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Intellect Design Arena Ltd Management Discussions

684.25
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Apr 1, 2025|12:00:00 AM

Intellect Design Arena Ltd Share Price Management Discussions

1. Overview

I. INTRODUCTION

Intellect is the worlds largest Event driven, microservices-based API led cloud-native, multi-product Financial Technology platform for Global leaders in Banking, Insurance, and Capital Markets. We offer a full spectrum of banking and insurance technology products through four lines of business

- Global Consumer Banking, Global Transaction Banking, IntellectAI and Digital Technology for Commerce.

Applying first principles thinking, we have elementalised the Banking space to a finite number of Events, Microservices and Application programming interfaces (APIs) which significantly simplifies any adoption / transformation initiative. Further supported by our twin technologies iTurmeric for Composability and Purple Fabric for Enterprise Connected Intelligence (CI), our IP asset vault presents a formidable combination of enterprise grade robustness, agility, richness of functionality and ease of deployment. We partner with institutions in the Financial Services space in their Business and Operations transformation agenda. We help them in transforming Business, Operations, Experience or in extending their capabilities. We have a deep understanding of these domains, working with global leaders for over three decades. Over this time we have significantly invested in developing differentiated Intellectual Property assets- architecturally superior Technologies, Products and Platforms with unparalleled depth and span of functional richness that helps banks and financial institutions accelerate their growth and transformation agenda. We have flexible Business models that suit the diverse investment and risk appetites of our customers. Our algorithmic delivery methodology is robust to ensure defect free, on time deliveries while being agile and sensitive to the dynamics of our customers priorities. Over the years, we have won the trust of global brands across geographies and they repose their trust in us as our net promoters. Global analysts too have recognised the superiority of our IP assets and have repeatedly awarded Leadership rankings to us. Our Design Thinking DNA gives us the edge to create differentiated products and platforms. Intellect has over 270 customers spanning 57 countries and with a diverse workforce of solution architects, domain and technology experts in major global financial hubs around the world.

II. OUR CUSTOMERS AND THEIR PRIORITIES

Our customers are Banks catering to Retail or Corporate customers, Central Banks, Wealth Managers, Private Bankers, Card issuers, Capital Market participants such as Brokers, Custodians, Asset Managers, Insurance Carriers, Government enterprises, Corporates and Retail chains. We partner with them in their transformation agenda and help them modernise their Technology, drive customer centricity, support their growth aspirations, deliver efficiencies and enhance their profitability. As consumers of banking and financial services, we have personally witnessed the pervasive impact of technology in this space. Technology has become the single biggest lever of competitive edge in this domain. While so, the diversity of our Customers coming from different geographies, at different stages of technology journey, operating under different regimes of regulation / data protection, facing different textures of competition and finally catering to different customer sets introduces multiple variants of priorities. Applying First principles thinking to this problem statement, we observed the following patterns in the Industry:

Intense competition from incumbents and new challengers - Fintechs, digital entities, ecosystem players have steeply increased the need for innovation, speed and agility. Institutions wish to design, configure and customise offerings and take them to market quickly, fine tuning them as market needs evolve. COMPOSABILITY thus, is a key ask.

To be responsive to Customer needs, Banks and FIs seek to know more - about the customers, competition, market trends and developments so that their decisions and actions are best tailored. Thus,

CONTEXTUALITY becomes the second key ask. Needless to add, Decision grade data is the key to providing Contextuality. With the fast paced developments in Artificial Intelligence (AI) and Generative AI, the ability to assimilate data in multiple formats and sources, validate and synthesise them to decision grade insights is decisively a key differentiator.

The maturity of the digital era - has brought in three facets of Digitisation - the 3Es - EXPERIENCE and EFFICIENCY, Effectiveness. Experience is a given ask at every touch point and channel. To deliver a holistic experience, seamless back end processing was required, addressing processes, workflows, business rules, entitlements and exception handling. AI also offered the ability to intelligently automate processes and user journeys. Thus. EXPERIENCE and EFFICIENCY became two sides of the same coin - Digital In and Digital Out, as we put it. EFFECTIVENESS related to delivering holistic value by leveraging connected Enterprise Intelligence.

The mission critical nature of the applications - running real time across time zones, geographies, currencies and supporting peak volumes with a committed response time - demanded the ability to scale up to support business growth delivering high performance - HYPERSCALE, HIGH PERFORMANCE with ENTERPRISE GRADE Security.

