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00:00 [MUSIC]
00:07 >> Hello and welcome to Earnings Edge.
00:08 This is Rucha Somaiya and today we have with us Mr.
00:12 Ashish Rai, the CEO of Orion Pro Solutions.
00:15 Welcome to the show.
00:17 >> Hi. Good afternoon. Thank you for having me.
00:21 >> Thanks, sir. So pretty great earnings this quarter.
00:24 So firstly, I would want your take on how the earnings were.
00:28 >> Yeah. So we delivered at the high end of our guidance of 30-35 percent.
00:36 So we basically delivered what we said we will deliver.
00:39 It is the third year in a row that the business grew in excess of 30 percent.
00:43 So we feel good about the growth momentum and we delivered margins.
00:49 We've been guiding to a EBITDA between 20 and 22,
00:52 and a part between 15 and 16,
00:54 and that's exactly where we came in.
00:56 So all in all, the team delivered pretty
01:00 strongly to come in at the high end of the guided range.
01:04 >> Sure, sir. So the margins are
01:07 pretty strong and in line with the stated guidance.
01:09 So what's your outlook on FY25?
01:11 Do you still expect to stay at 35 percent level or how do you look at that?
01:17 >> Yeah. So look, I think we've been now growing
01:20 at between 30 and 35 percent for the last three years.
01:23 I think we feel good about continuing that growth trajectory.
01:27 Our guidance for 25,
01:29 our planning number is between 30 and 35.
01:32 We intend to keep EBITDA between 20 and 22 and part between 15 and 16.
01:36 So essentially, we more or less stick to
01:40 the trajectory and we continue to scale the enterprise to meet the demand.
01:45 There is a really strong demand for quite a few of our offerings out now.
01:51 So we need to see that we continue to
01:53 scale to keep delivering the growth numbers that we're committing.
01:58 >> So margins will likely be flat around this range, is it?
02:03 >> Yeah. So look, I think our model,
02:06 at least over the medium term is in the software business,
02:10 the economics of course improves with scale.
02:12 So overall, you are delivering that much excess EBITDA,
02:16 but then the size of the opportunity in front of us is so large
02:22 that our communication to the shareholders,
02:25 to the investors has been that we will try to
02:28 keep EBITDA at the level between 20 and 22.
02:31 We believe that is a good level to be probably the top five percent
02:34 of Indian tech at that EBITDA level.
02:38 So we believe the All-Info shareholder is pretty pleased with that performance.
02:42 As the economics improve,
02:44 we pull the excess back into increasing the size of the R&D budget.
02:49 We invested, which we expense out all of it.
02:53 So I think last year we invested almost about 80 odd crores in R&D.
02:58 This year, FY25, that number will probably go up to about 100 odd.
03:03 >> Sure. Talking about the excess cash,
03:07 you've declared a one is to one ratio of bonus,
03:10 and I think that's what the street is pretty happy about.
03:14 Apart from that, you have declared dividend as well this quarter.
03:18 So how do you expect to utilize your cash going forward?
03:22 So as you rightly mentioned,
03:24 you'll likely invest the cash into the business again and expand the R&D budget,
03:28 or do you have a certain percentage in mind to give back to the shareholders?
03:34 >> Yeah. So look, we've upped the dividend payout
03:37 from last year to this year has gone up 100 percent.
03:40 So of course, we've increased that.
03:42 I think the right investment for us in terms of
03:48 the excess capital in the enterprise is to pour it back into product, into technology.
03:53 That is where we believe we create the long-term value for the OEM pro shareholder.
03:57 So we'll keep paying, of course,
03:58 we intend to keep paying dividends and all,
04:00 but bulk of the use,
04:02 I would split it this way.
04:03 I think we've been doing M&A.
04:06 We will continue to deploy some capital towards M&A.
04:08 I think in the last six months,
04:09 we've done three M&A that we've announced.
