InfoBeans Technologies Limited

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To, Date: 04[th] Nov, 2024

The Listing and Compliance Department National Stock Exchange of India Limited Exchange Plaza, 5th Floor, Plot No. C/1, G block, Bandra Kurla Complex, Bandra East, Mumbai – 400051 Script Code: SM – INFOBEAN	The Manager, Listing Dept. BSE Limited Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai-400001 MH- IN Scrip Code: 543644

Subject: Transcripts of the earnings call conducted after the Meeting of Board of directors on Monday, 28[th] October, 2024 at 04:30 P.M. (IST)

Please find enclosed the transcripts of the earnings call conducted after the Board meeting held on 28[th] October, 2024 for your information and records.

This information will also be hosted on the Company’s website, at https://www.infobeans.com/investors/

Thanking you, Yours Faithfully For InfoBeans Technologies Ltd

Digitally signed by Surbhi Surbhi Jain Jain Date: 2024.11.04 21:25:17 +05'30'

Surbhi Jain

Company Secretary & Compliance Officer

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Sep 30, 2024, Q2FY25 Earnings Conference Call

Management

Avinash Sethi, Co-founder

Krunal Sanghvi, Sr. Manager, Finance

Mridul Maheshwari, Manager, Corporate Development

Surbhi Jain, Company Secretary & Compliance O�cer Transcript

Surbhi Jain

Good afternoon, ladies and gentlemen. Welcome, everyone, and thanks for joining this Q2 FY '25 Earnings Call for InfoBeans Technologies Limited. The results are available on the stock exchange. In case anyone does not have a copy of the same, please do write to us, and we will be happy to send over it to you. To take us through the results of this quarter, we have with us Co-Founder, Mr. Avinash Sethi.

We will be starting the call with a brief overview of the company's performance, and then we will allow the Q&A session. Kindly ask your questions by raising your hand after the brief overview by Avinash is over, and then we will address all the questions one by one. I would like to remind you all that everything said

on this call that reflects any outlook for the future can be considered as a forward-looking statement and must be used in conjunction with the uncertainty and risks that we face. These uncertainties and risks are included, but not limited to what we have mentioned in the prospectus filed with the SEBI and the subsequent annual report. With that said, I turn over the call to Mr. Avinash Sethi. Over to you, Avinash.

Avinash Sethi

Thank you very much, Surbhi, and thank you, all shareholders, investors and potential investors for attending this call. Thank you for your time and attention. This is the presentation around the last quarterly numbers and also we will cover half yearly numbers. Those who are new to InfoBeans, those who are not aware, I’ll quickly run through the standard commentary about the company first, and then we'll talk about the financial numbers, and then we'll open up to question and answers.

InfoBeans is a company founded in 2000. Today, we are a 1,500 people team across all the locations that you can see on the screen. We are present in India in 5 locations: Indore; Pune; Chennai; Vadodara; and Bengaluru. In Europe, in Germany, we are in Frankfurt. In Middle East, we are in Dubai. And in U.S., we are in Bay Area, Silicon Valley, and New York. Next, please. This is a quick roadmap of how we have progressed over the year. The first 10 years were more foundational, as we are first-gen entrepreneurs.

So we spent a lot of time holding ourselves and understanding and establishing the business in the initial 10 years. Real growth started only after that when we started building the organization and having professionals run the show. And then we went public in 2017, we acquired our first company in 2019, then the

second one in 2021. In 2023, we reached a revenue of INR 399 crores. And this year, we onboarded Phaneesh Murthy, who was with Infosys and then IGATE as a CEO of IGATE, and he retired and left IGATE.

So he's helping us as an adviser to the Board trying to grow the business to the next level. Next, please.

A quick overview on the numbers. One of the biggest strengths of InfoBeans is direct relationship with very large customers. And we have added 4 more to this kitty. So put together, we have 29 plus 4, 33 large enterprise customers. 90% repeat business is what, again, another strength that we have. Our clients stay with us for long, and we generate repeat business year after year. We've been successful in acquiring 2 companies to grow the size of our business.

And another interesting point is that we have a large number of team members who are with us for 5 years or more, that is very unique to metric which is very di�cult and unique to us as a part of the IT industry. We've been able to retain so many professionals with us. We are listed on both NSE and BSE. Half yearly snapshot, we have INR 202 crores in revenue in the first 6 months. INR 42 crores EBITDA, which is about 21% EBITDA now. Our aim is to reach a 24% size on EBITDA. PAT is INR 20 crores, which is about 10%. Cash and equivalent that includes AR of INR 75 crores is about INR 231 crores. INR 157 crores is the cash that we have in the bank. And 26% is our revenue CAGR in the last 5 years.