With Platforms, Marketplaces and Ecosystems taking center stage, interoperability, seamless data exchange, and integration with other applications within and elsewhere - became a must. This was further accelerated by the Embedded Banking phenomenon, where a Banking interaction could be triggered from just about any engagement or User journey. This created the demand for Open, Cloud native architectures with Microservices that could function as independent applications by themselves and Application Programming Interfaces (APIs) that would help them communicate with each other. As Banks and FIs turned to technology to answer their business asks, they also had to catch up on their technology, depending on their current stage. This meant the allocation of available dollars between maintaining current Lights on platforms and the Upgrade programme. Often, the rich information cache in their current systems and the switching costs made their transformation programmes near impossible. So, these institutions sought a way to keep the best of both worlds.

III. HOW HAVE THE FIVE WAVES OF TECHNOLOGY REVOLUTIONISED THE

FINANCIAL SECTOR?

Technology has driven significant transformation in the financial sector over the past few decades. Five technological "waves" can be used to categorise this transformation. Financial technology products and services have grown more complex, with each wave building on the preceding one. While these have made it simpler to access financial markets, accelerate transactions, and enhance consumer experiences, there have also been challenges of data privacy and cybersecurity, to name a few.

1. The first wave replaced manual processes with mainframes and computers. enabling banks manage higher volumes effectively

2. The second wave led to automation of Branches and introduction of individual systems such as Payments. This wave evolved to the adoption of databases and client / server technologies paving way for powerful desktop based Analytics.

3. The third wave, leveraged the internet to launch connected services and web applications eventually graduating to Mobile Apps with the launch of the smartphone -simplifying Banking, anytime, anywhere.

4. The fourth wave witnessed the advent of the Cloud laying the foundation for Platforms and Marketplaces, bringing together multiple complementing applications and service providers for greater value to customers.

5. The current wave - BankTech Wave 5 blends open architectures such as

Microservices that could act as ‘independent applications, APIs - Application Program interfaces - that help these services to

‘communicate with each other with the scalability of Cloud platforms and the power of Data - Artificial Intelligence/ Machine Learning that lends contextuality to the Applications.

IV. HOW DOES INTELLECT ADDRESS THESE REQUIREMENTS - OUR

TECHNOLOGY INVESTMENTS

Intellect has been consistently ahead of the curve, investing in platforms and technologies that would meet the above asks. Intellects products had a unified architecture that was MACH compliant - API-led, microservices based and cloud-ready, with an option to adopt the headless engine and build differentiating Experience layer on it. This enabled offering Packaged Business capabilities (PBCs) for each Bank vertical, which addressed the demands of Open architecture and Composability. Banks, Insurance companies and FIs could compose/assemble their own Product bundles, best suited for their customers and Markets rather than work with a Monolithic product. Pre-published APIs ensured interoperability with other Applications within the organisation or in the Ecosystem. iTurmeric, Intellects MACH composable platform simplified Design of User

Experience, Integration with the Ecosystem and Process orchestration, qualifying as a best-of-breed Cloud / Digital acceleration platform, where legacy applications can co-exist while transitioning to the target end state.

Intellects Purple Fabric Data platform with 8 AI technologies addresses the

Data lifecycle sourcing from multiple structured and unstructured sources, validating and enriching them and using them for decisions.

Intellects Contextual Banking Operating system (CBOS) accelerates adoption with limitless configurability with ready PBCs and APIs/ connectors to backend product processors and channels, with the flexibility for Banks and FIs to design their Experience layer while offering the robustness for hyper-scale, high performance. To cap all of these and to answer the demands of BankTech Wave5, Intellect launched eMACH.ai in FY23.

WHAT IS eMACH.ai? eMACH.ai, the most innovative open finance platform that offers banks and financial institutions the ability to compose their own unique "My Signature Solution.". It converges and synthesises all of the IP assets described above

329 Microservices, 550 Events, and 1757 APIs, offering a plethora of possibilities to match the imagination of Financial Ecosystem Designers and their customers alike. This powerful combination of MACH architecture and AI helps in

1. Enabling Composability of Applications by assembling Microservices, connecting them through APIs and integrating with other Applications / Ecosystems using iTurmeric - Intellects MACH composability platform This facilitates faster / agile design of Products and faster time to market.

