Leading with an unique Contextual Banking Experience
I wish to start this communication with an exciting news. As we were getting ready withthis report we have been rated # 1 in the world for both Retail Banking and CorporateBanking our largest Banking verticals by IBS Intelligence Annual Sales League Table 2020.This ranking is based on the new deals won last year and therefore an indication ofmarket/ customer endorsement of our products. This vindicates our product and marketinvestments and strategies. This also places us in the global league of market leadersat par with giants in the Advanced Markets. I am personally delighted with this milestoneand excited about the possibilities ahead of us. As I sat down to pen this letter Istarted reflecting on the last four years' journey of Intellect. As you know Intellectde-merged from Polaris Consulting Services in October 2014. The initial steps oforganising the company around the four business units listing Intellect in the stockexchanges identifying talent for each of the business lines and building a brand aroundIntellect were allcompleted in the rst 18 months. Soon after that we startedaccelerating our progress across the six capitals of Brand End Customer Leadership IPExecution and Finance - represented by BELIEF as an acronym.
In 2016-17 we commenced the Intellect iGTB - Oxford Leadership programme that hasnow become a marquee signature event looked forward to and attended by the who's who ofthe Global Transaction Banking industry. We also commenced design of Go-To-Marketstrategies for our products. On the IP front we commenced investments into Arti cialIntelligence and Machine Learning spotting the trend early in the curve. Thoseinvestments have resulted in our capturing several of the top Insurance logos in the USfor our AI and ML-driven Fabric Data Services and Xponent Underwriting workstation. Ourproduct User Journeys also started expanding to meet the market requirements elicited inRFPs. On the Talent capital we hired several leadership pro les from our competition andcustomers - those who were excited with the prospect of creating IP in India and buildinga global brand. We also commenced design of our Delivery Excellence framework that wouldguide us in achieving implementation certainty. We won a key transformational deal with alarge European customer - which continues to grow from strength to strength. By the fourthquarter of the year our operational results were positive.
In 2017-18 we built further on our product User Journeys. We also invested inmarket presence and brand building. Our initial investments towards making our productscloud-ready were made. Our revenues crossed the Rs. 10 Bn mark. We also won twotransformational deals in Asia resulting in our License revenues growing signi cantlyover a year ago. We won the prestigious Government eMarketplace (GeM) bid against globalcompetition and went live with the rst phase. We expanded our delivery capacity to meetimplementation commitments. In December 2017 we held Lakshya our visioning exercisewhere we drew up the blueprint for Intellect 2.0 - the journey from 2018 through 2021 withfocus on three themes - Industrialisation Monetisation and Customer- Centricity. 2017-18was also the rst full year of pro table growth. In 2018-19 the rst year ofIntellect 2.0 journey we laid extraordinary focus on the Industrialisation agenda -industrialisation of our products to greater maturity meeting the stipulations of ahigher number of and diverse RFPs and industrialisation of our Implementation process.Methodologies such as Product Walkthroughs Test Walkthroughs and Testing frameworksdeployment of low-coding technologies and platforms and Integration frameworks weredeveloped. The proof point was in winning two large transformation deals both in AdvancedMarkets each with License revenues of over $10m an endorsement of the architectural andfunctional superiority of our products. We launched Intellect Digital Core (IDC) ourdigital core banking platform. We also won the rst IDC deal in the UK on a clouddeployment mode. We started acquiring marquee logos in the Insurance business where wedeployed AI and ML-driven API-ready products on the cloud. The budding iWealth businessacquired two wins in Asia. Revenues from Advanced Markets went up and so did our perdealLicense realisation. Our revenues and pro ts as a result grew signi cantly over a yearago. In our communication to the Investors we had committed that FY19 would be the yearof scale up for iGTB. We stood by that commitment. In 2019-20 we built further onthe Industrialisation agenda. Our products are now more than 90%+ mature with a richcomprehensive User Journey set. We released new versions of our low-coding technology -Canvas 19. We launched an Integration platform - Olive Fabric. We went live with theIntellect Digital Core in the UK fully compliant with regulatory data privacy andecosystem requirements. We won more logos from amongst the top Insurers in the US. Thesego-lives were a further assertion of implementing cloud-ready API-led open architectureproducts in an Advanced Market delivering over 90% accurate data a new benchmark in theIndustry Fabric Data services - our platform for data