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Edited Transcript of INEE.NS earnings conference call or presentation 15-Jun-20 11:30am GMT

Q4 2020 Intellect Design Arena Ltd Earnings Call

CHENNAI Jul 29, 2020 (Thomson StreetEvents) -- Edited Transcript of Intellect Design Arena Ltd earnings conference call or presentation Monday, June 15, 2020 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Arun Jain

Intellect Design Arena Limited - Chairman & MD

* Manish Maakan

Intellect Design Arena Limited - CEO of Intellect Global Transaction Banking

* Pranav Pasricha

Intellect Design Arena Limited - CEO of Intellect SEEC

* Praveen Malik

Intellect Design Arena Limited - VP of IR

* Rajesh Saxena

Intellect Design Arena Limited - CEO of Intellect Global Consumer Banking

* Venkateswarlu Saranu

Intellect Design Arena Limited - CFO

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Conference Call Participants

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* Rahul Jain

Systematix Shares & Stocks (India) Ltd., Research Division - VP of Metals & Mining

* Rajeev Agrawal;DoorDarshi Advisors;Founder

* Sumit Garg

Alpine Management Services III, LLC - Operating Partner

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Presentation

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Operator [1]

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Very good evening, ladies and gentlemen. Thank you all for standing by. And welcome to the Fourth Quarter Financial Year 2020 and for the Full-Year FY 2020 Investors Earnings Conference Call of Intellect Design Arena Limited. (Operator Instructions)

Now I would like to invite and hand over the conference to Mr. Praveen Malik. Thank you, and over to you, sir.

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Praveen Malik, Intellect Design Arena Limited - VP of IR [2]

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Thank you, operator. Good evening, and welcome, everyone. Hope you, your colleagues and your family members are safe. Thank you for joining us today to discuss the Intellect Design Arena Limited financial results for the fourth quarter of FY 2019/'20 and the financial year ending 31st March, 2020. An investor presentation and the press release have been sent to all of you and is also available on our website. Our leadership team is present today on this call to discuss the results.

We have with us today Mr. Arun Jain, Chairman and Managing Director; Mr. Venkat Saranu CFO. And also on the call are Mr. Manish Maakan, CEO of iGTB; Mr. Rajesh Saxena, CEO of iGCB; Mr. Pranav Pasricha, CEO of Intellect SEEC. They will be joining from their respective locations. And besides them some other senior members of our management team who will also be present on the call.

Mr. Arun Jain will first brief you on the strategy of the company. And the respective CEOs will update you on their line of business. The CFO will then brief you on the results. It would be followed by Q&A, which will be replied by the senior members of our management team.

On 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, which must be read in conjunction with the risk that the company faces.

With this, I hand over the conference to Mr. Arun Jain for his brief. Arun, over to you.

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [3]

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Good evening, everyone, joining the call. Since this is annual results, I would like to take you how the Intellect strategy is planning it out on a holistic basis. The results are available in front of you, so you must have seen the results of the quarter 4. The revenue, the EBITDA, those numbers you would have seen, so I don't have to get into those numbers right now.

As a product company, the really important thing is whether we are, on the strategic path, going in appropriately. So in various industrial designs, we have aligned our strategy around products, what products do we have, then we choose to go to market; which market, and then chose which customer and then how do we keep creating more year-on-year.

Now on Slide #2. With each product requires huge investment and management time to go to market and building a market acceptance. we presented to you during Investor Day 2018 that we're looking 1 LOB by LOB when we go to market. So we've chosen GTB to accelerate our marketing, which resulted into FY '19 GTB business achieved $100 million revenue equivalent to the Intellect revenue in 2015 at the time of demerger. So it's accepted the right model. And obviously, by having such an accelerated growth of $50 million to $100 million in 2 years, which they demonstrated, which required consolidation and industrialization and delivery focus. So that resulted into lower numbers in current year.

The second piece was GCB, which is -- which we plan between '19/'20. We launched IDC 17 in core banking system, which is a large piece of core banking system, which is occupied by Temenos, Finacle, and Flexcube, and this space was -- seems to be difficult space to enter, but since our product has phenomenal technology differentiation, we planned it out very, very carefully that for this quarter to go to Europe first from Asia Pacific to drive the growth engine. So I'm ready to announce in '19/'20, we have open banking available in U.K. and -- which is leading to many of the -- and the product quality is substantially better, which Rajesh will take you through. For '19/'20, we have a good traction in GCB emerging in '19/'20. 2021 will translate into a substantial profitability out of this business.

Our third business SEEC is a focus of this year. We look at AI/machine learning as a critical piece of digitalization, the decision grade data is of the typical piece. And for decision grade data with the accuracy of more than 90%, we need to pick up one particular use case for a particular space, like underwriting space like Big Data. It took us 4 years to deliver Fabric data service as a platform, and that Fabric data service platform we use for 1 single use case right now, but the platform can be leveraged for multiple use cases. So Pranav Pasricha will take you through how this decision grade data is building a traction in the U.S. market and how calibrated it is driving the growth in this business and what is the potential of this business going forward.

RTM business, which is a capital market business, which we have not shared much details with you as an investor. We will be starting this journey from April onwards. We have launched some products here. I'll share with you a detailed strategy afterwards. And I'll share the GeM strategy and 1 new product, Turmeric strategy. That will be shared by me.

At this point of time, I think we spent in -- '19/'20 was a year for industrialization. We spent a lot of work on industrialization and make the product cloud-ready. We've invested close to 150 man-years of effort to drive accelerated micro-services, API-based architecture and cloud-ready platform and using low coding platform.

So one good news at this point of time is all the 4 businesses, which we've conceptualized in 2015 are cash flow positive.

With this, I would like to hand over to Manish to share the highlights of GTB business.

Manish is in the room? Manish, you are there?

If Manish is not able to get connected, Rajesh, can you take it to the iGCB in the meantime.