2. Leveraging Embedded AI for delivering greater operational efficiencies, with higher straight through processed transactions, reduced cycle times and greater data accuracy.

3. Harnessing the power of Data to provide contextuality that could power hyper-personalisation and sharper decisions guided by decision grade information.

4. Progressive migration from earlier generations of Technology without losing the insightful data residing therein.

5. These technologies and platforms equip our Products across Lines of Business with Composability and Contextuality apart from delivering high-quality Experience and Efficiency - now a given in the Digital journey. Through pre-published APIs, Packaged Business capabilities (PBCs) and Microservices and by collaborating with our Marketplace partners, we offer our Customers - who are contemplating a Business or an Operations transformation - the flexibility to choose from a repertoire of Products, Platforms, Technologies and Accelerators, all of which have won multiple accolades across the Globe, with an assured robust and agile delivery commitment from us.

V. HOW ARE WE ORGANISED AND WHAT PRODUCTS & PLATFORMS DO

WE OFFER?

Intellect is organised along the lines of the verticals that it serves. There are two Banking verticals - iGCB (Intellect Global Consumer Banking) and iGTB (Intellect Global Transaction Banking) - addressing the requirements of the respective Banking verticals. IntellectAI comprises Insurance and Wealth & Capital Markets business. We have also recently launched Digital Technology for Commerce to address the Procurement cycle and Accounts Payables processes for Governments, Corporate and Retail

The key products offered by these Business Units are: iGCB - Intellect Global Consumer Banking:

IDC - Intellect Digital Core suite built on eMACH.ai & hosted on the cloud is a Core and Retail Banking platform for contextual, real-time Banking - integrating Retail Banking, Lending, Digital Banking and Channels with intuitive dashboards and analytics. Live in the UK and in Growth markets, this is sought after by New Bank Licensees, Digital Challenger Banks and Banks that seek to transform their Core platforms iKredit360 - With the boundaries of ecosystems blurring, there is a huge opportunity for banks, eCommerce players, and NBFIs to think beyond traditional lending products and deliver an integrated experience across the credit ecosystem. iKredit360 is a comprehensive and composable technology platform, driven by eMACH.ai, that enables institutions to curate unique credit experiences to merchants, channels partners and end consumers. With its ability to converge systems, AI driven decision support, manage financial products such as Loans and Cards, credit lifecycle management, Collaterals and Dispute Management and integrate fintechs, iKredit360 empowers financial institutions to expand and extend their credit experiences to become the primary engagement point for their customers. The platform has live installations in both Advanced and Growth markets, registering wins in non-traditional segments such as BNPL (Buy Now Pay Later) and Point of Sale credit origination

Intellect Quantum Core, a Market leading Central Banking suite, is the contextual and composable open finance platform for meeting the unique requirements of Central Banks. Functions such as Currency Management, Treasury, Debt Management, Government Accounts, Payments, Citizens portal, General Ledger, FX Management are the highlights of this technology offering. A de-facto category leader, Quantum drives the largest and most complex Central Banks across Growth Markets and Europe and is invited for every Central Banking transformation initiative

Intellect Capital Cube, is a combination of Treasury and Asset Liability Management with high end capabilities for Risk Management, Liquidity Management, Treasury, Trading Analytics, Capital adequacy and Customer servicing. The product has a significant footprint in Growth Markets apart from powering the multi continent Treasury Operations of the Worlds Leading Bank in Treasury Operations. The Product also finds Markets in other Financial Institutions such as Central Banks, Insurance Cos and development finance institutions iGTB - Intellect Global Transaction Banking:

CTX - Corporate Treasury Exchange - driven by eMACH.ai supports Corporate Liquidity management with intelligent functionalities for Cash concentration, Sweeping, Investments and consolidation across geographies, currencies and categories. A Market leader supporting a fourth of Global cross-border MNC sweeps, the Product has presence with the Market leaders in all key Geographies and supports Virtual Accounts Management and Escrows as well

Paycash CX, powered by eMACH.ai, enables payment processing and orchestration through pre-defined, intelligent workflows that aggregate across payment channels and address the payment cycle end to end, ensuring a very high level of straight-through processing, supporting Limits management and Remittance repositories as well. The Product has significant presence in North America, Asia and India

