 and all your products and now that you -- I'm not the one to say whether all the investments are done, but I think eMACH and investments are mostly large part is done. Can you throw light on whether there will be acceleration in sales growth, which can lead to huge operating leverage. And we can see that in both PAT and margins in a sustainable way. This is my first question, Arun.

[Arun Jain, executive]

There are 2 kind of a growth we are measuring right now. In AI platform, the growth number, the penetration in the accounts will be large, like 6 accounts deal in last quarter. The translation into financial number will be smaller because those AI deals will be using a platform. So financial numbers versus deal numbers will have a different kind of a correlation. But deepening those Destiny deals will help in ensuring the growth momentum as sustained.

Second is, what you're looking at it, how you're providing your operating leverage, operating leverage is happening. We are seeing that in last -- without GeM, we have not gone down the numbers to last quarter when we discussed the numbers. Almost INR 70 crore revenue went away, which got filled by the 7% sequential growth from quarter-to-quarter, from last quarter to this quarter.

So looking at the guidance right now, I think we are still navigating the guidance. We have designed the company for 20% growth. But looking at the total IT industry going towards a slowdown from the perspective of all the counterplayer, we're still dwelling whether excluding GeM guidance, if I remove the GeM revenue from the $303 million revenue, around $30 million, if I remove from GeM, it's around $273 million revenue. On that base number, we are looking around 15% guidance could be there.

[Venkatakesava Vivekkumar Turaga, analyst]

For the whole year next year, right?

[Arun Jain, executive]

For the whole year. It may not be quarterly balance, but a whole year it can be.

[Venkatakesava Vivekkumar Turaga, analyst]

And over the next 2, 3 years, your content of greater than 15%, 20% on next...

[Arun Jain, executive]

Yes. 20% is a design element but it can -- sometimes it can become 25%. That's the kind of ups and downs can happen. Last year, we lost 3 big deals which could have transformed the entire landscapes. One is one of the largest bank in India. They've gone for a very small company. Second is one large deal in Canada. And third is another deal in Europe. If this deal would have come in early, we could have been a very different looking company. And these deals are in the range of $100 million-plus. We signed 1 OTP, $100 million-plus, but there are 2 more deals of $100 million-plus, which we just lost because of political reasons where we are almost there.

[Venkatakesava Vivekkumar Turaga, analyst]

The second question is in the last 2 quarters back you said 3 wide moments are there in terms of core banking in terms of digital core banking and then BaaS in terms of GTB and AI. So if you can elaborate on how these 3 wide movements are actually how permanent now we are on winning deals and any competition and in terms of core banking, where are we now? Are we more confident of winning more? So these 3 wide moments that you mentioned 3 quarters back, if you remember though.

[Arun Jain, executive]

Yes. I think all 3 are perfect on the dot -- got in a strategy. Manish can start, then...

[Manish Maakan, executive]

Quote them all of that. You would have seen all 3 from -- after doing OTP, VakifBank was another next Europe big transformation. In AI, Arun already talked of the 6 deals, and we have 2 deals on BFSI, one in U.S. and one in Australia, so expanding out multiple of these sub-accounting platforms. So all 3 patterns have happened.

[Arun Jain, executive]

Rajesh, you want to cover? [ Better to get a momentum ].

[Rajesh Saxena, executive]

Specifically, let me talk about core banking. I think from a core banking perspective, the last year was a very good year. We closed many deals. I think we closed more than 8 core banking transformation deals in the last year. And as I look at the pipeline, the pipeline continues to be very good. It's a deep pipeline. We are in multiple stages. And what we are also seeing from a core banking perspective, I think we talked about this as eMACH.ai. What we are seeing is that we are now getting called by Tier 1, large Tier 1 players, regional players, et cetera, which is also putting pressure on us from a presales perspective. But we are seeing that graduation of how we are getting into larger Destiny deals. So core banking field, if you study is right now, there are many opportunities, and we believe that we are well poised to take advantage of that.

[Venkatakesava Vivekkumar Turaga, analyst]

You just mentioned that $100 million deal some bank you have lost in India. So do you think -- what are the reason is just because of competition or are you seeing any trends that you want to highlight?

[Arun Jain, executive]

India was not $100 million, it was $50 million size of the bank because of low costing, low pricing by the competition. So very low pricing.