We are very, very gung-ho about the partnerships that we have in place, right from Microsoft from the early times to the latest one, which is agineo, which is a German company working in ServiceNow. Then we have partnerships with Salesforce and ServiceNow also in place and Microsoft Azure also comes in as a cloud partnership. We are very proud and happy to have achieved multiple

accolades and recognitions from the third-party institutions. The latest one being Top 100 Best Companies for Women in India, and Dream Companies to work for, Great Place to Work. We have also got Asia's Best Employer Award very recently.

This is what we do. These are the set of services that we o�er.

We do customized development for enterprises, and we build applications for them for their usage as well as we build products for them. We also have a specialized capability in terms of user experience and rapid prototyping where we build early stages of application before it goes into full-scale development. Then we are exploring and building solutions around AI capabilities. We also are helping our developers use tools to generate code while they are developing software. So we are trying to improve our e�ciencies using AI tools. We are also trying to help our customers deploy AI-enabled solutions so that they can do their job in a much faster way. At the same time, they are more e�cient in terms of their outcome, and the quality of their outcome. We are also partners to Salesforce and ServiceNow, as I mentioned, and we help in implementing and consulting our customers on the solutions around these 2 platforms. Then we have automation around robotic process automation, improving the speed of operations for our clients. We also do a lot of test automation so that any time software needs to be tested, we don't have to do it manually, it just goes through test scripts, which run on an automated way. Which again, makes the GTM very, very fast for our existing customers. Next, please.

Key updates. Our revenue has grown to INR 102 crores, which is an 8% growth Y-o-Y and 3% growth Q-on-Q. EBITDA margins jumped from 19% in Q1 to 23% in Q2. We onboarded 4 new clients, one Fortune 500 company, two U.S.-based large enterprises, one from India b.sed M&A pipeline, where we continue to

evaluate companies, specifically focused on ServiceNow and Salesforce. And we are finding that there is some moderation in valuation expectations now. Still I'd say it's not as close to what we would have expected, but we are still pursuing those opportunities and working towards it. It is a constant exercise that happens all the time, but the closure takes a lot of filtration and a lot of due diligence before we come to a term sheet signing stage.

Our Events and applauds, I talked about it. ESG and CSR. InfoBeans Foundation continues to go well. We had 2 batches that underwent the placement program. And again, 90% of them got placed successfully. We also did a very specific program for women leaders in the organization called Shakti. And 25 out of those 60 people enrolled in a year-long program is advancing to the next level, it is an empowerment program for women leaders. 25 of them have now proceeded to the next level, where we'll again focus on them and work with them towards their career progression.

Next, please. The 3 founders on the top, Siddharth, Mitesh and Avinash, myself, then we have independent directors, Shilpa, Sumer sir, and Mayuri. Shilpa and Mayuri live in the U.S. Sumer sir lives in Punjab. Again, a very senior leadership, Emerson looks after sales and marketing. Amit is our Director of Delivery now. Kannan is handling delivery e�ciencies, process implementations. And Denise is the heading design function. Manish looks after operations, Ram, client success in the U.S. Darshana looks after Salesforce business development in Pune. Kanupriya is VP of People. Arpit, is heading design.

If you look at it, they have been with us for so long. Tarulata looks after sales and marketing in the U.S., Geetanjali, sales in the Middle East market. Chaitanya looks after delivery and Salesforce Practice in Pune. For the clients that we talked about, ALM is one of the longest relationship that we have, more than 22

years. We continue to work with them. They do legal content publishing in the U.S. IQVIA is one of the large healthcare services provider. Co Advantage is one of the HR solutions. Then we have clients which are under NDA, again, a very large company on the logistics side. SMBC is a financial institution based out of Japan, but we work with their U.S. firm.

There's a cloud data services and storage company that we work with. And there's a German client, which is a multinational conglomerate in the technology space. And there is a wireless communication company, which is again one of the largest players, and then the pharma company again a very, very big name out of Germany. So our large enterprise clients is our strength. We have direct relationship with each one of them. And on an average, if I look at the average age of my top 10 customers, it will be easily crossing 9 years. So we generate a lot of repeat business from our customers.