Digital Transaction Banking suite (DTB), driven by eMACH.ai, enables Banks to deliver a seamless experience across the Corporate Financial supply chain, enabling them maximise fee income, improve cross-sell and address the effectiveness of the Banks distribution channels. A category leader in Growth Markets iColumbus.ai, the Next-gen Trade and Supply Chain platform with AI, ML, NLP and Computer Vision, is built on eMACH.ai leveraging native artificial intelligence to harness the power of paperless trade, the openness of a digital marketplace, advanced contextual data analytics, and superior limits management and risk distribution. All available through superb omni-channel UX, for sustainable trade and supply chain finance

IntellectAI:

Magic Submission, fueled by eMACH.ai, is a sophisticated, purpose built, AI solution that extracts and validates necessary information from documents, normalises them to the Insurance carriers target models, enriches further with relevant insights through triangulation from thousands of external sources and provides a simple human in the loop exception handling user experience. ML feedback loops ensure continuous learning. The platform uses scientific techniques to make human-like judgement calls in real-time for business scenarios

Intellect Xponent and Risk Analyst build on the capabilities of Magic Submission and empower the Underwriters and Risk Managers with decision grade insights, predictive analytics and AI driven algorithms to deliver faster and more reliable quotes

Intellect Xponent and Risk Analyst build on the capabilities of Magic Submission and empower the Underwriters and Risk Managers with decision grade insights, predictive analytics and AI driven algorithms to deliver faster and more reliable quotes iESG - a global ESG solution designed for financial institutions. The AI powered intelligent data sourcing solution, built on the worlds largest platform eMACH.ai, is designed for financial institutions seeking to embed ESG intelligence into their investment evaluation processs based on Industry standard ESG guidelines

WealthForce.AI, powered by eMACH.ai, enables exponential growth with our embedded AI and data-driven, intelligent Relationship Manager platform, designed to supercharge revenue, customer experience and engagement. It is a BIAN-aligned, revolutionary offering designed to enhance the productivity of relationship managers, while ensuring hyper-personalisation in each customers wealth journey

Intellects WealthQube, driven by eMACH.ai, is targeted at Wealth Managers, Private Bankers, Advisory firms and Independent Financial Advisors. Organised around Offices, desks and tools, the product addresses the priorities of the Relationship Managers of better engagement with and providing intelligent advise to their clients through a 360 degree view, apart from the ability to transact across Exchanges, currencies and asset classes. The Product has established a footprint with key clients in Growth Markets, specifically India

Intellects Capital Alpha and Capital Sigma - support the Market operations of Brokerage and Custody, complementing the Wealth Management function with the ability to handle multi currency, multi Exchange settlements, integrating the Front, mid and back offices. These products have won approvals from Stock Exchanges in several countries in Growth markets All of these products have won multiple accolades and ratings from leading Analysts and awards for Customer implementations. These have been detailed earlier in this report. iDTC - Intellect Digital Technology for Commerce:

We recently launched three platforms as a part of Digital Technology for Commerce.

1. GPX This platform is for managing the Procurement processes at Government Departments and Ministries, Public Sector Enterprises and

Central organisations and supports the cycle of Request for Proposals / Quotes, Bids & responses, Auctions and Tendering, Purchase Orders and settlement along with Catalogue management of products and services, Vendor and Customer Exchanges

2. CPX This platform replicates the above functionalities for Corporate Procurement process

3. APX This platform automates the Accounts Payables cycle by digitising diverse varieties of invoices, validating and enriching the data and facilitating automated upstream processing and integration with ERP systems

VI. WHO ARE OUR COMPETITORS?

Given the spread of our product portfolio as well as geographic reach, we do not have a single or a few competitors across the board. Competition varies with product / Line of Business and Geography. In Consumer Banking, our competitors are, Thought Machine, Temenos, nCino, Oracle Flexcube, Infosys Finacle and TCS BaNCS. In Corporate Banking, we have Finastra, Bottomline Technologies, ACI, Reval competing against us, while in Treasury, its Finastra, Guava and Finacle. In Insurance, we compete with Guidewire, Duck Creek and Carpe Data.