[Venkatakesava Vivekkumar Turaga, analyst]

So overall, we are content of 50% about a 3-year period, given we are now -- both of the investments have been done in the production platforms. Can I take it?

[Arun Jain, executive]

Yes. When the investment will be required, more investment will be required in AI right now. We are -- the Purple Fabric, which I'm mentioning with the generative AI, we are finding a big traction. We built Purple Fabric is a one platform where we are bringing 5 different knowledge banks and the knowledge walls or knowledge depository to create a connected intelligence and enterprise level. We're talking to all the big 5 consulting firms to look at it, to deliver expert agents and Copilots on the top of AI. This is an area where we may require another investments like we had last year, INR 140 crores of the investment in last 2 years, we are doing INR 140 crores from INR 120 crores. So our investment bucket is $20 million. So it's still -- it may come INR 160 crores, INR 165 crores for the coming years on investments. So that -- but it's not a large investment. It's just INR 20 crores, INR 25 crores more investment from that perspective. Other products are ready to go to market. So operating leverage can start coming this year.

[Venkatakesava Vivekkumar Turaga, analyst]

So R&D, just why I'm pressing on this is because now that you have started investing in distribution and you started also partnering with many system integrators. That's why I was expecting to be more content on our growth. So that is why I was just pressing on this because...

[Arun Jain, executive]

We all love it but let's wait.

[Rajesh Saxena, executive]

You take the system integrator route to start kicking in. We've had few wins this year. They need to also feel confident once we deliver it. In a 12- to 18-month period, the indirect distribution will suddenly start adding significantly over there. That's the right journey we have started.

[Arun Jain, executive]

I'm meeting the CEOs of all this size now. So now they are coming to us, which was a reverse way. So I think that wheel has rotated, how will it translate the numbers since the investor conference, not a business plan conference. We are cautious about it.

[Praveen Malik, executive]

Shall we have Rahul Jain ask the question, please. Can you unmute Rahul Jain, please. Rahul, you can ask the question.

[Unknown Analyst]

So just one clarification to start with. When we said 15% guidance is what I heard, is it on the adjusted basis for our revenue of GeM in this year? Or this is on the reported basis that we expect to deliver for fiscal '25?

[Arun Jain, executive]

Adjusted basis. I mentioned clearly $273 million.

[Unknown Analyst]

Secondly, in this quarter also, when we see this adjusted working that you have shared with kind of employee, there's a INR 9 crore revenue that would have come from GeM in this quarter also, and there is a INR 27 crore like-for-like cost. So if my computation is right, can we understand how it should shape up now? Does this INR 9 crore will normally give or take a very small number going forward? This INR 27 crore worth of cost can be repurposed in the subsequent quarter? Or how and will we are going to take a benefit out of that?

[Arun Jain, executive]

Just INR 9 crores of GeM additional revenue. This was a backlog of some CR having booked out in the last quarter. So whatever we completed until December, the actual billing happened during the Q4. That's our only backlog. Nothing future-related.

[Unknown Analyst]

And this INR 27 crore call that we are saying in the same cost can be repurposed for other projects or as long we expect in second.

[Arun Jain, executive]

This INR 27 crore cost, which [indiscernible] has been GPX and CPX what we have launched is directed towards that. And they have a good plan to look at it next 2 quarters to start generating a revenue over there.

[Unknown Analyst]

Right. And just 1 last bit on the GeM and the view in the market. You already highlighted about the macro thing. But so far, at least what we have observed is that in the software industry, the pain is not as you would actually have seen in case of services that has -- so do you think there is some kind of an adoption curve, which is now taking shape with the supporting the momentum and can ensure growth to continue for this fiscal and beyond. Or it's too early to conclude that kind of a policy?

[Arun Jain, executive]

And this growth is coming from the pipeline, the funnel which we have, the 80-plus Destiny deals we have. So that's the reason for the growth numbers, more than any market scenario. This is more grounded basis.

[Unknown Analyst]

So basically, you are attributing this to strong execution, which we are able to find, really we should be able to deliver this?

[Arun Jain, executive]

Sure.

[Praveen Malik, executive]

Next, we have Mohit Jain. Mohit, please ask the question.

