Key highlights from 3i Infotech Ltd (3IINFOTECH) Q3 FY23 Earnings Concall
Management Update:
- [00:02:59] 3IINFOTECH said its revenue mix will shift from classic enterprise business to the next-generation business going forward.
- [00:12:22] 3IINFOTECH said there was a reduction in overall employee cost of INR8.9 crores vs. last quarter due to lower exercised ESOPs, a one-time variable pay impact, and cost reduction in the US territory and globally.
- [00:18:08] 3IINFOTECH’s headcount grew by 11.4% since the beginning of the financial year and by 5.6% in this quarter. Attrition declined to 25%, which is 9 percentage points less than 3Q22.
Q&A Highlights:
- [00:22:39] Siddharth Gupta from Voyager Capital asked about the breakup between newer products and legacy services. Thompson Gnanam MD said the company’s classic enterprises business earned INR142.9 crores with a 9% GM in 3Q23, while its new NuRe line of businesses earned INR39.3 crores with a 26.6% margin.
- [00:23:19] Siddharth Gupta from Voyager Capital asked about the company’s plan for the property in Vashi that is back on its books and plans for it. Sanjay Rawa CFO said a negative income included in Vashi property deal, resulting in INR23 crore net gain and asset reinstated in books from April 1, 2021, causing INR 2.6 crore increase in depreciation charges. 3IINFOTECH is obtaining documentation from SIDCO for NOC to use property for own consumption.
- [00:23:31] Siddharth Gupta from Voyager Capital enquired if the company has any plans to raise equity or debt in the future despite being net-debt free and having a good cash position. Thompson Gnanam MD said regarding fundraising, the company has achieved its goal of liquidating non-current assets to add to its cash reserves. 3IINFOTECH received income tax refunds in 3Q, and will consider fundraising options after Q4.
- [00:43:02] Purushotam Savlani enquired if FY23 4Q target of INR 230 crores is achievable and in FY24, the target of $122 million, approx. 27% YoY growth is achievable. Thompson Gnanam MD replied that the company has two goals. One is to reach INR760 crores milestone and maintain momentum for next year and second to reach a monthly run rate of INR80 crores. 3IINFOTECH added that it expect acceleration once these targets are hit.
- [00:45:34] Prabhu Anand asked about the status of RailTel’s development work, previous progress, and the timeline for product rollout. Thompson Gnanam MD replied that there are two perspectives for the RailTel deal. One is focus on monetization and asset utilization. And second, develop a super app serving as a one-stop-shop for passengers and linking to other businesses. Revenue generation and app development will happen simultaneously, with the goal of becoming a super app in 3-4 quarters.
- [00:49:57] Prabhu Anand enquired if the increase in cash on hand of INR80 crores is solely due to gains from property or if there are other sources contributing to the increase. Sanjay Rawa CFO clarified that revenue has increased due to the collection of old income tax assets. This included tax deductions at source from various years, which were realized in the current quarter.
- [00:52:13] Divya Daga from Vijit Global asked about the cash flow from operating activity amount in 3Q and if it was positive or negative. Sanjay Rawa CFO answered that it was positive and the amount will be between INR4-5 crores.
- [00:52:30] Harpreet enquired about any update on SD-WAN. Thompson Gnanam MD said the company is focusing on SD-WAN for its 5G core, but the first priority is launching its 5G lab as a service product. 3IINFOTECH plans to have more SD-WAN information next quarter and a product ready soon.
- [00:53:01] Harpreet asked if the company has any plan of rebranding 3IINFOTECH. Thompson Gnanam MD answered that the company is rebranding and splitting into two tracks: 3i in banking and NuRe in digital business. These tracks will eventually converge, but currently operate separately. 3i represents enterprise while NuRe is the new digital arm.
- [00:54:57] Harpreet queried if the company is capitalizing on the layoffs in North America by hiring some of the affected talent. Thompson Gnanam MD replied that 3IINFOTECH is exploring alternative strategies as a smaller, agile company. 3IINFOTECH is interested in a flexible workforce, but concerned about their loyalty. Despite this, 3IINFOTECH plans to develop the concept and have received inquiries about it.
- [00:55:59] Prabhu Anand K enquired about the Malaysia sovereign cloud, specifically regarding customer wins and partnerships for selling services. Thompson Gnanam MD said Malaysia’s sovereign cloud, which has onboarded customers through partners and aims to provide better service at a lower cost. The cloud is positioned as a disaster recovery option for enterprise companies, with pilots set to start in 4Q. 3IINFOTECH also suggests using the sovereign cloud in Malaysia as a backup option for large coalition corporates.