VII. WHY DO WE WIN?

We differentiate ourselves by applying Design Thinking led First principles thinking in every facet of our Business process - development of products, adopting technology, deployment of frameworks that demystify understanding of domain and technology, building and adoption of low coding platforms that accelerate development of robust and yet agile products that the Market demands and in delivering them in full and ahead of schedule to our Customers. These have been dealt with in detail earlier in this Report. By this differentiated approach, we deliver significantly higher value to our customers both in supporting their revenue growth and simplifying operational processes, increasing throughput, reducing turnaround times and costs. In each of the waves of technology outlined earlier, we have invested ahead of the curve be it Service Oriented Architecture in the mid 2000s, Complete Digital technologies to address both the User Experience as well as Internal architecture, Cloud native platforms and technologies, Data and AI/ML technologies that has prepared us to address the opportunities that each Wave opens up. Our unified MACH architecture eliminates several risks associated with assembling disparate systems, apart from delivering consistency and integrity of data across applications. These have helped us qualify in detailed assessments of Technology / Architecture by Tier 1 Banks in Advanced Markets, competing with both established, traditional players as well as new age startups. In addition, the functional depth of our Product suites / Platforms as well as the flexibility we offer our Customers in designing commercial engagements put us ahead of competition.

VIII. WHAT IS OUR BUSINESS MODEL?

We operate in three Business models

1. Traditional Product Sale Model: In this model, we License the Product to the customer for use on-premise. The customer also pays us for maintenance of the Product during the period of License. We also earn revenues in implementation of the Product and for any customisation carried out for the customer. We also work with some customers in supporting the Product and the business over the period of License with on-site presence of personnel / remote support. Our License revenue stood at Rs. 4,452 million and Maintenance revenue stood at Rs. 4,483 million in FY24.

2. Customer Centric Partnership Model: We collaborate with the customers as their Strategic Technology partners and work with them on their Technology / Business roadmap. As this blueprint is translated to action, we take on implementation / support roles for their Business or Operations transformation agenda. We are paid for our services apart from any Intellectual Property licenses that we may grant them for use in this transformation journey.

3. Cloud deployment / Subscription based Revenues: For customers who do not wish to take on the investment in Technology Infrastructure and / or the complexity of managing them, we offer our Products and platforms on the Cloud deployment model - either in a unique hosting arrangement or through an independent Cloud Services provider. We receive revenues through Product licensing, Cloud set up, Hosting, Subscription revenues - either fixed or linked to Customers Business metrics. Our subscription revenues stood at Rs. 4,551 million in FY24. Together - License, Maintenance and Subscription revenues - are termed License linked revenues and is an important metric for a Software Product

Co. Intellects License linked revenue in FY24 stood at Rs. 13,486 million compared with Rs. 11,731 million in FY23. Intellects License linked revenue grew at a compounded annual growth rate (CAGR) of 18% over a 3 years period. Based on the customers investment appetite and Business plans, we draw up flexible arrangements to work with them to suit their priorities and resource profile.

IX. SUSTAINABILITY

The discussion on Business Models raises the agenda of Sustainability. As much as the commercial objectives of growth, market leadership and profitability, Intellect recognises the imperative of Sustainability as a key organisational priority - with the purpose of our Business being making the Financial world more sustainable by simplification, elimination of processes and resultant waste, conservation of resources through automation and enhancing governance through better connected Enterprise Intelligence, all creating higher value. The Board, Leadership and Business teams have committed themselves to this objective. Intellect brought out its maiden Sustainability report in FY23. Having defined the Policy, key objectives, goals and metrics and adoption of a global reporting standard - GRI - we have progressed into completing the second year - expanding the scope to more locations/ facilities, achieving progress in the metrics, acquiring the required certifications and accomplishing most goals set out for FY24. Intellect approaches the Sustainability agenda through a holistic three pronged strategy

1. Initiatives around Environment, Social and Governance agenda within Intellect as an organisation

2. Initiatives by Intellect associates and its Business partners in the communities around us through our Social Impact initiatives

3. Initiatives at the Ecosystem level in terms of positively influencing relevant policy making The disclosures as per the mandated format in the Business Responsibility and Sustainability Report form a part of this Annual report. A more detailed narrative of our Sustainability agenda and initiatives are provided in a separate Sustainability report. We recognise that long term stakeholder value depends on this key agenda and will report the accomplishments in this sphere, as a responsible, sustainable, well governed Human Corporate, as we progress further".