[Mohit Jain, analyst]

Sir, congratulations, a reasonable quarter. So first is on the U.S. I saw you have an update deal, but it looks like eMACH.ai had its first win there. So is that correct? And what are your plans for U.S.? And then I have 2 follow-ups on AI.

[Arun Jain, executive]

So Banesh, you would like to answer? The 6 deals you won, what is the traction in the U.S. on your AI space in U.S.?

[Mohit Jain, analyst]

Also beyond insurance, if you can talk a little bit about if core banking is going there or some other products that you're going to offer beyond insurance?

[Arun Jain, executive]

Sure, sure. We'll come to that. Let's hear the AI and then we hear that our CBX product in Canada and U.S., that's our second product line. I'll ask Rajesh or Manish to discuss about the Canadian market where we are getting momentum in North America.

[Vishwanath Prabhu, executive]

Yes. So just to update you, Mohit, I think the fact that IntellectAI very early had adopted AI-first approach through our businesses on the insurance side is now building a good pipeline. I think we've done 6 deals. We've got an excellent pipeline to complete over the -- and we have quite a few contracts out there. It does take time to close some of these contracts. But we are well in progress with quite a few deals as we speak.

Clearly, I don't need to -- sort of everybody is aware of the amount of activity taking place in the AI space. And I think some of what we have done is investments, over the last few years on AI, has actually resulted in a very good platform that Arun has already talked about, which is giving us the connected intelligence from an enterprise perspective, which is quite unique. And I think a lot of the product focus now would be to start leveraging those capabilities for our clients across the Intellect businesses in both GTB and in the GCB business lines.

So a pretty good pipeline for the insurance businesses coming over the next few quarters. Similarly also, we have closed out some good wealth deals but they're under contracting and they're quite significant. So hopefully, we'll get traction on that, too. Again, we bring a lot of AI capabilities for wealth advisers in the market, so I think we expect that to also do quite well in the next couple of quarters.

[Mohit Jain, analyst]

Okay. And this was through a partner, the eMACH.ai or was it through our own sales team?

[Vishwanath Prabhu, executive]

Our own team. But at least for insurance, our own team. But we have a very strong relationship with both the large cloud providers in the U.S.

[Mohit Jain, analyst]

Great. And the second was related to GeM. Now we have given ex-GeM numbers for the first time, so the recurring margin is whatever you have shown in Q4 now that is the new normal for Intellect. Or how should we take it by [ '25 ]? 26% is what you're looking at.

[Vishwanath Prabhu, executive]

Calibrating very quickly ex-GeM number, but I think 23%, 24% because some investment will be required, so around 24% numbers, it will be around.

[Mohit Jain, analyst]

Around 24%, okay. And sir, your tax rate now that we have this exceptional item and I assume you have moved to the new regime, so now should be a new 25% standard tax rate going forward?

[Vasudha Subramaniam, executive]

The ETR across the globe will be 23%, and for India it's 25%, so we'll optimize it to 23% at a consolidated level.

[Mohit Jain, analyst]

Right. And last on receivable days, you have also given DSO. Now that's the new DSO number for Intellect or should we read going forward? Because I assume from 1Q numbers will be ex-GeM only?

[Arun Jain, executive]

Yes. So what is the old pending is there in GeM, we will be reporting separately because there is a pending money sitting there. If we are looking at non-GeM business, receivable will be less than 100.

[Mohit Jain, analyst]

89, 90, I think you have reported...

[Arun Jain, executive]

Yes. 90 days, which is there.

[Vasudha Subramaniam, executive]

You can take it as less than 100 days.

[Arun Jain, executive]

Less than 100 days, definitely less than 100 days.

[Mohit Jain, analyst]

At the consolidated level?

[Arun Jain, executive]

At the consolidated level. But GeM we'll keep it separate, we'll park it separately to collect the money. It's taking its own time in government of India to collect.

[Mohit Jain, analyst]

So there also, DSO, I think this should get over in 6 months or something like that, right?

[Arun Jain, executive]

If the government pays in time, and it's over in 6 months' time, logically, it should go over in 6 months' time, but then you need to keep the fingers crossed.

[Mohit Jain, analyst]

Got it. All the best for '25.