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Rajesh Saxena, Intellect Design Arena Limited - CEO of Intellect Global Consumer Banking [4]

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Yes. Thanks, Arun. I hope you can hear me.

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [5]

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Yes, we can hear you.

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Rajesh Saxena, Intellect Design Arena Limited - CEO of Intellect Global Consumer Banking [6]

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Yes. So I'm on Slide 5. So let me give you a quick update on GCB and how it has fared in 2019/'20. As you are aware, we have the following products in GCB's table: our flagship product, Intellect Digital Core, IDC; Quantum Digital Core for Central Banking, which is a category leader, our lending suite; CBX-R, which is our omnichannel digital solution; and cards. We are all aware that core banking space has the largest fab and Temenos is one of -- is the market leader in this space. Besides Temenos, our other main competitors are Flexcube, Finacle and Finastra.

Our product, IDC, has been making steady progress over the last couple of years, and 2019/'20 was also a further validation and acceleration in that journey. Last year, we launched our 2019 version, IDC 19.1, with open banking and regulatory-compliant version on cloud for U.K. and Europe. We are -- I'm happy to say that we are among the only 4 solutions today in the world which are certified for open banking compliance in the world. So we are 1 of the 4.

I'm very pleased to also say that we continue to progress on our product journey and would be looking at launching our '21 version next year, which will be open API, micro-services-enabled, fully scalable and cloud-native solution. This will position us as 1 among the 4 global vendors who we believe are also in this journey with this architecture. What it does is it really helps us to expand our TAM for all Tier 1 banks in the world. Not only are we -- from a product perspective, we are also very well recognized by analysts. Our IDC journey has been recognized by them.

And let me draw your attention to Gartner, which is probably recognized as the best in this space. Gartner has ranked us last year as #1 for open banking. And also this year, they have ranked us as 1 of the top 6 global vendors in Magic Quadrant. Just to draw your attention that Gartner previous year had 9 vendors in this list. So they have dropped from 9 to 6, and we are 1 of the top 6 in this Magic Quadrant. So for example, this year, they have dropped FIS from the Magic Quadrant. We also scored -- we are the top scorer in the peer insights against all core banking vendors.

From a selling perspective, IDC has actually been adjudged as the winner in terms of breadth of functionality. It is actually rated as the #1 product from a breadth of functionality among all global vendors. So as you can see, we are making steady progress, and our product is getting validated by the analysts.

Another important point that I want to draw your attention to is that we are probably the only product company which has both retail banking suite as well as the corporate banking suite. So if you look at from a market validation perspective, this is also validated by a good funnel that we are building in IDC. In the last 2 quarters, we have submitted 25 proposals, out of which we are awaiting results for 9 in the next couple of weeks or quarters.

Out of this 9, we are either in the top 2 or in the top 3 in the final stages. Our strategy to expand in advanced market continues to bear results, while last year and this year, our focus is going to be on Europe. I'm happy to share with you that we have been shortlisted as a qualified core banking vendor by American Bank Association in Washington after a very rigorous evaluation. This will open up opportunities for us, and we are looking to start building our Americas business in FY '22/'23.

A quick update on our Quantum Core Banking solution, which, as I said earlier, is a category leader in the central banking space. Just to remind everyone on this call that RBI, Reserve Bank of India, uses our Quantum solution. This year, we have added 2 more wins in this space, and we are close to signing a Central Bank in Africa.

I also wanted to talk about our proposition on SME banking. We've been working on this for some time. So recently, we have launched CBX-Origination, which is originational -- which is our origination platform for SME lending with cloud-native micro-services architecture, which was launched this year. We have already won 4 deals on this platform. We see great potential of this product, especially during COVID times.

I'm now on Slide 6. In order to build desire, this year we launched our first curated digital transformation program along with Cambridge University in U.K. The first annual program was held in Cambridge, U.K. in January of 2020 and was attended by 27 CEOs, retail bank heads, CIOs and digital transformation leaders from leading banks across the world. The program, which was delivered by Cambridge, had a curated experience. And each of these participants from 27 banks left with a blueprint of the digital transformation for their bank. It was a runaway success and we will be continuing this as our annual event.

So this was a very short summary about GCB. With that, I'd like to hand it over to Manish, if he is back.

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Manish Maakan, Intellect Design Arena Limited - CEO of Intellect Global Transaction Banking [7]

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Rajesh, thanks. I think a quick update on the GTB business. I think as you're all aware, FY '17 to FY '19, we grew up very well and we all doubled up our revenues from $53 million to $100 million. So 2 years of rapid growth has meant that we had to do a lot of heavy lifting in the last financial year.

Our focus for FY '20 was a year of product engineering and delivery execution. And in this year, we actually delivered 15 new licenses, go-lives happened, 6 upgrades happened and 40 significant extensions happened, 3 new cloud platforms went live with customers.

So that was on the significant side on the delivery side, where the foundation was built. We grew very rapidly. But about on our revenue, I think the first 3 quarters, we have seen a lot of deal movement. Finally, in quarter 4, we had 3 very large deals from North America, Europe and Middle East with upwards of $10 million in license revenue, gets us back to our original track after 3 quarters.

When I say significant deliveries have happened in the past -- in the previous 2 financial years, we doubled our revenue, $53 million to $100 million. This was driven by a significant license generation, which should naturally show into our AMC. So for the last 2 years, the years FY '19 and FY '20, we grew our AMC by 11% each year. And we're looking at the same rate for FY '21 and the 2 large $10 million deals we did in the last financial year will result in FY '22 AMC going up by 20%. This is the bedrock for the products business. So consistent AMC growth is seen over there, which is happening.

So I think with this, what we have also achieved is, we have a market leadership with IDC -- with the global markets. And we will be able to grow even in growth markets up to 50 installs. In the advanced markets, we have seen -- right now, we have top 15 of the 50 banks trust iGTB. We won 12 analyst awards last year, and 34 of our customers won awards. So consistent brand recognition across the board.