X. HOW ARE WE CONFIDENT OF THE FUTURE

Our calibrated journey to market leadership in Financial Technology continues to drive growth in Revenue, Licensed linked revenue and Recurring revenues that increased at a 3 year CAGR of 19%, 18% and 24%, respectively. All four levers - Product to platform journey, selected partnership strategy, large to mega Digital deal winning and enterprise-wide Go-lives implementations bring joy and fulfillment to all of us at Intellect.

The power of design thinking is driving better and faster deliveries resulting in maintaining a cash reserve of Rs. 7,756 million and a robust YoY growth CAGR in Gross margins, EBITDA and PAT by 14%, 22% and 25%, respectively. As outlined in our FY23 Annual report, we summarised our thoughts and insights from Lakshya 23 our visioning exercise for Intellect 3.0 journey as below. The progress in FY24 against these is indicated as well.

1. Our current products and platforms are likely to witness accelerated growth over the next 3-5 years Our pipeline has grown by over Rs. 1,000 Crs in FY24 with a 20% increase in the number of Destiny deals

2. The profitability from these would improve during this time frame leveraging on the investments already made, better referencing and the advantage of our Architecture. Our EBITDA Margin have moved up by nearly 2% Year on Year in FY24. We expect further improvement in FY25.

3. We will progressively expand our footprint into new geographies as opportunities unfold based on affinities from existing Customer installations We won a very large transformational deal in a new country Hungary in FY24 and followed it up with a second win as well. We won three Core Banking deals in the Pacific region based on a Central bank referenceability. We won 6 AI deals in the US in the last quarter of FY23, further strengthening our referenceability in that market.

4. We will incubate more platforms as future bets for growth - We have launched three new platforms as outlined earlier

5. We will build a strong Partner Ecosystem, for which we have laid the foundation in FY23, to expand our footprint as well as collaborate technologically for greater reach We have working arrangements with the Global System Integrators, Big 4 Audit firms, Large Consulting firms and the Top 2 Cloud Service providers. We won a large deal in Asia working with a large Consultant this year and have similar deals in various stages of pipeline. Several of our AI deals in the US are with one of the Top 2 Cloud Service Providers.

6. We will build on our relationship with our rich Customer base to be their Technology partners in Migrating to Bank Tech Wave 5 from their current states We have identified a list of prospective Customer Accounts and have a Customer focused organisation structure in place to progress this initiative With the appropriate design of organisation, talent, systems & processes, business models, technology & infrastructure, brand building and funding, we are confident that we will further accelerate our growth and profitability in Intellect 3.0

2. FACTORS IMPACTING OUR RESULTS OF OPERATIONS

Our Companys consolidated revenue from operations (including other income) for FY24 was Rs. 25,654 million and the consolidated profit after tax for FY24 was Rs. 3,227 million. Our Companys standalone revenue from operations (including other income) for FY24 was Rs. 17,353 million and the standalone profit after tax for FY24 was Rs. 1,656 million. A strong growth in revenue and consistent profitability was achieved on the back of robust deal wins, execution of new digital platforms and increase in business from existing customers, reflecting the Companys ability to consistently acquire new customers and execute more recurring business from existing customers.

Other factors

In addition to the above factors, the following factors could cause actual results to differ materially from our expectations:

1. Overall global economy;

2. Changes in fiscal, economic or political conditions in India;

3. Companys ability to successfully implement its strategy and its growth and expansion plans;

4. Increasing competition;

5. Changes in the value of the Indian rupee and other currencies; and

6. Regulatory changes pertaining to the BFSI industry in which our

Company operates and our Companys ability to respond to them.

3. Principal components of our Consolidated Statement of profit and loss Revenue

Our revenue consists of: a. Revenue from operations Our revenue from operations comprises revenue from our four business verticals viz., Global Consumer Banking, Global Transaction Banking, IntellectAI and Intellect Digital Technology for Commerce. b. Other income - Other income consists of interest received on deposits with banks, interest on other financial assets, dividends from investments in mutual funds, profit on sale of investments, fair value gain on investments, miscellaneous income and net profit on sale of assets. As per the Consolidated Statement of Profit and Loss, our revenue from operations and other income for FY24 stood at Rs. 25,064 million and Rs. 590 million, while it was Rs. 22,312 million and Rs. 513 million, respectively for FY23.