[Praveen Malik, executive]

[Operator Instructions] As of now, doesn't seem to be anybody -- any further questions.

[Arun Jain, executive]

Okay. That's very good news. I think we communicated well on the -- some more?

[Manish Maakan, executive]

Yes, 4 questions are there. Yes, there are 3 more questions there.

[Praveen Malik, executive]

Next, we have Mr. Nishid Shah.

[Nemish Shah, analyst]

This is Nemish Shah from Emkay Investment Managers. So again, I had 1 clarification with respect to GeM. So if I just compare the Q3 numbers that you have provided with GeM and without GeM and compare the Q4 numbers, so in Q3, we had a cost base of around INR 67 crores in GeM, which has come down to about INR 27 crores in Q4. So just wanted to understand, so were we able to redeploy costs of about INR 40 crores? So what is this INR 40 crores differential cost with respect to GeM if you can clarify?

[Vasudha Subramaniam, executive]

Q3, we also had GeM in the sense that -- GeM got ended only by mid of December. So until such time, we have GeM cost, we had third-party costs related to GeM and all. So in Q4, we conservatively made some provisions for some of the costs. It's not a provision against the doubtful debt but for some of the liquidated damages we made some provisions. So as it is -- in Q3, we had GeM, at least still back end of December, and that is the reason for the difference.

[Arun Jain, executive]

Can I ask how have we deployed INR 40 crores?

[Vasudha Subramaniam, executive]

That's what in QPX.

[Nemish Shah, analyst]

Okay. So that was largely third-party outsourcing costs?

[Vasudha Subramaniam, executive]

We had a third-party outsourcing, yes.

[Nemish Shah, analyst]

And so this INR 27 crores or that is any third-party costs related to that or that is largely on our books?

[Vasudha Subramaniam, executive]

INR 27 crores did not include any third party. It included some of the employee costs so we retain them for redeployment. So that cost is also getting included. And secondly, we also, as I said, we made some provisions on some liquidated damages. And because of which is what our ETR for the quarter is also a little high because that's been disallowed for the purpose of income tax. And we also had some CapEx-related costs on account of GeM. So all these 3 constituted this 26%. There was no third-party cost involved in this quarter.

[Nemish Shah, analyst]

Got it. So going forward, not entire INR 27 crores will continue, or it will be lower than that?

[Vasudha Subramaniam, executive]

Yes, it will be lower, yes. We may make some investments but will not be the entire.

[Praveen Malik, executive]

Next, we have Mr. Umang Shah from Banyan Tree Advisors.

[Umang Shah, analyst]

Sir, are we seeing any lower competitive intensity from Temenos, considering they have some own issues that they need to look at on PR side?

[Rajesh Saxena, executive]

So actually, it's a very interesting and a difficult question to answer. But when we look at it from a market perspective, we are seeing Temenos still very much in the fray. So we have not seen that as if the intensity has got lost. This is the ground -- from the ground market feedback.

[Umang Shah, analyst]

Right, sir. That's useful, sir. And sir, in terms of Thought Machine, I wanted to understand that Arun made some comments about how new-age fintechs don't have the kind of security features that we do. Would you include Thought Machine in that or would you say that on the -- at least on security front, all the 3 firms are on the same level?

[Arun Jain, executive]

Rajesh, you want to answer?

[Rajesh Saxena, executive]

Yes, please go ahead, I can add, Arun.

[Arun Jain, executive]

Thought Machine as a framework, so basically, Thought Machine provides a framework to the bank, not a full core banking product as such. So their strategy is slightly different from Temenos and Intellect. Our strategy is to provide a full, complete domain-focused product where on Thought Machine, a lot of things has to be worked out by the implementation partners, so implementation partners makes a lot of money on Thought Machine. Once they have to build a solution, then they provide the partners, provide the security framework and other things on the top of it. So on the box, on the cloud, ready product to be used. I think we have invested the money into that. In Thought Machine case, it's a customer who invest that money into them. Rajesh, do you think that...

[Rajesh Saxena, executive]

No, no, I was just going to echo the same point saying that Thought Machine is giving us a simple framework and the framework, either the bank IT team or an SI has to build on that framework. So if you really compare between Thought Machine and Intellect, we come not only with the underlying eMACH.ai architecture, but we build -- we bring the deep domain, the banking domain and that's what sets us very unique from Thought Machine.