A strong pipeline continues for all our products. And in the last 100 days, we've seen 18 proposals go out with $50 million-plus to the customers. We will need to work through the current uncertain times to monetize it, but the demand is very heavy. And I think with COVID opening up, we should see how to monetize it.

iGTB is the leading Fintech brand trusted by leading corporate banks in the world. And we look at continuing to monetize it.

That's a quick update from my side. I hand it over to Pranav.

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Pranav Pasricha, Intellect Design Arena Limited - CEO of Intellect SEEC [8]

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Thank you, Manish. Am I audible?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [9]

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Yes, we can hear you.

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Pranav Pasricha, Intellect Design Arena Limited - CEO of Intellect SEEC [10]

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Okay. So those who have attended our previous investor days meetings, you might know on the Intellect SEEC side, we are focused on the insurance side of the business. Our business stack was built 100% on cloud-native technology, and we leverage a lot of machine learning and also big database business solutions.

So to start with the overall macroeconomic environment, the COVID times actually -- recently have actually really propelled us even further. These are the times when we get a lot more demand and interest for digitization and also mid-office automation as well as digital businesses. As insurance companies look to do more and more business online, our database solutions are actually getting a lot of lift.

When we look back at the last financial year, I think it was a very successful year for us. Leveraging the kind of solutions that I was talking about, we expanded our complete offerings across the front-end of the insurance value chain. So previously, while we were focusing on software-based decision automation platform for underwriting called Xponent, and Risk Analyst for big database decision-making, we expanded our suite to use machine learning models to automate intake and the processing of incoming business submissions and interactions between brokers and carriers and customers.

So these are basically big time digital intake solutions that complement now the other 2 solutions and then make it a complete trifecta of underwriting as we call it. So we call it data intake and underwriting. So our solutions can now help an insurance company completely digitize the front-end of their business. So that suite was completed in last financial year.

In terms of the business success, we now have major flagship logos across the U.S. and U.K. The last year was very positive for us in that, that we signed now a few of the global top 10 clients on our client list. The -- we started the year with a number of PoCs and a number of early deployments of our solution, where our machine learning algorithms were being tested and refined. As you may know in these things, in data and machine learning, the more the platform gets used, the better it gets.

So the last financial year has been really good for us because we were able to prove at large scale with some of the largest carriers in the world that our data and machine learning solutions are actually very accurate. And they've been proven to be more accurate. In many cases, actually, in most cases, than the human spend hours working on cases.

So as an example, we have recently won a large assignment, this was late last year, going live early this calendar year, where we replaced one of the world's largest BPOs at one of the world's largest companies for doing complete digital automation. So the end-to-end process was digitized, and that has helped the carriers save hundreds of FTE. So these kinds of cases are now really helping us get established as the leading machine learning and data brand in the United States, in particular.

Likewise, we won a Celent award. Celent is one of the most recognized analysts in our market. They're talking about software for banking and insurance. So for a major U.K.-based carrier, we won the global model award for machine learning-based automation. So that's another case example where we've taken a very manual process and completely digitized this using machine learning solutions for a major life health pension company in the U.K. So as a result of this, our subscription, our model is 100% based on cloud and database subscription. We have a very strong growth rate. We, as of the end of March, our data subscription rate is growing at over 70%. So hopefully, this year should continue to see strong growth for our business.

We're also talking to a number of carriers and -- in creating a number of other propositions. So our, what we call, strategic PoCs, where we look to enter into agreements with companies to either do new use cases or to apply machine learning to different assets of the insurance value chain, that is also increasing. So that means that our model library continues to grow at a very strong pace.

And this is important in this space because you need to continue leadership. Particularly given COVID times, as I said earlier, this is important because we seem that this trend of human-to-machine transition is here to stay. And I think by taking a leadership position, this has really helped us, where we are very well positioned in the current times, and it's growing very fast.

Finally, in terms of brand capital, our brand has now become one of the predominant brands in the insurtech market. We were one of the title sponsors of a major and the largest insurance industry event in Las Vegas. We had over 6,500 people, and we have the prime positioning and our funnel pipeline continues to be strong.

So I'll leave Arun to talk about the COVID comments. So we are just looking at this market. As I said, the interest is very strong, so we're continuing to watch how we can make continued progress on closing the deals through the social distancing times.

So good year in reflection and looking forward to next year. Over to you, Arun.

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [11]

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Thank you, Pranav, Manish and Rajesh. I think you've given us perspective on these 3 businesses, how robust underlying businesses have been created. And these 3 businesses are definitely driving significant growth.

So just to mention about IDC, just to summary IDC, Intellect Digital Core is the largest target addressable market. And that my competitor, Temenos, run $800 million company only on core banking systems. So that's a very huge potential available in IDC because of complete digital and micro-services-based architectural IDC.

Second is Manish's GTB business because of the brand recognition and 50-plus installation, we have taken a lead here from our competition, and we are able to charge premium pricing on it as well as more full demand is coming there, which is demonstrated by 18 RFP during the COVID time, which [as you just saw there.]

Intellect SEEC business is coming to that stage where it's purely a data model and cloud model. We have incremental customers, who are signing it up on cloud, are coming at 80% margin business. So that's an important point in SEEC business update.

From there, GTB businesses we invested till now. And this year will be the -- our plan 2021 for the year, SEEC business will take off the way iGTB were last year, it's on the track.

Now we are preparing for RTM business. RTM business has a lot of assets, Capital Cube, which is Intellect Treasury, runs over $2.5 trillion worth of the assets. Reserve Bank of India works on Capital Cube. Citibank is using this in 40 countries. We had spent enough time in branding it, putting a go-to-market dollars behind it, that seems to sell right now. This year, April onwards, we started identifying what are the target addressable market, which are big.

