Since this is the first time I am writing to you after we listed on the BSE I thoughtof sharing the story of the journey of IRIS with you. It also gives me an opportunity tothank the many people who have guided us as we have tried to make a difference to theworld around us.
Making a difference. That's what our goal is. And that's what our business is allabout. That is what we strive to do every day to the people in the world around us. Findpurpose the Mahatma said and we have done just that. The means shall follow the Mahatmahad gone on to say. With profound apologies to the Mahatma we have modified it a little.A company that finds purpose will discover that business follows. Profits too shallfollow. The bania in the Mahatma would have approved I think. Technologies may come andgo but so long as what is being served is useful to people and makes a difference to theirlives the business will stay relevant. Today we make a difference to over two billionpeople in the world. It helps the math to have some 1.2 billion of them residing in Indiabut hey that is our karmabhoomi our work place. How do we do that? By equippingregulators across four continents with tools to keep a close eye on those that theyregulate. By helping these regulators collect the right data and collect it right so thatthey may make sense of it.
Allow me to share a couple of examples. The NPA problem in the Indian banking systemhas been engaging the attention of all of us in India for quite some time now. But most ofthe analysts do not seem to know that the problem came to the fore because of the stepstaken by RBI for which they need to be given credit. RBI has simply made it expensive forbanks to hide their NPAs by asking banks to report in XBRL. It is a matter of pride for usthat the reporting platform is built around iFile one of our products. I keep remindingmy young colleagues that our work with the RBI is crucial for keeping the Indian bankingsystem safe so that their grandparents can sleep better at night knowing that RBI nowhas the means to stay on top of the system. In a Middle Eastern country our work helpedstave off a market crisis. The capital markets regulator who spotted unusual activity inthe market managed to rein in the mischief makers before market integrity could becompromised. Our solution helped the regulator connect the dots with little delayallowing them to act swiftly.
Our early investor
I can tell a story or two from each of the 22 countries where we have done something orthe other. But I must tell you that we would not be around to tell you all this todaywithout the support of Rakesh Kathothia and his Subhkam Ventures who may have had no clueas to what we were talking about when we approached them in 2009. But on therecommendation of UR Bhat they invested in our company. Nobody knew about XBRL in thosedays and I am not sure if many do even now but for Rakesh Kathothia to invest in us was ahuge leap of faith for which I owe him and UR Bhat a deep debt of gratitude. His fundcontinues to be invested in IRIS and it is our hope and desire that when we emerge as asuccessful Made in India story on the world stage he will still be around as ashareholder to celebrate with us. I assure him that that is not going to be aninterminable wait. I cannot overemphasise enough the role of our independent directors whoserved on the board and those that are on the Board today.
Mr Pradeep Mallick who was the first Chairman of our Board of Directors and Mr NarayanSeshadri who chairs the Board now have played a huge role in ensuring that boarddiscussions were meaningful and on point.
When my colleagues stepped up
It is almost a cliche to talk about how a company looks at its employees as an asset.It is my colleagues who saved the company when it was going through its worst crisis.Today we will not be within striking distance of greatness but for my colleagues. Theykept the faith which in turn kept us afloat. As we were transforming from a servicescompany in the KPO space to a products company liquidity was tight. We could not paysalaries on time and often not in full. That is when my colleagues chipped in. By takingsalary deferments.
By taking salary cuts. By personal sacrifice the value of which is simplyimmeasurable. Today as we see good days ahead we recognise that it is because of themthat we have emerged stronger. I hope it tells you something about the character of ourcompany which is today your company too. We still owe them money against past salarieswhich we have promised to clear from the surpluses we hope to generate in the days ahead.We have already made a beginning and have started clearing the dues.
My co promoters & I
On our part the three of us who lead the company made sacrifices too. Whenever therewas pain we took as much of it as we could upon us. Tomorrow when there is pleasure to bederived from a rosy financial situation we will ensure that our colleagues are the firstto benefit. As CEO I have maintained that I will not take a salary until all employeedues are cleared. It is important to lead by example.
While I am the CEO of IRIS sharing the responsibilities with me are my fellowtravellers on this journey K Balachandran (Balu) and Deepta Rangarajan (Deepta).