[Praveen Malik, executive]

Next we have Mr. Mukul Varma from Varma Associates.

[Mukul Varma, analyst]

I just wanted to check on the buyback front, last time, when I raised this question, you had said that during discussions at the Board level, can we look at something on that front in the coming year? I think this year -- by this year-end you will be in excess of INR 1,000 crores cash on goods.

[Arun Jain, executive]

Once we are crossing INR 1,000 crores, then definitely, we can look at it. We should be -- as you rightly guessing the right number -- so we can take those...

[Mukul Varma, analyst]

One more thing, with the RBI getting very harsh on Kotak Bank, Paytm, and other banking institutions for point of technology spend because of their -- either the business going up and the technology is not commensurate with the software they use. So how do you look at it? How does that kind of generate business, more business for us? Or is it something where they will have to go back to their existing vendor to set this right? Because I heard the concall of Kotak Bank where they said they will -- they are already investing INR 1,700 crores in technology and they're able to invest much more to get things on track to start online onboarding to the 811 and credit cards. So does it throw...

[Arun Jain, executive]

I appreciate your reading the right news in the system. And I -- if you -- in the beginning, I mentioned there are some leakages in the old system. So it's like an old building. Legacy application is like old Bombay buildings or old Delhi buildings where leakages will happen from somewhere. Now to fix those leakages, either you refresh or you fix by the quick and dirty fixed tools. Logically, these 2 incidents happened in India. The more incidents are bound to happen in U.S. and Europe. Then only I think the people will pay attention to the legacy migration, accelerate the legacy migration. Still people are not fully believing it into what the new security standards of the world are. And it will take another, I would say, another 12 to 18 months to understand that legacy core and legacy lending platforms are fundamentally built on the technology by hauling the core, by doing patchworks. It's not going to solve the problem. You need -- they need to go first principle thinking of understanding what customer events are, what services bank is providing to them, what APIs do they need. Today, they are getting into a very, very quick and dirty.

And in Indian banks, I'm still saying that the cost of technology, the RFP is still they're not understanding the difference between what enterprise-grade software means for the banking. So we are facing those troubles to communicate the story of what enterprise-grade solution means to the banks and why banks require enterprise-grade software of that nature with almost so many grades are required and so much investments are required.

Very few -- we are investing close to 1,000 people in R&D, easy as 1,000 people in R&D. I mentioning to some U.S. person is $100,000 per R&D cost, it's a $200 million per year cost compared to any other vendor in America or Europe. Which company is -- that's a huge number for us to invest into making the enterprise-grade software. But people are still on the sidelines, not in the center of the stage to make an impact. But it will come somewhere, sometime.

[Praveen Malik, executive]

[Operator Instructions] As of now we have Mr. Nitin Sharma from [ MC Provident Research ].

[Unknown Analyst]

So on your 3 new platforms, the APX, CPX, you mentioned that discussions are ongoing. So help us understand, are these discussion focused only for the overseas market or in the domestic market as well?

[Arun Jain, executive]

Just repeat that question.

[Unknown Analyst]

So the discussions that you mentioned, are they focused only on the overseas market or in the domestic market as well?

[Arun Jain, executive]

Yes, they are starting from India market and then going to overseas markets. DPX is focused on overseas market as well as some of the Indian states are also looking for procurement solution. So that's a market we've done. So now there is a central government portal and there is a momentum of state government also on the government procurement portal. But this time we'll not be getting into the investment mode. We'll be selling the license. So we'll be getting the money upfront from government rather than getting into the partnership sharing model with the government.

And corporate procurement portal, we are finding a large space of procurement in India as well as in Asia Pacific and Middle East before we jump into the Europe and Americas. It's the same strategy what we do for any other product. First, we use India, go to Asia, nearby countries and then go to Europe and America, I'd say, 3-year journey when we move into this stage.

[Praveen Malik, executive]

I think Vivek want to ask some question once again, Arun, if you can. Vivek?