So we identified 2 markets in this quarter. One is CBX FX Trading platform for self-servicing the corporate for trading. And second, we'll identify liquidity, which is a critical time for COVID, where liquidity management becomes critical for the banks to look at it. So we have Contextual Asset Liability Management, CALM, product, which is -- so these 2 products in last 2 months, we positioned it, marketed it and receiving a good reception. So this year is a time when we build up a good pipeline for these products. So FY '22 would be our realization of growth momentum in RTM business.

Let me take through iGOV business update. The platform is anyway fully operational, and you must have heard a lot of things about GeM from all the announcements from the government perspective. Some of the data which I'm sharing with you is very, very positive. There is almost 44,000 government buyer organizations are on the procurement portal. There are close to 355,000 sellers offering their products on this portal. The number of orders which is placed on this portal is close to 2,15,000. So the value of order from GeM become INR 23,000 crore to INR 46,000 crore -- sorry, so the total number is in a single year, INR 23,000 crore is our order. It is almost $3 billion portal, like whatever Flipkart and other things were there $2 billion. So $3 billion of volume purchases are happening as of now on this portal.

So I think the things are going right. But what happened last year is that first quarter 1, which we went into election year, so that 3 months we couldn't able to get a good revenue from government purchases. And last quarter, which we were earlier expecting a still larger revenue, got shrunk by the last 3 weeks of corona coming in picture. So that is a dampener on GeM business. But overall, momentum is right, government intention is right and they are working with very, very high intensity.

One of the other things, which you must have read in terms of our -- that we have signed up with IBM partnership. Sometime in mid-May, there was announcement, IBM -- in IoT Conference, IBM has announced Intellect to be the first partner to be put on their latest cloud initiative. With the new CEO -- Arvind has come for IBM as a new CEO, he has taken the bet on financial services cloud to be the major initiative. And along with that, we launched Intellect Turmeric platform.

Turmeric platform is a platform, which enables corporates to move towards cloud adoption. So it has a tool set, which enables everybody to move to the cloud businesses. All the bank needs to get into open APIs. So we have an API exchange, which enables our bank to move to open APIs in a structured manner. We have an API studio, which enables the banks for leveraging their legacy platform to be aligned for suitable for cloud deployment. We have Experience studio to enable better User Experience. We have an Integration studio, which is the Olive Fabric, which handles all the integrations across all the platforms. And then, Developer's Sandbox.

So these 5 components, which are there in Turmeric platform, is very exciting for our partnership with IBM as well as for other customers, and this is going far. We are seeing huge demand in this. In last 60 days, we have done at least 35 different webinars for each customer around Turmeric. So that's a huge traction coming in Turmeric and cloud enablement for banking systems.

Coming to operations. I think we have aligned the cost structure of the company in last 4 quarters substantially by using design thinking. We start putting product innovation, delivery excellence, reduction in implementation time [reducing] cycle by 40%. So our implementation costs are coming down because of applying design thinking. So that eases our customer. If deal -- value of any deal is $1 million, earlier we were quoting for $400,000 for license and $600,000 for implementation. With the good design thinking application, we have increased license value to 60% of the deal value, which means customer has to pay only $1 million, but we are utilizing $600,000 for license, which in turn, with 20% AMC, increasing that 10-year total cost of deal going up for us by at least 50% on the retail revenue for the deal.

Our defect reduction is 80%. Low coding platform, like Purple Fabric or Canvas or ARX or Hub technology are helping us to deliver this lower cycle time. And you must have observed with this, we have reduced -- the RFP EBITDA cost has come down substantially compared to the last 4 quarters in spite of salary increases during '18, '19, '20, but constantly, quarter-on-quarter cost has come down by a right cost structure alignment.

Moving to COVID-19, I think this is a question which all of you have, what have we done in COVID-19 and where are we in COVID-19 journey. I think we started this journey much earlier. As soon as we got a first signal on first week of February from Malaysia and Thailand, what preparations Singapore is doing, we activated our BCP on first week of February. And by second week of February, our travel advisory was issued. So -- and then we started working on a potential impact on the customer during the third and fourth week of March. By first week of April, we had a substantial

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[committee] and spent some almost 2 days trying to understand all that is associated with it, this purchasing.

We identified -- next slide, we identified 2 major risks, that project deferrals could have been the risk for the company. At that time, we didn't now working from home could become so effective. But we are able to make the complete working from home from the day 1. Our investment in Google Suite and complete enterprise platform didn't have any stop -- had anything stopped. In less than 24 hours, our IT teams are able to deliver complete working environment to all the developers working from home.

And the other risk which was there was around collections because at this point of time, collections could have been the major risk factor. So after the entire focus of the management team went into completing the last mile collection issue and focusing on collections. Just in April and May, for 2 months, we collected $40 million from our clients. We are able to reduce our net debt to almost 0 by the end of the May. So that is a very, very big progress, which we could able to make during these 2 months.

So as of now, for 31st May, we have a first balance and we have good limits of over INR 200 crore to INR 300 crore limits are available to be deployed for money as needed. So we have completely eliminated that risk, which could have been the risk for first 2 quarters of the post-COVID environment.

We know that uncertainty is there. Banks are getting impacted. Their balances are getting -- their NPAs are increasing, and every country has problem on the banking side, but this is making them to bring digitalization more on the center stage. They need more quality data to make decisions. They need more quality digitalization. They need more mid-office digitalization.

So that is a common pattern which is emerging. And that suddenly, we find the number of RFPs, which has increased by the pull only because our salespeople cannot go substantially to the field. So a lot of RFPs are coming by pull rather than by push of the sales. Earlier, we are going for the push sale, now it's coming at a pull sale, which signals us that we are a strong brand in the market now, which is driving us a pull demand now. So this has changed their shifting from push demand to pull demand.