This also shows the amount of strength in terms of delivery and the trust that we have gained from our customers. Let's jump on to the financial snapshot. This is a quarterly snapshot, September '23 to September '24, 8% growth in revenue, 52% growth in EBITDA margins, EBITDA and a 200% growth in PAT margins. When I look at quarter-on-quarter comparison, 2% on revenue, 25% on EBITDA and 63% on PAT. In constant currency terms, which is particularly, let's say, USD, we have grown by 7% Y-o-Y. Some detail here. We have seen demand improvement from September '23 to September '24.

And we've also been able to control expenses so that we have a better gain in terms of margins, both on the sales and marketing expenditure as well as finance cost has reduced slightly. We also have been able to improve our utilization, and also reduced the salary cost, and therefore, a higher utilization led to a better margin.

Here, we see the H1 comparison between September '23 first half to September '24 first half. The revenue has grown by 7% from INR 190 crores to INR 202 crores and EBITDA has grown by 39% to INR 42 crores and PAT has grown significantly from INR 8 crores to INR 20 crores, 166% growth. Next, please. This is the P&L for 30th September half year ended. Some details here in terms of how revenue has changed, how expenses have been able to maintain constant between first half and therefore, the increase in EBITDA and PAT margins.

Let me also tell you that we continue to invest in sales and AI technologies. So there would be a certain amount of expenses which are going in the right direction towards the growth of the business that will continue. Next. Quick snapshot on the balance sheet. So we saw last time one of the founders have resigned from InfoBeans Cloud Tech. And therefore, the earn-out portion attributed to that founder has reduced our liabilities and also reduced our asset portion, noncurrent asset portion.

So that has reflected in the balance sheet right now. The profits have added to the assets and the equity portion. And yes, the current liabilities have reduced from INR 56 crores to INR 41 crores. And similarly, the noncurrent assets have reduced from INR 189 crores to INR 167 crores.

Next, please. Almost equivalent split between Digital Transformation and Product Engineering. InfoBeans Cloud Tech is contributing 15% to the overall revenue. U.S. market has reduced to 63%. And interestingly, Europe has jumped to about 20% in revenue, in Germany. And this is the quarterly number, by the way. UAE has grown to 11%. So both the markets, Europe and Middle East have grown well for us.

India has shrunk. And for right reasons, we curtailed all the low-margin accounts from India. That might have further reduction in future. But yes, interestingly, we used to have 80% U.S. revenue just a year ago, and we are now at 63%, which is a good sign. We are not overly dependent on one market and that we're seeing Europe is growing and Middle East is growing very well.

Next. One quick snapshot of the award that we received, eighth time in a row, Best Employer Award. And we have got the best companies award for top 100 companies in India for women. So certain events that we attend and invited to. This is the ServiceNow event in Mumbai. This is the Shakti empowerment picture where we have women running through the entire program and 25 of them are now to the next level in terms of leadership. So out of the InfoBeans Foundation students, 73 students have got placed. And one remarkable achievement that we've seen here is 40 of them got placed into one company called Softude. And this is the picture of that team in their o�ce. Very happy and proud of that.

Next. So Indore has a recent event where they planted 11 lakh trees and saplings in a single day. We contributed to that. We participated in that exercise. This is a picture from there. Market data, you would be knowing it already.

Thank you. Thank you, Surbhi. We can open up for question and answers.

Mridul Maheshwari

The first question comes from the line of Rajesh Chaudhry. Rajesh, kindly ask your question. Rajesh, we are not able to hear you.

Avinash Sethi

Okay, go to the next in line. Rajesh can come back again.

Mridul Maheshwari

The next question comes from the line of Rohit Singh.

Rohit Singh

No, I am audible, sir?

Avinash Sethi

Yes, Rohit.

Rohit Singh

Considering the recent uptick in the IT job index alongside the U.S. Federal Reserve rate cuts, what are the projections for the demand environment in the coming quarter over the next year?

Avinash Sethi

Thank you for asking, Rohit. I think what you're asking is with the rate cut in U.S., what is the demand scenario for us, right?

Rohit Singh

Yes, sir.

So when you acquire a company, there is always this mechanism where you pay a certain portion of the payout as a part of yearly achievement. Now since one of the founders has left midway, yearly achievement, which would have otherwise been due by the end of this fiscal is not payable anymore. And therefore, that needs to be rewritten in terms of the asset value as well as the liability that we had towards that founder.

