Notes from above management call

• We are positioned between the best of both- Thought machine(usability) and Temenos (depth of product)
• GTD has good reference ability- 90+ accounts in GTD.
• 1200 people R&D team
• All products have composability by using API, and products(Liquidity, core banking, lending, credit card) can be assembled using different API. Temenos does not have the common capability on open architecture for all products (they do lots of M&A)
• Every few quarters, we will migrate a product into the platform.
• Platform is sharp and country-specific, with 97% capability of the product.
• Platform business DO NOT cannibalise the products business.
• There are two types of customer
  - who wants to invest upfront- go for a product license.
  - Others prefer platform services.
• Customers in the EU/US look for a platform. If the cost is substantial over ten year period, then they convert into licences plus AMC (AMC is 20% of license cost)
• We try to make it a subscription base, but we are flexible

Underwriting Platform - Out of 300 insurance companies (in US), we have a lead of around 20 customers at the moment, and we are signing it off at an accelerated pace. - The underwriting platform is gaining a lot of traction in the US. Hence we are saying the US will grow faster this year.

• Platform revenue is anything between 300k/per month to 1 million/month, but this is backloaded, meaning less revenue at the start and more revenue as they progress.
• Product license cost USD 3 million over 10 years but in subscription, it is around 10 million… 3 times more than license revenue
• Cycle time for the platform is 60% less than a product. If the focus is cost, then the client may be inclined to go with the platform stack.

Profitability:
- Travel cost up, Talent cost up, tax cost up (around 25%).
- Need to invest more in platform/R&D.

• Our growth, compared to the competition (e.g Temenos), will be market leading. The organisation is geared for 20% growth. This growth requires investing in our IP and remaining relevant.
• Will grow without diluting our capital.
• When we launched the product iKredit/Auto, there was a powerful pull from the market; hence we launched the platform now. We could have delayed the investment but preferred to do it now.

Global Recession market-
- Nice businesses like us which cater to specific needs will remain relatively insulated. Our costs are small as compared to the banking budgets of clients.
- Some of the destiny deals (~ 60)- will come to know if they are getting funds by Nov.

• Big banks are not delaying the decision based on the macro environment. However, the smaller player whose funding depends on the stock market may be impacted.
• EU/US banks need to upgrade their technology to reduce costs.
• Europe is ahead of the US in terms of cloud adoption.
  • America first wave of cloud adoption .
  • Europe- New core banking solution is in demand.
  • Asia Pacific- Product-based model
  • Middle east- slowly getting into cloud products but mainly product based.

Focus is to build deals in Europe, Canada and US. Noth America will be faster growth this year.

• Gartner- look at the number of deals signed in the last 3 years. Forrester look at the product architecture. Hence we moved from Gartner.

• Banks which have agility are winning in the market. Others are finding it difficult to traverse the market.

• Best Matrix to look at it- License link revenue.

Product Implementation :
- Kept implementation in-house (Temenos is not the case)
- DID NOT Give implementation- We were building the brand earlier so keeping it necessary was necessary.
- Partnerships are becoming important.

Subscription-based revenue
- Suppose we book 1 million USD product- 1 million is shown in the book
- subscription- Only 3 months of revenue is shown for the product.
- Tier 3/Tier 4 customers are going for platform products.
-Bigger clients prefer for an upfront license.

Product Platform- Costs us $5-6 million/per year.
- First-year revenue may be around USD 1 million/per year
- It takes 6 to 8 quarters for the platform to break even (1 million to 6 million).
- When the platform revenue becoomes 30 million - my platform cost will be USD 8 million. That is when License link revenue will move into 65% range.
- In 3 to 5 years, we will generate around 30 million USD revenue (individual platform)
-GeM - we have reached 30 million as a number

• Azure/AWS- Work in Progress. It may take 6 to 9 months before we jointly announce a deal

• Why 20% growth aspiration- Inspired by HDFC Bank and focus is on predictability.

• Dividend/Buyback- We want around 1000 cr in our book before we become aggressive on payouts. We should have the protection of 3 to 6 months of the cost structure. With 400 cr per quarter, we need around 3 quarters of cost taken care of. Hence we are looking at 1000 cr before being aggressive on buyback/dividend.

My take:
Overall next few quarters will be challenging as they are investing more into platform business. Considering that nature of the product business, it may impact their near term profitability if they fail to sign up customer. However, Intellect a world leader in their field across different products and kind the investment they are making augurs well in medium to long term. I am invested and my views could be biased.

The answer to your question could be both Yes and No.

Yes because for producing Green hydrogen you need Renewable sources of energy Solar, Wind Hydro and open land mass for putting up solar and wind plant.
India has the unique advantage of (1) vast land mass of 33 million sq kms that is 3 times more than the entire European union (2) 300 Sunny days in a year and with great wind potential due to its unique climate - again it is among very few countries with maximum sunny days/ wind potential through out the year.

For example, Entire Europe has extended winter and there is hardly and sunny days and Japan hardly has any land mass to put up wind and solar plant… So these countries are definitely looking for importing Green hydrogen from India, given the seriousness of these countries to go green.

As of today, already India is the 5th largest producer of Solar energy and 4th largest producer of Wind energy in the world. (Source Ministry of renewable energy - link given below which gives statistics).

And if the Govt is fast and continue to push for Renewables and hydrogen and create a proper eco-system for production and export, it could materialize.or else we may fail.

The link below gives both solar and wind potential in India

https://mnre.gov.in/solar/current-status/

https://mnre.gov.in/wind/current-status/

CPP line will be commercialised Q1 next fiscal.
As for their FIBC business, falling RM should aid their bottomline (after high cost inventory gets exhausted). But, larger issue is weakness in Europe which their major market in exports.
However, FIBC being used for packing essential commodities like food grains, Pharma, milk powder etc etc, the dip may not last long.
CPP is completely domestic business and CPP being highly recyclable, majority of FMCG and other industries will shift from BOPP to CPP to ensure tighter recyclability norms (enhanced producer responsibility - EPR guidelines) which are in place but strict enforcement is awaited.

This is so informative. Thanks for sharing it with all the readers of valuepickr.

Thanks for the reply. I have one more question. Due to fright cost reduction with the same volume they will have 20-25 cr added to ebitda this FY. Is there any chance of topline coming down due to crude price falling? Because in FY22 the revenue was 1.38x over fy21 w/o much volume growth.
So due to cpp extra 20 cr to ebitda + freight cost coming down giving additional 20-25 cr ebitda should take the ebitda to 90 cr. so it’s available at forward ev/ebitda of 4.68. Historical lowest ev/ebitda around 4. So will there be any negative impact of crude price coming down on the bottom line or the gross profit level? except this negative point the company seems to be at cheap valuation.