We made 2 strategic shift that new contract signing with a new customer may take longer time. So if we go with the existing customer and drive them or helping them in -- helping them to improve their revenue acceleration or cost savings or risk management area or technology acceleration, these are 4 areas which we felt could drive substantial growth in existing customers. So we have 200 clients as of now with us. So that will give us good revenue accruals during the 2021.

We have -- and second thing, we are moving these towards cloud deployment and subscription model. So a lot of things have been moved towards a subscription model. GCB and SEEC has taken an initial traction on subscription model. And GCB is moving toward subscription model. In '21/'22, we'll look at GCB-driven subscription model. But '20/'21, still the license model is important for us. So the price balance of license model of GTB and hybrid model of GCB, where licenses and subscription-based model is there. Hence, pure model of SEEC is a combination by which we are stabilizing our cash flows as well as calibrated growth.

Our business levers are trusted brand. Just to highlight to you that the complete RBI support, National Financial Infrastucture is supported with us getting -- proud partner of it. We're supporting entire GeM. We submitted RFP more -- for $90 million post lockdown, which is a substantial big number. And one of the interesting thing is we're close to finalizing a deal with Central Bank based in Africa completely devoid of in-person meetings. That means the customer has almost selected Intellect without having a face-to-face meeting, which is a quite good achievement for my sales team and everything to build confidence in the customer who has done all the reference checks on the phone without any specific face-to-face meeting. So that brand is getting recognized in the banking industry, where we can close our deal on the video conferencing.

With this, I'll just tell Saranu to give the -- share our revenue numbers.

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Venkateswarlu Saranu, Intellect Design Arena Limited - CFO [12]

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Yes. Thank you, Arun. As all of other leaders have given a business update along with Arun. So I would like to give the update on the financial numbers.

As you can see that in Q4, we have reported a total revenue of INR 360 crore. As far as FY '20 is concerned, we have reported a total revenue of INR 1,351 crores. Similarly, if you look into the comparable revenues, which we have given back. In Q4 '20, our license revenue was INR 101 crore, AMC revenue was INR 67 crore, and cloud revenue, which is -- as we talked about, cloud is going to be another part of our business component, reported INR 38 crore.

If you look at the complete FY '20, the license revenue was INR 248 crore, AMC revenue was INR 253 crore, cloud revenue was INR 122 crore. So this is as for the revenue as well as growth is concerned.

Well, coming back to EBITDA, we are happy to say that in Q4, we have reported EBITDA of INR 64 crore and net profit, on account of various operation steps and everything whatever we have taken, we've reported INR 41 crore in Q4. On a yearly basis, our EBITDA we have reported INR 75 crore and net profit at INR 16 crore.

Similarly, our order book log -- backlog as far as the cloud subscription is concerned, it did INR 1,150 crore. And if you look into that, our cloud deals, as we mentioned that cloud deal is one of the important aspect as far as our overall business scheme is concerned, we are having INR 850 crore as of total -- I mean, order backlog is concerned.

Now as far as collections are concerned, in Q4, we have collected INR 298 crore. And we also made an investment of INR 24 crore in product development, which is part of our CWIP. Our total collection for the current financial year, that is last year, was INR 1,283 crore. And the investment product development is concerned, INR 110 crore, inclusive of INR 24 crores what we have spend in the last quarter.

And as far as cash and debt is concerned, we had a cash of INR 134 crore as of 31st March, 2020, and a net debt is INR 121 crore, which if I split into 2 parts, one is working capital debt is INR 51 crore and a long-term loan of INR 70 crore, resulting to INR 121 crore.

And we also want to tell that, in Q4, we won the 3 large digital transformation deals that have resulted in good income -- good revenue in terms of the license as well as the license

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EBITDA is concerned [by far.] So -- and as Arun also mentioned that last year, we went live on 44 instances, including 5 instances in the last quarter.

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [13]

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So rest of the slides are the retail numbers that are self-readable or self-explanatory. So at this point in time, I would like to give some time. I just want to just communicate, Mr. Abhay Gupte has joined. He joined from Logica and EDS, and now currently is working for MTL, Manipal Technologies Limited. He joined our Board as of today. The Board has approved his joining. And we have 41 high-value active pursuits [share listings - shareholders] in the company.

With this, I want to leave the floor open for some question and answers. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have the first question with the number ending with 948897.

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [2]

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Introduce yourself, please.

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Operator [3]

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Participant with complete number 8825948897.

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Unidentified Analyst, [4]

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There was significant degrowth in your services revenue. The assumption was that there was significant product implementation is underway. So if you could please explain the context of that degrowth? And given what is under implementation, if you could help us understand what the outlook for FY '21 was?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [5]

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Yes. So you're saying that there is a degrowth in the implementation design. Yes, definitely. By the way it's a conscious effort of any product company to reduce implementation revenue and increase cloud revenue and license revenue. So it's in the right direction. That number has come down respectively. So that's not a highly profitable business. Our license and cloud businesses have higher profitable numbers.

So in last 4 quarters, we consistently looked at it to increase the license number. And this was a transition year for us to move to the subscription-based revenue, so that is not -- so that's why it's not able to match to the new license revenue. But going forward, this will give us a better EBITDA. Going forward, in 2021, the EBITDA margins will be much better. If you observe that our last quarter margins are close to 18%, which we deliberated in the investor call that our business model will give us 20% margin level. So that's what we are looking EBITDA margin to be 20% level in this year.

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Unidentified Analyst, [6]

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So in your assumption of 17%, 18% margins for '21, are you assuming that the implementation revenues will be static neutral? Or have you built in some element of growth or degrowth?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [7]

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Implementation revenue, we don't even bother about it. It's just a derived one. Implementation is outcome of license deal and the cloud revenue. We don't build an implementation revenue as a focus area because...