04:13 If we find more opportunities,
04:15 we'll continue to deploy some capital there,
04:17 and then we'll continue to deploy capital in the organic growth initiatives,
04:20 which is mainly R&D,
04:22 as well as expansion of
04:23 the fixed assets that support the stock.
04:26 The stock numbers have also been going up quite significantly.
04:29 >> Right. Talking about your inorganic expansion,
04:32 that also has been stellar with the recent acquisition of ARIA.AI.
04:37 So any sort of budget that you are looking forward to
04:41 have in inorganic expansion or will you analyze the way it comes to you?
04:46 >> So the way we look at it is the following.
04:50 I think what we do is we have identified the bets that we are making.
04:55 So there are a few primary bets in specific sectors,
05:00 which is in banking, in transit payments,
05:02 and on the enterprise side,
05:04 where we say this is a segment we operate in,
05:06 this is the transformation opportunity that we are going after.
05:09 For example, the transformation in the corporate banking space,
05:13 the closed loop to open loop transformation.
05:16 So we've identified the levers,
05:17 we say there's a demand runway that's long out,
05:19 and we have a strategic blueprint of where we want our solutions to be,
05:23 which of course has a number of gaps.
05:26 So where there is an opportunity for us to acquire
05:30 an asset with the right kind of IP and the right level of team,
05:34 which fills a gap in our strategic blueprint,
05:36 we will deploy capital for that M&A.
05:39 Otherwise, we don't really have a lot of homo when it comes to deal-making.
05:42 We don't go out looking for M&A,
05:44 but there is always a buy versus build choice
05:47 in terms of fulfilling the strategic blueprint.
05:50 So if we find an opportunity,
05:51 we'll continue to do that.
05:53 >> Right. Got that.
05:55 Now, let's talk about Aria.AI.
05:58 You expected the acquisition to get completed by 15th of May,
06:02 as per the press release.
06:03 So how has the progress there been?
06:05 >> Yeah. So I think we've broadly been on track on most of the things.
06:11 We've been working with the teams in terms of integration.
06:13 I think the bigger job there other than
06:17 the regular formalities is to bring together
06:21 Orion Pros deep expertise in the building of
06:24 enterprise applications and the presence on the banking side especially,
06:29 and Aria.AI is highly mature framework as well as
06:32 capabilities on the enterprise side to bring it together to help banks,
06:38 to help insurers deploy AI at scale where they do their business processes.
06:45 So one end, of course, is all the Gen AI talk
06:47 that I think you hear as much as we hear.
06:49 But I think bulk of the value creation,
06:53 for any technology, not just AI,
06:55 happens on the application layer.
06:57 That is where we are very, very good.
06:59 That is where the banks run
07:01 their mission-critical applications to run their business processes.
07:04 That is where we are bringing the team and
07:07 the solution sets together to make the impact at every point on the workflow.
07:11 Can I deploy a fully autonomous agent,
07:15 a blend of rules and ML,
07:18 human assisted by an automated agent,
07:21 and so that the banks and the insurers actually get that benefit from AI.
07:27 So I think that's where most of the effort is going in.
07:29 We feel pretty pleased with how well we are progressing.
07:34 >> So let's again have a look on the order book front.
07:39 You had like 760 crore order book in the third quarter.
07:43 What kind of order book would be in this quarter?
07:48 >> Yes. I think we finished March 31st
07:51 with an order book in excess of a thousand crores now.
07:54 It's obviously at a record level for us,
07:57 that together with the strength of the pipeline is what gives us
08:01 the confidence in terms of continuing to grow at the level.
08:05 The order book has been very, very strong.
08:07 >> You also mentioned that the large part of
08:10 the 760 crore order book will be executed in
08:13 the next four to six quarters as on the last quarter.
08:16 So is the conversion into revenue,
08:18 I think that's the problem with the large IT companies as well.
08:21 So do you still stick to that point where the deal wins
08:26 are expected to get converted in the next four to six quarter,
08:29 or is the cycle a little elongated this time?