[Venkatakesava Vivekkumar Turaga, analyst]

Just you mentioned the previous participant that clients are going for banded solutions. So if you can give qualitative, I'm not asking about growth rates and all, but qualitative commentary on competitive intensity across markets and which products do you think people are ready to invest and you are more positive to drive growth over the next 2, 3 years? Because even in the last concall, you mentioned the same thing that in India people are not really going for the enterprise-grade solutions. So if you can give us where you think our products will find acceptance and where the growth will come from. And qualitative commentary with regards to how qualitative competition is shaping up across our products. It was our production sense, at least whatever you want to mention.

[Arun Jain, executive]

I think Europe is definitely a market which is very sensitive to the architecture change. So when they are going through it, what Rajesh was mentioning on OTP deal, it took us 18 months, 21 sessions of various architectural sessions before they selected us over the Thought Machine. In that regard of selection, wherever they have a rigorous selection, we are getting selected. Whenever the rigor is only RSV-based or rigor based on the pricing base, our referenceability become weak from that perspective.

So our win ratio in those areas, we are -- and it's there in Europe. It's there in Canada. It's there in some portion of U.S., not all the U.S. states, but I would classify U.S. into 2 categories. One is artificially focused and the second is branded focused banks. You can see them differently. And there where they are looking at architecture, they are looking at AI, they are more exploratory. They can be looking at understanding the technology first. I would not say exploratory, they are understanding the technology better, they invest in their strong architecture teams and then they select the solution.

So there, the virtual account system in the U.S., one of the largest bank in -- one of the top 20 banks in U.S., they selected entire embedded finance platform from us. That took us almost, again, 24 months to evaluate. So these are the long cycle deals. Now we will have -- this is our third or fourth deal in U.S. in embedded finance. And once we have 3, 4 -- once we cross the hump of 5 deals in U.S. in embedded finance, then the acceleration will happen.

[Venkatakesava Vivekkumar Turaga, analyst]

So BaaS, who can we see as our competitors in BaaS because you've [ sold that ]...

[Manish Maakan, executive]

They are primarily local vendors over there who are [ single modular line ]. The good advantage we right now are able to establish is it's part of a full corporate [indiscernible] enterprise platform. They could start with a point solution on just managing virtual accounts on how to manage the payables or receivables better. But a full treasury needs a deposit product, a liquidity product, a receivable product. So the architecture validation through some of these are happening. And once you break through and win with these through architecture, really then the competition eliminates because it's all legacy in U.S. or like all of us now.

[Venkatakesava Vivekkumar Turaga, analyst]

So you -- or next few years, you'll see this banded things, people having some -- realizing that they have to invest in enterprise to get anything -- need to think that you think will force them or it's...

[Manish Maakan, executive]

I think there are 2 patterns I'm looking forward to. One is a positive pattern that some of the banks are making those investments and will generate confidence in the rest of the market like we have seen. The second is number of accidents are happening. Sometimes that accidents accelerate way much faster, at that time, are you ready or not ready? Do you have proven life sites, I think that makes a difference. So that's -- we're following that journey right now.

[Praveen Malik, executive]

Arun, we have one last question. Mr. Rohit Balakrishnan from ithoughtpms.

[Rohit Balakrishnan, analyst]

So just my question was on platform revenue. So this quarter was around INR 56 crores. So first is, this includes the anchor GeM or this is excluding that?

[Vasudha Subramaniam, executive]

It includes.

[Rohit Balakrishnan, analyst]

Okay. So if I were to exclude that, so we are around INR 45 crores or around that INR 46 crores, INR 47 crores of revenue. How do you see this revenue shaping up over the next, let's say, 8, 10 quarters? I mean, just your color would be very useful, given we are seeing good traction at eMACH.ai? But at the same time in the past you've said you will do what your customer wants. So just your comments on this, how do you see the platform revenue sort of coming in? And just connected to this, as a result, then the margins as well because those are expected to be higher margins.

[Arun Jain, executive]

Yes, I think we can have more predictively 3 years from now, not quarterly. So your question is right. In 3 years' time, this business has to be a $50 million to $75 million business in platform revenue, should be there comfortably. So we are targeting $100 million, but $50 million to $75 million should be the platform revenue in 3 years' time. So that's a better way to look at the platform revenue right now.

[Praveen Malik, executive]

Thank you, Rohit, and thank you, everybody, for joining the call today. In case you have any further questions, please do write to us. Thank you. Now you can log out. Thank you.