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Unidentified Analyst, [8]

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I was concerned more from the cost perspective. I mean, yes, I understand the kind of margin neutral, but I was coming -- I was angling this from the perspective of recovering our fixed overhead that is tuned towards delivering these services.

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [9]

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Yes. So that's right. So we have cut down the cost structure. So we have kept implementation people also lesser. So in last 1 year, we have reduced close to 500 people in the company so that we are much more leaner and more license-focused, and more margin-focused also.

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Unidentified Analyst, [10]

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Sure. And if you could just help us understand the construct of your cloud revenues of the INR 120 crore that you earned in FY '20. How much of this is transaction-based? And how much would you say is fixed-based?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [11]

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It may be 50/50, maybe. 50% will be transactional-based, 50% will be fixed duration-based, monthly-based, basically.

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Unidentified Analyst, [12]

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Okay. So would you build in an element of downward slope in your transaction-based revenues?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [13]

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Downward slope, no, financial portals are not going downward right now. There is no...

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Unidentified Analyst, [14]

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No, I'm assuming in the number of transactions that have happened in your GeM marketplace might also slow down. So I was angling it from that perspective. Are there risks to degrowth of the INR 120 crore number?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [15]

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I would not feel that -- GeM in second and the third quarter will pick it up. The first quarter is a bad quarter for us. Remember, those government [season] has to be done. They are holding back those investments. And logically, it should go more than this year. Last year, they did INR 23,000 crore. This year, they should go at least more than that.

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Unidentified Analyst, [16]

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Sure. And my last question, if I get back to the queue, on the OpEx, we noticed a lot of levers having been used. Getting into Q1 and for the rest of FY '21, do we still have additional levers on OpEx? Or would you think you're going to max them out in the last quarter?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [17]

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In Q1, we have 0 travel costs, almost there in saving of INR 10 crore, INR 15 crore OpEx on travel cost reduction.

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Unidentified Analyst, [18]

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Yes. I mean, is there anything else on, say, employees or other expenses?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [19]

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In backlog, there is. It's a good number.

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Unidentified Analyst, [20]

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Right. So for full year, I mean, what kind of earnings would you suggest that we -- I mean, I know it's very difficult to quantify, but then if we have to use before exit and the Q4 earnings as a model, the reference range, what number would you want to guide us to?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [21]

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I won't be able to guide this time because corona period is there. But I'm saying, looking at all the numbers, where I shared that strategy, all the 4 businesses are cash flow positive, all the traction of the cost structures are coming there. So I think we are healthy on the cash. So I think we are much better than 4 quarters back. And that traction should be there going forward.

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Operator [22]

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Moving to next, we have [Nandan Mariwalandan] on the line.

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Unidentified Analyst, [23]

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Congratulations on a great quarter. My question is on the systems integrator sort of ecosystem. We spoke about it, I think, some time back. Is there any update on that? Are we looking to onboard systems integrator in some of our businesses?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [24]

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That's right. So IBM is one of the biggest system integrator we added right now. And we will be adding some more system integrator, with Turmeric being there and cloud businesses are there. But Rajesh Saxena has mentioned about core banking to be available on pure API-based architecture and Turmeric and cloud is available, now we are looking and talking to do more system integrator to work with us. Those are not being signed up right now, but we will -- in the next 6 months, we'll sign up 2 more.

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Unidentified Analyst, [25]

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Okay. And so that would -- does that also imply that we would have lower implementation revenue and sort of higher on the...

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [26]

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Yes.

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Unidentified Analyst, [27]

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Okay. And just sir, one more...

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [28]

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No, no. I am saying answering for product company, this implementation was initially very important to drive the cash flows, but otherwise our excitement is license AMC. And if you look at Q4, our license AMC and cloud revenue is close to 57% of the book.

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Unidentified Analyst, [29]

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Right. And sir, if -- do system integrators sort of strategically help in getting deals as well beyond just doing the implementation part? Do we see that also? Or that would be majorly driven by the company?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [30]

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Both things happen. We see system integrators introduce us. They bring a confidence in new countries. If we are going to New York and countries like France or Germany, or Spain or Italy, we need a system integrator who brings the confidence there. U.S. integrators also have a lot because U.S. -- you need a local player. Despite of our U.S. counterpart, U.S. integrators can help in growing our IDC business there. So I think system integrators are definitely key part of our growth strategy.

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Unidentified Analyst, [31]

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Okay. And just sir, last on the same. I guess the number of go-lives also this quarter was low relative to our, sort of, run rate. So was that because of COVID? Or so that -- is it that some of those go-lives will happen -- have fallen into the next quarter or that's not the case?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [32]

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It is 1 or 2, maybe, weeks here and there so that these numbers are -- when you take a 35 -- 31st March cut, at least last 3 weeks go-lives were postponed to next month. So that's maybe the reason. So it's not a significant one because immediately as soon as countries start shutting down, for 3 weeks, nobody realized. Then they restarted the going live sometime end of April and end of May.

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Unidentified Analyst, [33]

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Okay. Okay. And just one on the provisions for doubtful debts, we saw a jump this quarter. So is that a one-off? Or do we see sort of continuing in the next year? Or...

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [34]

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It's a conservative approach we are taking. This time, we look at it that all the accounts which are there more than 1 year outstanding because of some delay in the project or delay in the customer side. So we look at it, that let's provide more conservative than not to do it. It's not that it's a write-off. This provision doesn't have any indication on. It's just taking right provisions. And today, we are close to INR 69 crore in provisions from -- over the last 5 years. I don't think we will be lending off, writing off 50%, 60% of it. So there will be write-back at some point of time.

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Unidentified Analyst, [35]

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And just last question, sir, on the cloud subscription part, we've seen amazing growth. So is it fair enough to say that this is a sort of base from which we will grow rather than sort of one-off? And maybe is there any seasonality in it as well in terms of fourth quarter or anything like that?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [36]

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No, this is a growth, will be seasonality but -- as we win the deal, but I think 2 businesses, we have a cloud revenue from SEEC, which has acceleration of 70% year-on-year but that business is small. GeM is our next piece, and third is a core banking piece.

