An overview of where we stand and where we expect to go
It the world. t has not been a good year for The pandemic rages on and there is noclear end in sight. Many of my colleagues were affected by Covid 19 with one of themSaptarshi Sengupta succumbing to it. Saptarshi or SAP as we called him was a fantasticcolleague with a constant smile on his face which is etched in my memory for good. Hehas been with us for well over a decade. A Chartered Accountant Saptarshi joined thecompany when we were still a KPO creating documents that public companies in the US wouldthen file with the US SEC. Recognising just how good he was we had given him anopportunity to work on the Federal Energy Regulatory Commission mandate which required USenergy companies to file in XBRL. And Sap rose to the task. I dedicate this annual reportto my good friend Saptarshi.
Given the situation around us it feels uncomfortable and even perverse to write abouthow we are well poised to grow.
It is impossible to be not mindful of the suffering around us. But as a colleague saidlife must go on. You will be relieved to know that almost everyone at IRIS and theirfamilies have taken the vaccine at a camp conducted in the office. We have also ensuredvaccination for people who touch our lives daily the vendors the contract staff andothers including professional services providers. After all nobody is safe untileverybody is safe.
We are excited about migration to the mainboard
Not long from now we should be migrating to the mainboard from the SME platformsubject to exchange approval. There are two ways migration will change our life. On theSME board the market lot was 4000 shares which will now be just one share. This willattract a whole new class of investors into the company. The second big change will be theneed to report results quarterly whereas on the SME board the results were reportedhalf-yearly. There is a certain amount of seasonality to our revenues. In fact anoverwhelmingly greater share of our revenues comes in the second half of the financialyear as one can see from the numbers for the year gone by. We need to impress upon ourinvestors that to interpret the signals every quarter may not be the most appropriate wayto analyse the company.
Good governance is in our DNA
Having embraced best governance practices before we listed and even exceeded theprescribed norms I anticipate no challenges for us on the corporate governance front aswe migrate to the mainboard . Our seven-member Board of Directors has four IndependentDirectors one of whom chairs the Board. The three founders make up the rest of the Board.Two of India's finest audit firms are associated with IRIS one as a statutory auditor andthe other as an internal auditor. The Founders of the company see our role as trusteeshipwhich guides us in everything we do and how we do it. Nothing speaks louder about ourgovernance practices than how we became the fastest company to IPO in India a record thatwill probably never be matched leave alone be bettered.
The pandemic has slowed the growth of our business
IRIS is a global RegTech providing software solutions for compliance. While thepandemic has certainly slowed us down our focus on building an annuity-led business hashelped us not just stay profitable but also improve our financial metrics. In the yearthat has gone by our strategy to move to increase our recurring revenues has paid off asevidenced by the fact that recurring revenues reached a healthy 71% of the total revenuesbooked by the company during the year.
The impact of the pandemic was different in each of the three segments we operate in.
Collect: This segment was the worst affected by the pandemic and has shrunk. Ourelectronic disclosure platform iFile helps regulators collect pre-validated data fromthose they regulate. Of late some analysts have started referring to this business asSuptech. It used to be that every year; a few regulators announced plans to adopt anelectronic disclosure platform built around XBRL. Over the last two years that has nothappened and we don't see that happening over the next 12 months. Governments simplydon't have the resources to go down this path. It is an RFP-driven business and when RFPsdry up so do new wins.
However we still have a steady stream of revenues from existing clients who pay usfees towards AMCs. Hence it is not a total washout. The good news though is that oncethe pandemic ends most countries are expected to rush to adopt XBRL and that is anopportunity we are confident of tapping into.
Create: While this segment more than made up for the loss of revenues in the
Collect segment we could have done much better but for the pandemic. Through thissegment we provide Software to enterprises to help them create their submissions ready tofile with the regulator. Most of the products of this segment are SaaS offerings.