Expenses

Our expenses comprise employee benefit expenses, other expenses and finance cost and depreciation and amortisation expenses. Our total expense, as per the Consolidated Statement of profit and loss, for FY24 stood at Rs. 21,069 million and Rs. 19,208 million for FY23.

Tax expense

Tax expense is recognised at an effective tax rate as applicable to the entities in the Group in accordance with the relevant tax regulations in the jurisdictions such entities operate.

RESULTS OF OPERATIONS FOR FINANCIAL YEAR 2023-24 COMPARED TO FINANCIAL YEAR 2022-23 Revenue

Our total revenue comprises revenue from operations and other income as per the Consolidated Financial Statements, increased by 12% from Rs. 22,826 million in FY23 to Rs. 25,654 million in FY24.

Revenue from operations

Our revenue from operations increased by 12% from Rs. 22,313 million in FY23 to Rs. 25,064 million in FY24. This increase is primarily due to higher Go-live executed and related AMCs in FY24 than FY23 and a robust growth in license linked revenues.

Other income

Our other income increased by 15% from Rs. 513 million in FY23 to Rs. 590 million in FY24 primarily due to an increase in interest income from bonds, other financial assets and fixed deposits in FY24.

Expenses comprises the following:

Employee benefits expense

Our employee benefit expenses comprise salaries, wages and bonus, contribution to provident and other funds and post-employment / retirement benefits expenses like gratuity etc. During FY24, the Company incurred Rs. 13,404 million whereas we incurred Rs. 11,444 million in FY23 reflecting an increase in expense of 17%. Such an increase is due to higher number of employees in line with increase in operating activity and increase in compensation for Associates of the Company.

Depreciation and amortisation expenses

Our depreciation and amortisation expenses increased by 13% from Rs. 1,215 million in FY23 to Rs. 1,372 million in FY 24. The increase is on account of depreciation and amortisation on additions to tangible and intangibles assets, respectively.

Finance cost

Our Company has been debt free since FY22. Our finance cost primarily comprises interest implicit in the arrangements relating to leases and customer contracts that are recognised in accordance with IND AS. Our finance costs decreased by 18% from Rs. 32 million in FY23 to Rs. 26 million in FY24.

Other expenses

Our other expenses decreased by 4% from Rs. 6,517 million in FY23 to Rs. 6,267 million in FY24 primarily due to the reduction in costs associated with GeM contract closure and cost efficiencies.

Exceptional item

The current tax expense of Rs. 1,385 million includes unutilised MAT credit balance of Rs. 125 million written off and considered as an exceptional item as your Company is moving to a new tax regime. Profit after tax

As a result of the foregoing factors, our total consolidated profit after tax has increased from Rs. 2,686 million in FY23 to Rs. 3,227 million in FY24.

Dividend

The Board at its meeting held on May 09, 2024 has proposed a final dividend of Rs. 3.50 per equity share of face value of Rs. 5 for the financial year ended March 31, 2024, subject to the approval of shareholders at the ensuing Annual General Meeting and if approved would result in the cash outgo of Rs. 479 million.

Status of Financial Position Total equity

Our Total equity stood at Rs. 24,511 million as of March 31, 2024 as compared to Rs. 20,686 million as of March 31, 2023 representing an increase of Rs. 3,825 million. Total equity comprises Share capital, Retained earnings, Securities premium, Reserves (General and Share based payment) and Other comprehensive income. Increase in Total equity is primarily due to profits earned during the year amounting to Rs. 3,227 million and Other comprehensive income of Rs. 447 million.

Liabilities

Our Company has no debt obligations as of March 31, 2024, other than lease obligations. The Company has only non-fund based credit facility in the form of various bank guarantees furnished on our behalf. Our total liabilities as of March, 31 2024 is Rs. 9,538 million as compared to Rs. 8,187 million as of March 31, 2023, representing an increase of Rs. 1,351 million. Our customer advances (including advance billing to customers based on contractual terms) increased by Rs. 461 million, employee benefit related liabilities increased by Rs. 227 million in line with the operations in FY24. Deferred tax liabilities (net) have increased by Rs. 444 million due to MAT credit utilisation (including Rs. 125 million being written off as an exceptional item).

