The BFSI products space offers exciting opportunities powered by three developments. The first is the intense competition that in turn is influencing the digital push to deliver better customer experience and to be more efficient. The second is an increasingly complex and tight regulatory environment that increases compliance requirements, and disintermediation that seems to challenge the fundamentals of the industry. The third is that the industry trend now favours ‘buy’ more than ‘build’, tilting the scale in favour of product companies. Intellect offers a full suite of products for this sector, built on a unified architecture, integrating latest technologies including AI/ML, thus positioning itself uniquely ahead of competition, which is confined to either specific BFSI verticals, or specific geographies, or has acquired pieces of products that do not present a unified architecture.
Customer experience has been the differentiator for banks and therefore for BFSI product companies. Themes such as ‘mobile-first design’ and ‘same experience across all touch-points’ have dominated developments in this space. Our holistic ‘Digital 360’ approach ensures that this part of ‘Digital Out’ that addresses customer experience delivers ‘real-time contextual experiences’ to customers.
These developments typically bring in uncertainty, which increases the risk aversion of the sector. A conservative sector to start with, these kinds of developments lead to deferral of decisions, or delays in the approval of projects, or reduction in budgets. Two quarters in 2016-17 were impacted by these developments. While we always operate in a backdrop of geo-political uncertainty, our primary demand drivers assure us of a growth phase.
From Intellect’s perspective, we have integrated the latest in technology such as artificial intelligence, machine learning, and natural language processing in our products and platforms. We are offering many products in the subscription model, taking advantage of cloud technologies. Being a robust, end-to-end industrialized technology player addressing the needs of global leaders in BFSI, we do not see a threat from fin-tech start-ups – most of which address specific slivers of demand or tackle the B2C space.
From India, TCS, Infosys, and Oracle Financial Services compete with us. Globally, Temenos, Finastra, FIS, Bottomline, and ACI compete with us. We are unique in providing the full product suite for BFSI through our 14 products that address all verticals of banks and insurance majors. Some of our global competition has augmented its product portfolio through acquisitions, which results in inconsistent technologies coming together and leads to tardy and expensive integration. In contrast, Intellect has developed all products in-house with the same unified architecture. This enables us to deliver quickly to meet market expectations in areas such as true digital architecture, emerging innovations in AI/ ML, and in getting the products cloud ready.
With a truly unified architecture, we are best positioned to provide digital solutions. Digital is all about giving the power of intelligent decision making to end-customers – in real time. Such a capability can be delivered best only if you have a unified architecture that allows transactions to flow through seamlessly. It is only because of such an architecture that we are able to deliver capabilities such as contextual banking.
We also differ in our sales strategy. There is a natural cap to the amount one product that can be sold in a particular country. Our competitors address this by spreading themselves across the world. Our chosen strategy is domination of chosen markets. We invest strongly in hiring local sales force and building deep relationships with customers. Our strategy is to sell 14 products to one customer rather the sell one product to 14 customers.
Intellect’s business is well balanced between growth markets and advanced markets with 55% of the business from advanced markets. The net result of this strategy has been that we have successfully commanded premium pricing versus our global competition in markets where they have been leaders before.
FY16-17 was impacted by external challenges, despite which we delivered 13% growth. Therefore, I don’t think it was below par. I believe we have now crossed the hump of market acceptance. We are also ready with a complete suite of 14 products across banking and insurance verticals. In FY17-18, we won a significant deal with each of the market leaders in some of the APAC countries and in India in the iGTB business. We also won a deal in the US, apart from expanding our relationship in Canada. In the iGCB business, the launch of IDC 18.1 Intellect Digital Core in October 2017 saw us win six deals in quick succession, including a breakthrough entry into Europe. In all, we won 12 transformational deals during the year.
Our deal qualification process has become much more rigorous. We choose the deals that we bid for and are able to strike a much better success rate because of focused efforts. In addition, the recent wins with market leaders and successful ‘go-lives’ of earlier wins have provided us much better references. In this sector, the typical buying pattern is to ‘follow the leader’. Therefore, our wins with leaders generate further opportunities.
We won the prestigious Government eMarketplace deal in FY17-18 (along with our consortium partners) in the face of stiff global competition. The portal went live earlier this year. We earn revenue as fixed basis points of the total GMV transacted through the portal. GeM’s GMV has crossed Rs 100bn recently. It is anticipated that the current transaction rate will scale up significantly with increased thrust on adoption of this portal by more states, government departments, and PSUs. In its fullest potential, the GMV is expected to scale up 10-15x from current levels.
Intellect invests consistently in technology and sales and marketing. Our investments in R&D are around Rs 2bn per year. We have also been investing in branding, market expansion, and augmenting our sales / pre-sales teams. We had raised approximately Rs 2bn last year through a rights issue to fund growth in addition to meeting increasing working capital needs and retiring debt progressively.
After significant investments, we are able to see the potential for growing beyond 20% yoy. Pursuing such a higher growth trajectory requires more growth capital. Also, as we pitch for large deals, we find the need for a stronger balance sheet. Therefore, we have opted to raise more equity rather than additional debt to fund these requirements. Based on deliberations with the board, the promoter has offered to bring in more funds – up to Rs 1bn – to re-affirm his commitment to the business. We have also secured approval for an enabling resolution to raise funds to the tune of an additional Rs 4bn. We will decide on the timing and mode of raising this additional capital when the requirement arises. Each of our products are in different phases of value realization. Some are delivering in the current financial year, while others would deliver over the next 2-3 years. We would access the market when a specific need for additional funds comes up.
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