aggregation cleansing validationand provisioning - stands proven with these go-lives. The Intelligent Data Exchange (IDX)which combines data uptake validation and enrichment was market-tested. It is expectedto scale up for monetisation in FY21. Several wins in the Global Transaction Bankingbusiness of the prior year went live some of them winning awards for the respectivebanks. We won two signi cant deals in the US both with large Global Banks which wouldhelp us build reference in that key market. When live these implementations would alsoserve as a reference to our cloud-ready Liquidity platform and Virtual Account Managementplatform. IDC won more deals in the Growth Markets of Asia. Our Lending suite also wonseveral deals in the Middle East and Asia. The Small and Medium Business (SMB) Lendingplatform supported by AI and ML for sharper credit-decisioning is now market-tested.Quantum Core continued to be the category leader winning with and going live in moreCentral Banks. iWealth business went live with the wins of the last year at multiplelocations in Asia. Towards the end of the year we also launched two sharply-focusedproducts around the opportunities spotted in the forex trading and Asset LiabilityManagement spaces - CBX FX and Contextual ALM. These are set to monetise in FY21. TheGlobal Consumer Banking business was slated to scale up in FY20 and it did! With fullymature products that are comprehensive in their User Journeys and architecturally-superior with a lean and agile implementation methodology we are ready to leapfrog intoour monetisation phase as envisioned in Lakshya in December 2017.
All the mature business units were cash-positive in FY20. In addition they closed witha robust deal pipeline guring amongst the last two vendors in almost every key deal. Theorder backlog that represents assured revenue also increased steadily over the year.Collectively Intellect won 27 deals in FY20 of which 10 were large transformationaldeals. We also went live in 44 customer installations during the year.
Industry Shift Towards Cloud Model
A part of our implementations in the iGCB business and almost all of theimplementations in the Insurance business have been deployed over the cloud - eitherprivate cloud or shared. Our revenue in these installations is through the Subscriptionmodel where the customer pays for the License Maintenance as well as infrastructure byway of annuity fee over the life of the contract.
While this may potentially lead to higher contract value and adds to predictable /assured revenue streams the component of upfront license is lost. Subscription revenueswhich were at 5.7% of the total revenues at the beginning of the year rose to 10.7% ofthe total revenues in Q4. This had a bearing onthe current year revenue numbers. While wepredicted this shift in our earlier Investor communications this acceleration was fasterthan our expectations.
Our annual maintenance revenues grow by about 10%. Increased License wins over the lastfour years and an increase in average License helped accelerate this further. TogetherSubscription and Maintenance revenues form an assured revenue stream that lendspredictability to our forecasts.
In FY20 We also rigorously evaluated our cost structure and now have a leaner morenimble organisation our cost base fell by an annual run rate of over Rs. 150 Crsbetween the rst and the last Quarter of the year. A large part of this has been achievedthrough our industrialisation efforts in the Intellect 2.0 journey over the last 8Quarters resulting in industrialisation of our delivery processes through the DeliveryExcellence framework maturity of our products and development of smart frameworks andplatforms that have a multiplier effect on productivity. This has led to a reduction inthe product development and implementation efforts reduction in defects and a reductionin customer issue tickets. We have been able to achieve this cost reduction despite ouradditional investment in cloud technologies and platforms in the Calendar Year 2019 toprepare the organisation to leverage the industry shift towards cloud adoption.
The slowdown in the iGTB business and the shift to Subscription model impacted ourtop-line growth for FY20. The cost rationalisation helped redeem part of the EBIDTAgures. Lower gures for other Income and higher interest payout and amortisation costsresulted in lower Net Pro t numbers.
Banks and Financial Institutions would obviously be impacted as a result of the ongoingCOVID-19 crisis which has far-reaching economic consequences. That said we also seeseveral opportunities emerging even as many countries are trying to get their economicengines red up again while recovering from the pandemic.
1. Digital transformation will accelerate to work around the limitations placed onin-person interactions. Digital model will no more be a choice but an imperative.
2. Banks will seek to accelerate revenue growth and look for new revenue models tocompensate for the drop in traditional revenue streams such as Interest arbitrage.
3. Cost rationalisation and ef ciency improvement will gain momentum as the nancialinstitutions and insurance carriers will seek to protect their bottom line despite lowerrevenue realisation.