The impact of the pandemic has come from two quarters. Firstly the pandemic has causeda delay in the rollout of XBRL mandate by various countries in Europe. Several countriesannounced a postponement by a year reducing the size of the opportunity available to us.Secondly the pandemic did not let us go out to meet customers. Our experience is thatwhile we are successful in converting customers who we can meet the pandemic has forcedus to try and engage digitally and over the phone. That has not been easy. Even so we aresatisfied with what we have achieved under the circumstances.
Consume: This is our data and analytics segment. With the pandemic in play wechose not to make any major investment in this segment for now. Now that we have turnedprofitable and hope to stay that way we will work to monetise the assets that thisdivision houses.
As my colleague says the present is tense but the future looks good even if notentirely perfect.
The post-pandemic world will favour us.
The most important fallout of the pandemic is that the pace of digitisation hasincreased around the world. This augurs well for IRIS as you can imagine. I want to offertwo examples of how the world has changed in ways that we may not have expected.
In India GST adoption has forced every business in India to go digital. If initiallythey did so because they were forced to do so they are now waking up to the benefits ofgoing digital. The opportunities that stem from this are enormous. By the virtue of beinga GST Suvidha provider IRIS is well-positioned to benefit from this.
The second example I wish to cite is from our experience in Malaysia. From living in aworld of paper filings the country has effortlessly moved to digital filings with an easethat many countries in the world can learn from. The argument that relatively lessdeveloped countries will find it a huge challenge to go digital stands demolished.
Compliance is going digital
As the world goes digital inevitably all compliance will also go digital. Moredepartments in more countries will need solutions a demand that IRIS is well-positionedto serve. While we have a handful of competitors who can compete with us on the Collectsegment and several on the Create segment practically none can provide solutions thatstraddle the entire information supply chain: from Collect to Create and to Consume.Therein lies our competitive edge.
We need to invest heavily in sales and marketing
While being an Indian company with an Indian cost structure also helps greatly thechallenge before us is to be a strong marketing company. Many of our global competitorsare well-funded and have a huge war chest to battle it out in a competitive marketplace.It has been our experience that most Indian investors do not understand the importance ofinvesting in marketing and sales and look askance at initiatives focused on gaining marketshare. This kind of approach will mean a tradeoff of the present for the future.
We face a similar choice before us. Our products are in place and we need to mountaggressive campaigns to grow. We need to do this in the USA in Europe and elsewhere. Weneed to grow our recurring revenues.
Eight years ago we saw the writing on the wall that led us to pivot away fromknowledge process outsourcing or KPO to software products. Today our focus is evensharper. Even as we continue to grow our business around compliance we recognise thatdelivering Software as a Service or SaaS is the way to go. We will continue to havesoftware products sold in the conventional mode as on-prem solutions. We will also have asmall services revenue stream from the company's KPO side but the company's overwhelmingrevenue driver will be SaaS.
The time for SaaS has arrived
Earlier this week global consulting major Mckinsey released a report on the outlookfor the Indian SaaS players. They expect the Indian SaaS companies to hit a trilliondollars in value by 2030. As India's only listed RegTech SaaS this should give investorsin IRIS great comfort. We are in the right place at the right time. The question you mayhave is whether we can execute. As managers of your company in our capacity as yourtrustees our responsibility is to keep your company relevant in these rapidly changingtimes and deliver growth while sticking to the core proposition that defines our business.Staying relevant is our mantra. Fifteen years ago we embarked on our XBRL journey. Todaywe stand vindicated with 70 countries accounting for over 96% of the world's GDP havingadopted XBRL. Ten years ago we pivoted from KPO to products and sacrificed servicesrevenues to focus on products. Today we are still in the same RegTech solutions space. Wehave demonstrated our ability to spot trends early and stay relevant by moving to SaaS. Wecontinue to have a resource constraint that will affect just how fast we can grow butsustainable growth for us is a way of life.
Before I conclude I have a request. This year like in the year preceding we willhave a virtual AGM. I would be grateful if each one of you finds it convenient toparticipate. That would mean a lot to us. I thank you for giving this a patient read.Please do not hesitate to contact me or any of my colleagues if you have any suggestionsto offer or questions to ask.
|Swaminathan Subramaniam |
|Chief Executive Officer |