Balu is also the CFO apart from being the much more grounded than me. Every companyneeds a Balu. Deepta handles HR and is also President of the International Business. Someof you may have read about her in that runaway best seller 'Stay hungry Stay Foolish'. Dolook her up she is on page 272 in the English edition. I am married to her.
Both Balu and Deepta unlike me are engineering graduates with an MBA from an IIM toboot; Deepta from Ahmedabad and Balu from Bangalore. Deepta and Balu worked at CRISILbefore turning entrepreneurs. I studied economics at Yale worked for the World Bank inWashington DC as a Consultant before returning to work in the media first with EconomicTimes and then with Business India. Somewhere along the way I was also part of the Indiancricket establishment as a member of Jagmohan Dalmiya's team. At IRIS most of my work isaround strategy. That means that while Balu and Deepta handle today I handle tomorrow.
I can tell you with confidence that tomorrow for us looks good. We have put the crisisthat gripped us from 2014 onwards behind us. Revenues are rising again but what issignificant is that compared to four years ago most of our revenues today come fromsoftware products and data including SAAS and DAAS. Moreover after being in the red foran extended period we turned profitable in the second half of the financial year gone by.The IPO was a watershed in our history and the confidence you showed in us has put thespring back in our step. Thank you. In the MDA section of the annual report we discussthe business in some detail.
The fastest IPO ever
It was on August 27 2017 that the thought of going public even occurred to me in thecourse of a meeting Balu and I were having at the Oberoi Mall in Goregaon. Some 33 dayslater on September 29 our IPO opened for subscription. Shares of IRIS listed on the BSEon October 11. I am not aware of any company in India or anywhere in the world that hasgone public in so short a time.
If this happened without a hitch that's because we have always been ready for publicscrutiny. From the day we were founded we had been keeping ourselves prepared for thisevent. Whether it was about having adequate representation of Independent Directors on theBoard
or having a woman Director (this was easiest condition to fulfill with Deepta aspromoter) or having internal audit we were not just meeting but even surpassing thegovernance standards prescribed even for listed companies.
Why did we go public I am asked all too often. Aren't you too small could you nothave waited a little longer so that the company gets to be a certain size? And how couldyou even think of going public when you were posting losses? Very valid questions all.
When Dhirubhai Ambani guided me
Yes we are small. Yes we were in the red when we went public. We are still in thered. But we are working to change all that. Our financial worsened from 2014 onwards as wetried to reinvent ourselves. We were a services provider we have now transformed into asoftware products company. The times of transition were tough and from being profitablewe slipped into the red. We tried to raise funds to fund the transition but we did notsucceed. But company performance wise we knew we had hit rock bottom the only way wasup. But we also knew that we needed a helping hand to dig ourselves out. That is when Irecalled a conversation that I had had with the late Dhirubhai Ambani many many years agolong before IRIS. The best time for a company to go public is at its nadir provided thepromoters are confident of a turnaround he told me. That way the subscribers to the IPOare certain to make money he had added. Those words stayed with me. If we had any doubtsabout going public Dhirubhai Ambani's advice clinched it.
But would investors subscribe to the IPO we wondered. But we need not have worried.Ten phone calls later we had the commitments. As it turned out each one of them investedin the IPO marquee investors all. It helped greatly that we were a well known companyeach of them knew us well too. It must also have helped that we were pricing the issuemore attractively than what the performance of our global peers would have justified. Itmust also have helped that they had seen us transform over the years so they knew that wehad what it takes to get to the next level. Today as we stand on the verge of what wehope will be a period of sustained high growth I thank every one of them for their help.I thank you and each and every one of our 500 + investors without whose help we would notbe here today. You helped us dig ourselves out of the hole. Thank you.
What's the significance of the IPO to us you may ask. It is because of the IPO that wecould start paying salaries on time. It does not matter how great a company's products maybe it does not matter how wonderful a company may be but if one does not pay salaries ontime employee morale is affected. From the day of the IPO we have not had to delay oursalary at any time. The IPO also validated for the employees the confidence they had intheir own company. It was a powerful message and that has done more to morale thananything else. Thank you investors.
And thank you colleagues for staying the course. We could not have done this withoutyou. Each of you.