So we expect this number to go up. Now this cloud revenue is INR 38 crore on INR 360 crore, it's close to 11% of our revenues. Last time, when I was talking to you, we got 5% of our revenue when we said we will be 10% of revenue. I think we should be moving 5% each year, maybe 15% over next year revenue should be cloud revenue as we move forward.

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Operator [37]

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Moving to next, we have Mr. Rajeev Agrawal on the line.

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Rajeev Agrawal;DoorDarshi Advisors;Founder, [38]

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Sure. My first question is, if we exclude the license revenue from this quarter, which was quite substantial, then the recurring revenue, the stable recurring revenue was very weak. So could you just talk about what -- how you think about that?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [39]

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I think I mentioned the quarterly revenue [and quarterly earnings] is sometimes misleading, sometimes we are going to bail when the project gets finished, some milestones get finished. So just don't look at quarter-to-quarter. On an annualized basis, if you look at our books, then it will be much better for us -- you to understand how the number looks like, but quarters are quite misleading.

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Rajeev Agrawal;DoorDarshi Advisors;Founder, [40]

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Got it. If I were to extrapolate 40 bps of financial '20, first of all, would we be able to extrapolate what we did in financial '20, year '20? Or do you think there may be some impact due to part of the COVID and uncertainty we have?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [41]

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Sorry, can you just repeat again, your voice is breaking right now.

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Rajeev Agrawal;DoorDarshi Advisors;Founder, [42]

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My question was that given the COVID situation, should we be able to extrapolate our order or our revenue from the various buckets, [GeM, SEEC, RTM and] cloud. And should we be able to extrapolate that for financial '21? Or do we expect some dip there in '21?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [43]

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As of now, our demand is increasing as you look at it. Manish was mentioning, the digital -- mid-office digitalization is improving, our demand is improving. We weren't able to forecast month-on-month because it's an event which happened once in a time in the world and in our living memory, there is no such event which can be used to extrapolate the future of what we'll be looking at it. But looking at a $90 million worth of proposal we've submitted in 90 days, I think this COVID is giving IT companies like Intellect, a good consolidation platform and our efficiency on decision-making is going up. Our clients conversations are going up.

So we are not seeing anything negative. And I think we're seeing COVID to be more positive to bring digitalization agenda on the table. And all the financial institutions, whether it's banks or insurance companies, are more dependent on digitalization. And we would see positive growth rather than negative growth in coming years.

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Rajeev Agrawal;DoorDarshi Advisors;Founder, [44]

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Sir, can you just talk to me about your revenue models of GeM. You mentioned that as transaction increases on GeM, should we expect sort of a percentage-wise similar increase in our revenue? Or how is the model -- revenue model for GeM?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [45]

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Revenue model is transaction-based. It's the basis for sale.

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Rajeev Agrawal;DoorDarshi Advisors;Founder, [46]

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Okay. Is it transaction or is it the amount of transaction?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [47]

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Amount -- value of the transaction.

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Rajeev Agrawal;DoorDarshi Advisors;Founder, [48]

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Got it. Okay. And then when we look at -- you mentioned that we collected almost INR 100 crore in April and May to be very positive get to a net debt nil number. Do we think we are at a point where we are self-sustaining from a cash perspective, and we don't really see any risk of having to raise money from the capital market?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [49]

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That's right, that's right. I think last year also this question was raised whether you will be raising capital from capital market, and we said no. And I think it's a great work done by management team of Intellect not to raise any capital and sustain ourselves with our existing capital. So I think we will now able to sustain much more better because we have a limit since that time. We had INR 131 crore of debt as of 31st March. But so far, so good and looking fairly positive.

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Rajeev Agrawal;DoorDarshi Advisors;Founder, [50]

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Okay. And then lastly, maybe if I can get some comments from you, that our stock being down significant with COVID that's around. But there is a significant value in the company, and there is a big difference in the value and the price. So is there any thought process about how to bridge this gap?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [51]

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These are short-term measures. To me, personally, the way you're asking questions are fully to me. I have seen these kind of things like when the live stock went to [INR 26] in 2009. So these are [the value] events which we know are not commensurate with the company's intrinsic value, and this provides opportunity for the right investors to come in. At that time, Rakesh Jhunjhunwala came in. He made a lot of money with the live stock. So it always provides opportunity because technology stocks are not understood by the market, and especially for the companies.

We are the largest product company. If you look at the license plus AMC, we are -- total revenue, which is license-linked revenue is close to INR 600 crore plus. There's no single company out of India, which will be generating INR 600 crore plus. It's equivalent to whole company size. In 2015, revenue was INR 592 crore. Today, only license-linked revenues are INR 600 crore plus.

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Rajeev Agrawal;DoorDarshi Advisors;Founder, [52]

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Okay, fine. Sir, is there anything that you, on the management side, are thinking about in terms of seeing how you can bridge the gap?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [53]

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Sorry, management side?

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Rajeev Agrawal;DoorDarshi Advisors;Founder, [54]

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Like, is there something that you can do on your side to bridge the gap or this is it just over time, it will sort of correct itself?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [55]

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It will take its own time. Nobody can do anything on the management side.

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Operator [56]

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Moving to the next, Sumit Garg on the line.

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Sumit Garg, Alpine Management Services III, LLC - Operating Partner [57]

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The time period for which the GeM contract has been awarded to you?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [58]

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Pardon, time period?

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Sumit Garg, Alpine Management Services III, LLC - Operating Partner [59]

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For which the GeM, Government eMarketplace contract has been awarded to you, that will end in?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [60]

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It will be ending in '24 or something. So it's a 6, 7 -- 6-year contract.