08:32 >> Yes. So just the nature of how we declare our order books,
08:36 which we don't really take in the long-term streams that come in.
08:40 So for us, most of our business is
08:42 deploying the application that we send,
08:44 for example, where there's
08:45 a license payment that comes in immediately,
08:47 and then typically there are implementation projects that
08:49 go out for that product in terms of 12, 18 months.
08:53 We normally don't have a lot of multi-year.
08:56 We don't declare a lot of multi-year streams like AMCs, etc.
08:59 We just keep adding them every year.
09:01 So for us, most of the,
09:02 I would say 70-80 percent of our order book,
09:06 assuming we have the capacity to deliver,
09:09 would get converted over the next 12, 14 months.
09:12 >> Right. So the recent deal wins
09:15 have been around the bank and FinTech sector,
09:17 and you've been talking about growth
09:20 and investment in that sector too.
09:22 So can you just let us know what kind of revenue is coming from
09:25 this sector in terms of percentage or
09:28 any range that you can give for the banking and FinTech center?
09:31 >> Yeah. So look, the structure of our business is
09:34 that you've got two major divisions, banking and FinTech.
09:38 We finish the year,
09:40 it's 53 percent of the revenues,
09:42 and the technology innovation group,
09:44 which does transit payments and the enterprise side,
09:47 is 47 percent of the revenues.
09:49 The banking and FinTech side has been growing.
09:52 I think last year it grew about 37 percent.
09:55 The TIG side grew about 33.
09:59 >> Right. So talking about banking and FinTech,
10:02 one interesting point is amongst
10:05 the software services and the banking and FinTech segment,
10:10 you have around 60-40 kind of breakup.
10:13 So do you expect this kind of breakup to continue,
10:18 or are you looking at more towards
10:20 margin-accurative businesses?
10:22 >> Sorry, between banking and the TIG side?
10:27 >> Yeah, the tech innovation side.
10:29 >> Yeah. So look, what was happening is this,
10:34 I think last couple of years,
10:36 banking was growing slower,
10:39 and we were really deploying
10:41 all of our resources towards rebuilding the product set.
10:46 Over the last two or three quarters,
10:48 we've finished our product build-outs,
10:50 and we've now been aggressively out in the market,
10:53 expanding sales channels and actually selling.
10:56 So we do expect banking and FinTech to grow very,
10:58 very strongly going into this year and into next year.
11:02 So that will change the mix a little bit.
11:05 By and large, I think we should stay in the,
11:08 let's say, banking between 50 and 55,
11:12 and TIG between 45 and 50.
11:13 It depends on the relative growth rates.
11:15 Both these segments are growing very, very strongly.
11:17 So it's hard to really change the mix in any short-term.
11:23 >> Right. So one last question again.
11:26 Let's talk about the cash generation in the company.
11:29 It has been very good.
11:30 I see that you have reaped around
11:32 36 crore of borrowings looking at the cash flow statement.
11:35 So do you expect to be around like debt-free
11:38 in the coming quarters or years?
11:40 What is your outlook in that?
11:41 >> Yeah. We are now totally debt-free.
11:44 So if you look at when we started the journey three years back,
11:49 in terms of pivot and all, I think debt levels were about 180-200 crores.
11:53 I think we repaid all of it.
11:55 We're now in a mode where we don't need to really take on debt,
12:00 but we need to make some very,
12:02 very heavy investments just to capitalize on the sheer size of
12:06 the opportunity in front of us is so large
12:08 that we need to continue to make investments.
12:11 But I think from a debt standpoint,
12:13 we are zero right now.
12:16 >> Right. So very, very interesting insights
12:20 and congratulations on the good quarter,
12:22 and thanks for joining us on the show.
12:24 >> Thank you.
12:25 >> Thank you, sir. That was Orion Pro. Stay tuned for more.
12:29 [MUSIC]