Rupesh Tatia

I see. I see. Okay. Okay. Understood, sir. And I mean, Avinash, you have always said that macro doesn't matter. We're a small company, 1 or 2 deals can change our growth trajectory. So are you now in a position to say that our trajectory has changed and over next, let's say, 4 to 6 quarters, double-digit, high double-digit growth kind of will return? Are you now in a position to give that kind of directional guidance?

Avinash Sethi

Rupesh, we don't o�er guidance, but I'm positive now. I'm much positive than probably 2 quarters ago. So things have shown good signs, there are businesses that we have, the clients that we are seeing are generating a lot of work and a lot of demand. So yes, I think we are going in the right track. Whether it will convert into a 20% growth, 30% growth, I don't know. But we certainly want

that. That is the hunger, that is the need that we have. So yes, we are striving for it. We would want that to happen.

Rupesh Tatia

Okay. And then finally, sir, suggestion, I know you look up to best in the industry in terms of practices, corporate governance and all that. So I would also suggest you maybe look at their presentation, maybe if we can start showing up total contract value, deals win, some other by product, by industry segment, some revenue because a lot of details are there given by other industry players. And I know you want to follow the best practices in the industry. So I would urge you to look at that.

Avinash Sethi

Sure, Rupesh. Point taken.

Mridul Maheshwari

Avinash, there are certain questions in the Q&A.

Avinash Sethi

So a very good question from Vipul. We have been saying from the last few quarters that we're actively working on potential deals on the acquisition side. So he's asking what are the challenges that is preventing us for a successful acquisition?

So Vipul, the fundamental point here is that we are very selective in choosing the targets. Second, we want the customers only from the U.S. market.

We don't want the customers from the other markets, primarily because we understand the U.S. market better than the other markets. Just because we've been there for a much longer period, plus one of the founders live there. So when you look at the filters, we have a very strong filter. And therefore, the number of deals that we come out through that filter is less. Plus, when we look at acquiring company, it's not just the financial transaction. It is a much more detailed work in terms of how the integration will happen, what are the cultural alignment, what are the synergies, how are we going to make 1 plus 1 more than 2. So all of those analysis are being done.

And therefore, it takes time. Third is the valuation itself. If there is an illogical ask, then we will not be able to pursue that. So we have dropped a lot of deals where we have given a term sheet based on the value that we estimate for the business and we make an o�er to the seller company, but then they would drop it because their ask was much higher than what we have o�ered. So we do our work. And obviously, if it doesn't close, it doesn't close. We are not willing to make any irrational choices here. We're not willing to make any acquisitions just for the sake of growth numbers by being a much higher dilution for the company because we want the ROI to happen in 4 to 5 years.

And if the ask is such that the ROI will happen in 10 years, then there's no point in acquiring that company. We are better o�building that capability eventually. So that build versus buy analysis happens. And therefore, these acquisitions are tough to happen and it's not very, very simple transactions.

The second question you have is we hold more than INR 180 crores in cash. Should the acquisition opportunities are not available, has the management considered share buyback in the open market?

I think one of the things that I would request all the investors to understand is we are a tiny company. So the comparison that you make of ROE or ROCE from large IT companies is not comparable. That's the first thing. Second is all of those presentations and ratios that we see of the larger companies may not really apply appropriately to us. Therefore, having cash in hand is a good thing. We saw that in COVID times. It gave us a lot of strength even in the severe adversity. And even though it is nothing if we compare to the kind of companies that we're looking at, let's say, INR 100 crore company typically would be available for more than INR 200 crores in value.

If I have to acquire INR 100 crore company today, I'm actually short of money in that sense. So it is a business of large companies to do buybacks and give hefty dividend. But for a company which is growth-hungry, giving back money to the community doesn't really help. right? I mean, it doesn't make sense. If we are trying to grow the business, there's no point in giving back in terms of share buybacks or dividends. We'd rather grow the business and deliver that growth, which becomes a multi-bagger return for the investors rather than a tiny buyback. So I've answered Vipul. Do we have a next question?

Mridul Maheshwari

The next question comes from the line of Rajesh Chaudhry.

Rajesh Chaudhry

Am I audible, please?

Avinash Sethi

Yes, Rajesh.

Rajesh Chaudhry

Yes. First of all, congrats for an excellent set of numbers. My question would be. What is the attrition rate at the moment? And has the salary hike been taken care of in this quarter?