If there are no questions, we can close the call. It's already 6:00 pm.

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Operator [61]

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We have 2 more questions, if you could take?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [62]

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Okay, 2 more, we can. Okay.

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Operator [63]

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Moving to next, we have [Mr. Vinod] on the line.

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Unidentified Analyst, [64]

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Hi team, this is Vinod. So 2 questions. On the banking industry, digital maturity level, what percentage of the bank you think has already reached 4 and 5 who may not need products like provided by Intellect Design vis-a-vis those who need products? I am just trying to gauge the market size, the future market size for your products.

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [65]

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Okay. So I think in the technology space, every bank has to modernize their technology every 15 years. So there is no -- nothing called a bank doesn't need a new technology for them. Because we are in technology space, so whatever is being implemented by a bank in 2005 needs to come for replacement in 2020. Whatever the product we sell to the customer, it comes back to upgrade after 7 years.

So there is a continuous market on banking products, which is bank has to invest. Bank like Citibank invest $4 billion per year on various product businesses. FIS and Fiserv, their market caps are more than $80 billion, $90 billion. Their revenues are more than $10 billion. So this space is a very large space on purchasing of banking technology and insurance technology. So there's no shortage of market from, if you want to see, at your level of saturation. If you're looking that Intellect will get saturated or banking market will get saturated, no way because this is an industry which works on our technology.

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Unidentified Analyst, [66]

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Okay. You also see -- do you have some numbers on the number of new banks which are getting opened in, let's say, developed versus developing economies?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [67]

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Yes. There is a full list with us. We go to them each -- Singapore is opening up some new licenses and U.K. is opening some new licenses. We always -- our sales team is driving those kind of sales.

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Praveen Malik, Intellect Design Arena Limited - VP of IR [68]

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One more question, operator. Last question.

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Operator [69]

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Sure. Moving to next, we have the last question from Mr. Rahul Jain.

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Rahul Jain, Systematix Shares & Stocks (India) Ltd., Research Division - VP of Metals & Mining [70]

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Sir, just wanted a broader picture. Of course, you have shared within your commentary some of the inputs, but what are the key positive things that you could possibly draw out of the discussion that you might have in the last few weeks from -- in terms of how the client may change behavior? Because I think we've been hearing from banks for quite some time about their intent to invest in the digital channel, but the way this digital channel needs to be transformed, I think the need of the hour has only multiplied significantly over the last 2, 3 months. So are there any specific thing that is giving you far more confidence than in the past? Or this is just the intent as of now and we may see culmination into order over a period of time?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [71]

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Yes. Rahul, very good question. But one is a front-end channel of self-service customer, that's one traction which banks are looking for. Sometimes banks have this self-service channel, which are not best technology, but still they are existing. Those customers may not look to immediate investment because something is there. If something is there, they don't want to displace that unless the bank is a positive-looking bank and want to invest into that.

But what we have seen is complete digitalization, end-to-end, mid-office digitalization. Because today, with COVID what has given a focus is that a transaction when it originates from the customer and gets serviced from that end, it needs to be almost 80% STP, 90% STP, straight through processing. And that is where banks are spending more money because they found significantly wanting in that space. So that's data space of, Pranav what he has highlighted, is helping that from a BPO operator also today, it's difficult to get. And if that entire process becomes automated end-to-end, or Manish, liquidity process becomes completely -- or payment process becomes real-time.

Those are the things where the new RFPs are coming because we never thought of that mid-office is as important because it was working with the people, and they never felt the gap on that. So that is where the bank is immediately investing and they are accelerating those investments, which was supposed to be some RFP, which we are talking to the banks, which are supposed to come in end of the year, they are accelerating it and they are spending in this month itself. So our presale team is extremely, extremely tight right now.

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Rahul Jain, Systematix Shares & Stocks (India) Ltd., Research Division - VP of Metals & Mining [72]

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So when you talk about this mid-office digitalization, do you see then the demand in the market will be more module-led rather than big bank approach?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [73]

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Obviously, yes. That's right. So it will be module by module. It will be progressive modernization. That's why Turmeric plays a very critical role.

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Rahul Jain, Systematix Shares & Stocks (India) Ltd., Research Division - VP of Metals & Mining [74]

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Right. And on the implementation side or, let's say, change in the growth side, do you see a need for increase such thing because right now, a lot of regulations are getting changed, and the existing software may require continuous change to the specification. For example, in India, you have seen this moratorium put into place or further there's need of change that is to be done on the software. So do you see that kind of a thing driving up even the implementation revenue in short term?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [75]

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You have studied the market well, Rahul. So yes, those are a request which are coming in. So we need to capture as much as implementation, increase implementation revenue during this year for the changes that is happening with the bank rules as well as the regulation, both as places. Changes are there in the marketplace and they wanted adequate teams to support those changes. We are looking for meeting those requirements.

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Rahul Jain, Systematix Shares & Stocks (India) Ltd., Research Division - VP of Metals & Mining [76]

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Right. And lastly, from my side. In case in a very hypothetical situation that we don't see fresh deal signing for some time, so what is the typical implementation team schedule that we may have for -- I mean, do we have implementation team occupied for next few months irrespective of new orders? Or these are more like what you win in Q1 get executed in Q2 kind of a thing?

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Arun Jain, Intellect Design Arena Limited - Chairman & MD [77]

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No, no as of now everybody is fully booked. We are short of people right now. We are recruited 100 people last -- full-fledged graduates in the month of May.

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Praveen Malik, Intellect Design Arena Limited - VP of IR [78]

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Thank you, operator. Thank you, everybody, for participating in the call. Any questions or any clarifications out there, please do write to us. And thank you very much. Operator, now you can close the call.

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Operator [79]

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Sure. Thank you. Thank you all the participants and speakers for joining this call on the behalf of Intellect Design Arena Limited. Thank you. You all may disconnect now.