Chennai, India, September 13, 2016, 01.52 PM IST
ET Now: Despite IT's current rollercoaster ride, brokerages are upbeat on your company. Give us an idea of your product portfolio monetisation.
Arun Jain: There are life cycles in IT industry. At times some significant shifts come about. The latest shift is from being a service industry to being a product industry. Globally, all product companies such as Fidelity Information Services, Fiserv, Temenos have been quite upbeat because the pattern of buying is changing in financial sector. It is because of the shift that there is a warning on the services industry and a positive outlook on the product space.
Coming to Intellect's portfolio, we have four businesses. One business is focussed on consumer banking — iGCB which completes with FIS, Fiserv and Temenos. The second business is around global transaction banking. The third is the capital market and risk and treasury business. Our fourth business is insurance.
Looking from a global perspective, investors will see a huge digital wave in all four of these businesses. Banks are not looking to do everything organically now. They want to buy whatever products are available in the marketplace.
We are very excited because we are now in a right-time-at-the-right-place kind of situation. That was the premise of our last week's meeting with investors.
We are looking to move the portfolio from the adoption to the monetization phase. Out of 14 products, we currently have only two products in the monetization phase. 12 of our products are still in the adoption phase. It means there is a huge amount of likely upswing possible for us.
ET Now: Your deal funnel currently stands at about $470 million. What is the update on this?
Arun Jain: They are on track. I would not like to go into more details since the quarter is still running. Out of 22 deals, half a dozen deals are likely to be closed in the next six months.
ET Now: You won a deal from Capital Small Finance Bank for their digital transformation. What is the size of this deal and what kind of opportunity do you see there?
Arun Jain: Apart from the Small Finance Bank deal, we have another one in the same space. This is a space where new banks want to go digital. It is a pattern; it is not about just one single deal and the value of that deal.
These new players present a significant opportunity to Intellect. We now act the role of a digital challenger. We can equip new banks with the capability to compete with the old legacy banks that function with 20-year-old technology.
In this space, fintech companies and new banks are going to challenge the existing behemoths which enjoy various significant advantages over the new entrants. As of now we are adopting a two-pronged strategy. We tell legacy banks that we can make you the digital challenger. On the other hand, we tell new players that we can enable them to challenge the legacy players. So, there is currently a lot of excitement in this space
ET Now: How do you see licence income growing over the next one or two years? What will your revenue mix look like in a couple of years from now?
Arun Jain: In the investor conference, we gave the outlook that five years from now our operating margins should be 60% and the sales & marketing cost could come down to 23%. We projected our G&A at around 6%, and R&D and other costs at another 6%. This leaves a clear 25% operating margin.
Our growth target of 22%-26% is very much in line. At the time of our IPO in 2018, we will have doubled our revenue from Rs 600 crore to Rs 1,200 crore. We are clearly in line for that.
This growth is likely to be sustainable in the next three to five years because of the number of products that would move from adoption to monetization phase.
As you know, there are five stages in the life cycle of a product. Some of our products are currently in the adoption phase and a few other are in the incubation stage. Every year we bring at least two key products into the incubation stage, wherefrom they move to the adoption and then to monetization phase.