The beginning of our transformation Looking back it may seem that our problemsstarted in April 2014 when we decided to exit our services business. We had just closedthe year with revenues of just under H68 crore. We were profitable having postedoperating profits of just under H12 crore. But we were not happy. One because while ourrevenues may have grown 10 % from H62 crore in the year preceding profits were lower.Most of our revenues had been coming from converting documents of US companies into XBRL.We were partners with a US company Merrill Corporation who would ship to us documents oftheir clients which we would convert and send back to them for filing with the US SEC.
But we had seen this coming for some time. It was clear to us that with automationmore and more customers would stop outsourcing this activity to a third party. It was alsoclear to us that even those that continued to outsource would seek to get better pricing.We could not see how this business could grow. For one we had an exclusive arrangementwith Merrill Corporation who as we could see were losing customers to a competitor oftheirs who offered a semi-automated self-filing solution. Then there were othercompetitors who were simply offering cheaper solutions. We did not see a future in thisbusiness but instead saw it as one where revenues had already plateaued and could evenfall. Profits had started declining as margins got squeezed with Merrill asking us to dropprices which our cost structures did not permit. We were a premium provider and thequality of our output was exceptional because of our pool of experts who came at a price.
So between us and Merrill Corporation we agreed to amicably terminate ourrelationship. We continued with the relationship for another year as Merrill Corp took thework in-house to their facility in Chennai. At the same time our work began with asingle-minded focus to shed the services tag and become a software products company. Thebusiness was not new to us. We knew what had to be done.
BSE our 1st client then came SEBI Truth be told we had been planning for this dayright from 2006 when BSE became our first client for an XBRL reporting platform.Subsequently at SEBI's prodding it transitioned into the Common Filing and DisseminationPlatform (CFDS). The early wins at BSE and the endorsement of SEBI won us a mandate fromthe Reserve Bank of India (RBI) and the Accounting & Corporate Regulatory Authority ofSingapore both of whom continue to be clients. These big wins opened up the world for us.And when RBI went on to win a global award for the XBRL implementation even as theSingapore example began to be held up as the one to emulate our belief that we could holdourselves well on the world stage was validated our confidence bolstered.
Yet through all this we neglected to productise our offering as the profitableservices business probably lulled us into a false sense of security. As we disengaged fromMerrill Corporation we understood that we could not do services and products under thesame roof. They were as similar as chalk and cheese. We have been asked if we could nothave had it in a separate subsidiary. Perhaps yes but without management oversight abusiness with a bleak outlook for growth would simply have died a natural death and maybeeven a painful one. That is how we chose to exit the business.
The lessons from running a services business were well learned. Customers for whom wewould convert documents would ask us if there was any point in this whole 'XBRL nonsense'as they liked to refer to it. We recognised the need to show them value if we were tobuild a sustainable business. I recall my first meeting at the US SEC when the then Headof XBRL USA asked me what it would take for XBRL to become ubiquitous. It has to beuseful I told him and if the expansion of the XBRL footprint in the world has been slowthis is the reason. The usefulness of XBRL has not been demonstrated sufficiently tobusinesses for them to view it as something of value something whose power they canharness for their own benefit. But in country after country where we have won mandateswe have tried to demonstrate the benefits of structured data. In so doing we becamepossibly the only company in the world with offerings straddling the entire informationsupply chain. 'Collect' for regulators 'Create' to serve the regulated and 'Consume' toserve the demand for data and analytics became the three divisions of our company.
Building for the future But is XBRL enough to build a company of a significantsize? The answer is a resounding yes. But the fact remains that many regulators havechosen to adopt other data standards. Like JSON was adopted for GST filings in India. Werecognised that a regulator may choose a standard other than XBRL too so we developedcompetencies with other data formats too. We tweaked our products accordingly.
Our mission is to be a company with products for the creation submission andconsumption of data following open standards.
The reason for our existence and optimism about our future stems from the recognitionthat the explosion in the volume of data worldwide will leave decision makers paralysed ifdata sets do not 'talk' to each other for which data needs to be structured using openstandards. Because getting the data right helps lay the foundation for Industrialrevolution 4.0. That is precisely what we are doing. That is what sets us apart fromothers. That is what gives us hope and allows us to hold out the promise of a profitablefuture as a shareholder of IRIS.
Thank you for embarking on this journey with us.