Assets

Total assets (excluding the cash position) stood at Rs. 26,293 million as of March 31, 2024 as against Rs. 23,396 million as of March 31, 2023, representing an increase of Rs. 2,897 million. Our Tangible assets, Other Intangible assets (including those under development) and ROU assets increased by Rs. 671 million. Trade receivables and unbilled revenue increased by Rs. 2,070 in line with the increase in revenue.

Cash position

Historically, our primary liquidity requirements have been to finance our working capital requirements for our operations and for capital expenditure. We have met these requirements through cash flows from operations. The Company continues to maintain liquidity through robust collection management. As on March 31, 2024, we had a cash position of Rs. 7,756 million, as against Rs. 5,477 million in FY23 as summarised below:

Financial Year
Particulars 2023-24 2022-23
Investments - Refer note 10(a) 3,924 3,112
Non-current bank balances - Refer note 6(b) 1,789 1,394
Bank balances other than cash and cash equivalents - Refer note 10(d) 45 32
Cash and cash equivalents - Refer note 10(c) 1,998 939
Total 7,756 5,477

Key financial ratio analysis

Below are some of the key ratios indicating the financial status (based on consolidated financials)

Key ratios March 31, 2024 March 31, 2023 Management comments (only material variances)
Current ratio 2.04 1.75 Improved current ratio reflects the Companys ability to manage its working capital
Return on net worth 14% 14% -
Debtors turnover Ratio 4.69 5.90 -
Interest coverage ratio 177.11 115.01 Our Company is debt free and increase in interest coverage reflects the Companys capacity to service interest obligations arising out of lease and advance from customers (accounted for in accordance with IND AS).
Debt equity ratio 0.02 0.01 Increase is due to temporary borrowings (bank overdraft) in one of the subsidiaries as of year-end.
Operating profit margin 19% 16% Increase in FY24 is due to higher profits owing to higher revenue and cost efficiencies in FY24.
Net profit margin 13% 12% Increase in FY24 is due to higher operating profits, partially offset by higher tax expense owing to unutilised MAT credit write off as an exceptional item in FY24.

Qualitative disclosure about Intellect risk

The detailed overview regarding the risk and uncertainties which the Intellect is subject to along with the mitigation strategies is described in detail in the Directors Report under "Risk Management" Section. Also, the systematic risks arising on account of Technology disruption is covered in detailed manner in Intellects sustainability report. Also, other material business conduct and sustainability issues pertaining to environmental and social matters that present a risk or opportunity to Intellects business, rationale for its identification and approach to mitigate those risks along with its financial implications are provided in the Business Responsibility and Sustainability Report.

Known trends or uncertainties

Other than as described in the Risk Management section of the Directors report to our knowledge, there are no known trends or uncertainties that are expected to have a material adverse impact on our revenues or income from continuing operations.

Seasonality of business

Our Companys business is not seasonal.

Significant developments after March 31, 2024 that may affect our future results of operations

No circumstances have arisen since the date of the last Financial Statements which materially and adversely affect or is likely to affect, our trading or profitability, or the value of our assets or our ability to pay our liabilities within the next 12 months of the date of the last Financial Statements as disclosed.

Internal Financial Control and their Adequacy

The Company has designed and implemented a framework of internal controls and procedures, which enables the Company to identify risks and formulate an appropriate response in a timely manner. The Company has adequate internal controls commensurate with the size and nature of its operations, which have been designed to provide reasonable assurance regarding recording and providing reliable financial and operational information for accounting, consolidation, and management information purposes, in compliance with applicable statutes. Internal processes and procedures defined include controls that safeguard assets from unauthorised use, execute transactions with appropriate authorisation and ensure compliance with corporate policies. The Chairman & Managing Director and the Chief Financial Officer (CFO) have evaluated the effectiveness of the internal controls over financial reporting related to the preparation of financial statements included in this Annual report. The CEO and CFO certification has been provided as of March 31, 2024, in accordance with Regulation 17(8) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR). A Certificate included in the ‘Report on Corporate Governance section of this Annual report, discusses the adequacy of our internal controls over financial reporting. S.R. Batliboi & Associates LLP, the statutory auditors of the Company have audited the financial statements included in this annual report and have issued an attestation report on the Companys internal control over financial reporting (as defined in section 143 of Companies Act, 2013).

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