Intellect Design Arena – A Bright Spot In The IT Industry

[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1/1″ tablet_width_inherit=”default” tablet_text_alignment=”default” phone_text_alignment=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text css=”.vc_custom_1684397460381{margin-right: 16px !important;margin-left: 16px !important;border-right-width: 10px !important;border-left-width: 10px !important;}”]Intellect Design Arena has the world’s largest cloud-native, API-led microservices-based multi-product FinTech platform for global leaders in Banking, Insurance and Capital Markets. Intellect leads in Financial Technology Products addressing the business needs of the banking and financial services domains. 

The company caters to four main verticals in the banking industry viz, retail banking, corporate banking, insurance and treasury management. The company has four business units that are aligned with each vertical such as Global Consumer Banking (iGCB), Global Transaction Banking (iGTB), Risk, Markets and Treasury (iRTM) and Insurance (iSEEC).

Highlights of Q4FY22 and FY23 results

• Total revenue for FY23 stood at Rs 2,246 crore, a 21% YoY growth
• Gross Margin stood at Rs 1,228 crore in FY23
• FY23 EBITDA is Rs 450 crore in FY23, i.e. 20% of the revenue
• FY23 EBITDA excluding ESOP cost is Rs 495 crore i.e. 22% of the revenue
• Profit after Tax stood at Rs 267 crore for FY23
• Management aspires to achieve 20% YoY growth, with margin at 25-30% and sees large banking opportunities in core banking transformation 

 

Revenues rise but profits fall in FY23

Intellect Design offers a wide spectrum of products across banking and insurance, which are built on micro-services-based architecture, powered by AI and ML. With 12 products and four platforms across four business lines, the company is well placed to accelerate digital roadmaps of global financial institutions.

Intellect Design recorded total revenue of Rs 2,245.97 crore for FY23 as against Rs 1,856.47 crore at the end of FY22. It’s net profit, however, fell to Rs 267.3 crore vs Rs 349.08 crore at the end of FY22. Even though its profits are lower than FY22, it is important to note that the company has bounced back from net profits of Rs 16 crore in FY20. Going forward, profitability is likely to keep pace with revenue growth.

The company’s total revenues crossed the Rs 2,000-crore mark for the financial year FY23. In a scenario where the largest software companies have lowered their guidance for FY24 and are concerned about the order inflow from the US and Europe, Intellect Design Arena stands out with outstanding FY23 results. 

For Q4FY23, Intellect Design reported revenue of Rs. 615.5 crore, up 20.8% YoY, led by a strong jump in license revenue and AMC revenue. License revenue of Rs. 113 crore was up 42% YoY, while AMC revenue at Rs. 106 crore was up 25% YoY. 

License-linked revenue (License + Platform + AMC) was Rs. 333 crore in Q4FY23, up 18% YoY. The company won few Rs. 50 crore deals during the quarter (two license deals and one SaaS deal).

Annual recurring revenue – ARR (on annualised basis) improved to Rs. 881 crore in Q4FY23 from Rs. 837 crore in Q3FY23. 

The company has reinvigorated the team in Europe with the induction of seniors. The company continues to build up pre-sales and delivery capability and has three referenceable clients, which have gone live. The company has built a good pipeline in the U.K., Europe, and Canada 

According to the management, the company is currently in phase 5 of bank tech wave wherein cloud and AI disruption is taking place. Intellect management said that when tech disruption happens the companies have to realign themselves to tech stack and for that investment has to be done 3-4 years in advance. The company mentioned that it was able to see these signals that cloud & AI is going to disrupt the banking industry and they started investments in these spaces since 2017. This has led to its current slew of products.

New eMACH.ai launch is expected to be the growth catalyst

The company had launched eMACH.ai in March 2023, which has been accepted by 12 clients. Among the significant ones, the largest bank in Canada has chosen eMACH.ai enabled Corporate Treasury eXchange (CTX), Virtual Accounts and Escrow solutions. One of the leading universal banks in Philippines has chosen Intellect’s Retail Loan Origination System, Credit Card Origination system, Canvas, iTurmeric & AR. A leading global speciality insurance and reinsurance carrier in UK has chosen Magic Submission.

Among Indian banks, IDFC FIRST Bank has signed up for an upgrade of iGTB’s DTB platform, a commercial bank in Zimbabwe has chosen eMACH.ai enabled Intellect Digital Core and the largest commercial bank in Saudi Arabia has chosen Intellect Debt Management solution in the India-Middle Eastern Region.

Arun Jain, Chairman and Managing Director, Intellect Design Arena, said, “Our launch of eMACH.ai marks a significant shift in how transformation technology is addressed for the financial services industry. A blend of the best of composability, embedded AI, and data on a cloud-native open architecture opens up an entire world of possibilities for banks and financial institutions for designing value propositions contextualized for their customers. This endeavour is supported by iTurmeric, a unique visual composer for the intuitive design of experience, process orchestration, and eco-system integration. Within a short span of time, we are seeing significant interest from several banks and financial institutions to adopt this platform. The eMACH.ai is an outcome of intense R&D by over 2.4 mn hours and enhanced investment over the last 4 to 6 quarters.”

The number of destiny deals increased from 61 in Q4FY22 to 70 in Q4FY23. However, the average deal size fell slightly from Rs. 45 crore in Q4FY22 to Rs. 44 crore in Q4FY23. The company also won 12 digital transformation deals and had 10 new digital transformations go live during the quarter.

New high value deals align with management vision

The company mentioned that it is still in top three contenders for large bank deals in Europe along with Temenos & Though Machine in a couple of deals while in one deal it is one of the top two contenders. The company mentioned that the results of the deals will be declared in a couple of quarters. Intellect also mentioned that it has entered into a few RFPs and the Europe market where it is competing with three companies like Temenos & Though Machine.

TCS and Intellect Design Arena are in the race for a contract for the development of an advanced version of public procurement portal. The government invited tenders for new GeM (Government e-marketplace) portal development work in February-March this year and after scrutiny of the bids, TCS and Intellect Design Arena qualified in the technical stage.

Conclusion

With a good set of numbers this quarter and FY23 revenues crossing the Rs 2,000 crore benchmark, investor confidence in the company is building up. The management guidance for 20% growth at a time when other IT players are lowering their guidance is also a positive factor. The new launch eMACH.ai could propel the new phase of growth over this financial year. By the end of FY24, the stock can reach levels of 850 if it continues at the current pace.

ABOUT THE AUTHOR

Ketan Sonalkar (SEBI Rgn No INA000011255 )

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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