Avinash Sethi

Most relevant question, Rajesh. Attrition rate is at around 16%, which is fairly healthy for us. The appraisals have happened from 1st of October onwards. So yes, we are on the track in terms of what we committed to our team. So we don't see any tough times in the coming quarters. Therefore, we delivered on what we committed in terms of appraisals to happen from 1st of October. That has already happened.

Rajesh Chaudhry

Okay. And can we expect this kind of a run rate now because like since now we are pretty much growing and growing decently, especially in this quarter, can we maintain this run rate going forward?

Avinash Sethi

Yes. As I mentioned earlier to Rupesh, we do want double-digit growth annually as well, so we are unhappy with single-digit growth, let me tell you. But yes, we do want to continue on that path. And we are investing in sales. We are bringing more salespeople, more teams across the geographies, investing there. We're investing in AI technologies trying to understand how we can implement those AI tools and technologies for our customers. So that is an exercise that we continue to invest in.

So yes, we are, in a sense, unhappy with the current rate of growth. We certainly want a higher rate of growth from where we are. So we are investing in that direction

V.P. Rajesh

No. We will announce the LOI whenever that happens.

V.P. Rajesh

I see. Okay. Fair enough. Got it. And then the other question was on the cash side. What was our cash at the end of the quarter?

Avinash Sethi

Yes, INR 180 crores more or less, plus INR 75 crores in terms of AR.

V.P. Rajesh

Sorry, INR 180 crores, you said?

Avinash Sethi

INR 160 crores is it? Sorry, INR 160 crores in cash.

V.P. Rajesh

Right.

Avinash Sethi

And about INR 75 crores in AR.

V.P. Rajesh

analyst

Wonderful. Great quarter.

Mridul Maheshwari

We'll take the last question from the line of Manish Karwa.

Manish Karwa

Can you hear me?

Avinash Sethi

Yes.

Manish Karwa

Avinash, can you hear me?

Avinash Sethi

Yes. Manish.

Manish Karwa

Okay. Sorry about this. So I was just asking and again, this may be a repeat of the previous few questions, especially on the margin front. So there are a few things which are happening. First is that you are saying that there's a decent amount of cost cutting that you had done. Now what is the nature of these cost cutting? And will this benefit continue to us as growth starts to come in?

And second, the salary hikes, you obviously deferred the salary hikes over the last 2, 3 quarters. Now with salary hikes coming in, I assume there will be growth as well. But is there a risk to margins once the salary hikes happen? Or they've already happened, I assume, but would it reflect negatively on the margin front as we move forward?

Avinash Sethi

See, it will certainly impact the cost, definitely, yes. But at the same time, we're seeing demand showing up. So that should cover up. The second thing is the cost-cutting measures that we have taken is we have optimized our bench where we've aligned our sales funnel with the bench and everything else that is not aligned to that funnel, we have cut that out.

So that has helped in a sustainable, I would say, cost protection there. At the same time, we are also actively building the talent pipeline so that we don't

have a lot of idle time before the project starts. So these are some of the, I would say, tough things that we have done in the past. We've also cut down on clients which were not growing in margins, particularly Indian clients. So that also has been reflected. Some of the clients have been converted into a better rates so that now we have a steady revenue pipeline without hurting the margins.

So these are some of those bigger things that have happened. So yes, I think we should be able to recover.

Manish Karwa

Okay. Second thing, on the growth front, I think partly you answered. It seems to me that while you are bullish on new business coming in, but still the numbers that show up do not reflect a very high growth. Given a small size, I guess, we probably could have grown a lot more. What it seems to me is that some clients are running o�.

And as you also alluded, some Indian clients, you are also letting it go because of the margin issues. Now if the runo�were to reduce, I guess, the growth number should look very high because the new client acquisition seems higher. In this quarter also, you've seemingly added 4 new clients. And I assume these are large clients. So as the project starts to ramp up, you will probably see a much faster growth. So is this thought process or assumption right that as we move forward?

The runo�will reduce some of the margins we've already recouped. And as the new acquired clients starts to ramp up more, the 3% growth number on a sequential basis that you showed this quarter should actually start to look much higher as we move forward.

Avinash Sethi

That's correct. That is how technically services model work, and that is what we are also trying to do. New client comes at a higher rate. Obviously, there's a ramp-up in mind in terms of how things will progress.

Thank you, everyone, and now you may disconnect your lines.

AI assistant

InfoBeans Technologies Limited — Call Transcript 2024

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