4. Risk mitigation will be of paramount importance as we discover newer sources of riskbeing introduced by the changes to the ecosystem operating models and growth pursuits
5. Building on the Digitalisation agenda and Ef ciency agenda Customer Experience willgain greater focus and self-service platforms that deliver outstanding experience tocustomers will be in demand.
Our pedigree in working with global leaders in the nancial world for over threedecades our differentiation by adopting the Design Thinking approach our investments inTechnology Product and Market Development our rich blend of home-grown andmarket-sourced talent all of these working in perfect orchestration have fullyequipped us to capitalise on these opportunities. In a later chapter in this report weoutline speci c products and solutions that perfectly address each of these requirements.
Looking ahead beyond the immediate future we rmly believe that Contextual' isthe keyword that would de ne banking and nancial services. And that forms the theme ofthis year's Annual report.
The banking and nancial Services is perhaps the segment that is most impacted bymulti-dimensional changes of regulation of product innovation of changes ineconomic and market conditions of multitude of technologies of data privacy requirementsand serving multiple generations of end customers from Baby boomers to GenerationZ. With regulatory and competitive pressures stressing the revenues and incomes Banks andFinancial institutions are constantly looking for innovation to drive revenues and income.Technology has signi cantly contributed as an enabler in this pursuit.
Digitalisation was the starting point. Intellect pioneered the digital transformationwith its unique Digital 360 approach that not only focused on Digital Out - CustomerExperience but also on Digital In seamless end-to-end process orchestration thatensures straight throughput and drives operational ef ciency.
With Digital considered a given' in this race banks are looking beyond. We areagain ahead of the pack withthe application of Data and Analytics. Our Purple Fabricplatform that leverages structured and unstructured data Fabric Data Services thatvalidate and triangulate the data by application of Arti cial
Intelligence and Machine Learning and Intellect Data Exchange that combines datauptake validation and enrichment together help banks and insurers with contextualintelligence in offering sharper quotes assess credit worthiness predict delinquency andmore. While in Retail Banking this drives most appropriate product offerings to the endconsumer it helps in intelligence-driven routing of fund movements payment processingand balance consolidation for the corporate customers apart from the workflow anddocument management with Trade partners to name just a few use cases. Thesetechnologies apart Intellect's unique repertoire of User Journeys that have beendistilled from our rich domain expertise also build contextuality.
Making Transformation Progile
While several institutions and organisations aspire to adopt the new age technologyplatforms - that are microservices/ API-led cloud-ready and open architecture-based theyare often grounded by the investment in legacy platforms and continued dependence on thetreasure of data therein. Towards the end of the nancial year we launched our iTurmericplatform that helps banks and nancial institutions navigate this transition in acalibrated manner matching their priorities and appetite for investment and change. Theplatform explained later in this report combines an API Exchange API studio anIntegration Studio which can build connectors across diverse products / platforms in thebank's technology landscape and with the ecosystem and a Sandbox for developers. Thusthe journey to Digital and Contextual is accelerated without the friction points of a ripand replace approach. Add to this our unique Design Thinking-led approach the certaintyin implementation guaranteed by our Delivery Excellence framework and our flexiblecommercial models all elaborated later in the report it's truly Myagenda my way' for our customers.
The Future Does Hold a Promise
While the pandemic that we are in the midst of did unleash a sense of gloom and despairaround us our investments our IP assets our talent pool and our brand prowess havecollectively put us in good stead. In the rst 75 days of this Financial Year we havemastered the art of running the business remotely conducting demos e-meetingcustomers submitting proposals winning deals signing contracts and going live in keydeliveries. We were seamlessly on our feet in the remote working mode in less than 24hours and have managed key business functions without a let-up. While the Governmentspublic institutions and the medical fraternity are doing their best I urge each of us as individuals and organisations to stay safe and discharge our responsibility to thecommunities around us and to ourselves.
Well-prepared and therefore optimistic we look forward to the days when the pandemicwill be behind us. We are con dent of cashing in on the opportunities as outlined aboveand look forward to reverting to you with stories of success!
I thank you for your support and continued faith and con dence in Intellect!
I also wish to place on record my deep appreciation for all the stakeholders -customers who have trusted us our business partners vendors our associates and ourbankers - who have been with us in this journey.