Aurionpro Solutions Inc (AURIONPRO) Q3 FY23 Earnings Concall Transcript

Aurionpro Solutions Inc (NSE:AURIONPRO) Q3 FY23 Earnings Concall dated Jan. 25, 2023.

Corporate Participants:

Aashvi Shah — Contact

Ashish Rai — Vice Chairman

Analysts:

Swechha Jain — ANS Wealth — Analyst

Unidentified Participant — — Analyst

Neha Jain — — Analyst

Umesh Matkar — Sushil Finance — Analyst

Ganesh Shetty — — Analyst

Keshav Garg — Counter Cyclical Investments — Analyst

Ankit — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the investor call of Aurionpro Solutions Limited to discuss the Q3 and Nine Months FY23 results. Today we have with us from the management, Mr. Ashish Rai, Vice-Chairman and Director; Mr. Vipul Parmar, Chief Financial Officer; and Mr. Ninad Kelkar, Company Secretary.

As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Aashvi Shah. Thank you and over to you, Ms. Shah.

Aashvi Shah — Contact

Thank you, Niraj. Before the call, we would like to point out that certain statements made in today’s call may be forward-looking in nature and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. The investor call may contain forward-looking statements based on the currency held beliefs and assumptions of the management of the Company, which are expressed in good faith and in their opinion reasonable.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, financial condition, performance or achievements of the Company or industry results to differ materially from the results, financial condition, performance or achievements expressed or implied by such forward-looking statements.

The risks or uncertainties relating to these statements include but are not limited to risks and risks for expansion plans, benefits from fluctuations in our earnings, our ability to manage growth and implement strategy, competition in our business, including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals and our ability to win new contracts, changes in technology, availability of financing, our ability to successfully complete and integrate our expansion plans, liabilities and political instability, and general economic conditions affecting our industry. Unless otherwise indicated, the information contained herein is preliminary indicator and is based on the management information, current plans and estimates.

I now hand over the conference to Mr. Ashish Rai for the opening remarks. Thank you, and over to you sir.

Ashish Rai — Vice Chairman

Thanks, Aashvi. Good afternoon, everyone, and welcome to this earnings call for Q3 FY23. The results for Q3 continue our strong growth momentum of the last three years, reflecting an exceptionally disciplined execution from our team at a time when we’re seeing significant growth in demand across all our key offerings — most of our key offerings.

During the quarter, we saw very healthy growth in our key business lines, which ensures that we remain firmly on-track to meet the 30% growth target for topline and earnings.

I’m sure by now you’ve received the investor deck that details our performance in the quarter. Allow me to briefly summarize the key performance highlights. The revenue for the quarter stood at INR169 crores, a strong 30% growth year-on year and 9% on a sequential-quarter on quarter basis.

EBITDA grew 23% year-on year to INR37 crores and PAT stood at INR26 crores, which is a growth of 30% year-on year. EBITDA and PAT margins for the quarter remain at 22% and 16% respectively, in line with the same quarter last year.

On a 9-month basis, the Company has posted a revenue of INR469 crores, which is a growth of 27%. EBITDA for the 9-month period was higher by 30% and the profit-after-tax was higher by 39%.

EPS for the quarter was at INR10.97 and for the 9-month period it stood at INR31.69, which is an increase of 40% on a year-on year basis. This growth is the result of strong performance across all our core business segments, with exceptional growth in the PIT [Phonetic] segment on the back of accelerating execution against the order book.

We are very proud of this execution from our teams, especially in the backdrop of a tough global environment and I think it’s a great validation of the competitiveness of our offerings and the resilience of our chosen strategy to build a world-class IP-led software products and platforms product.

Q3 was a significant quarter for us in terms of achievements across several business lines. Transit business had phenomenal successes in the quarter and an especially proud moment when Her Excellency President Draupadi Murmu launched the cutting-edge open-loop ticketing system in Haryana, powered by Aurionpro. Launch in Maldives together with Mastercard and MTCC was another significant achievement for the transit business, a great quarter overall for the transit business.

Banking and Fintech business saw the launch of AuroDigi, a significant investment from Aurionpro, to create the next generation of corporate digital banking. Aurionpro Fintech in US also signed the largest order win till date for us in the US with an $18 million win with one of the largest payment facilitators in the US.

Aurobees’ signing with the BSE E-Agricultural marketplace that we announced and AuroPay launching B2B payments and partnership with global leaders such as FIS Worldpay and Stripe provide great proof points on the impact and success of our bets on next-generation Fintech platforms.

We’ve also seen a healthy expansion of pipeline in the last quarter as well as a strong expansion in the order book. The final order book now stands at INR760 crores, a very large part of which will be executed over the next four quarters to six quarters. We’ve been expanding our capacity to execute against this order book, including a net addition of over 400 staff over the last two quarters. We are confident that this sets us up to have a sustained growth over the next few quarters and beyond.

This quarter also saw a significant expansion in our sales force, with some exceptionally well-regarded sales leaders joining us across India, Southeast Asia and the US. These leaders are building out the next phase of expansion of our sales channels, and I’m confident that these additions will really deepen our leadership pool and over time contribute to accelerating our growth momentum in these markets.

If the last 12 months have taught us anything, it’s that we can’t accurately predict what the macro environment will be in the short term. While any significant deterioration in the economic environment can throw challenges for the industry overall, we believe that our strategy of creating a well-diversified portfolio of highly-differentiated, IP-led products and platforms will allow us to continue to outperform our peer group and grow at rates significantly faster than industry growth, as we’ve been doing the last three years.

The competitiveness and depth of our IP portfolio is thanks to the dedicated efforts and focus of our teams over the last several years. And this gives us a very strong defensive moat and will allow us to continue to clock above-average win rate when we compete and a pricing power way above the average undifferentiated [Indecipherable]. We feel confident that our IP portfolio will allow us to grow the earnings power of our business much faster relative to the industry and will help us to significantly expand the intrinsic value of our business over time.

All our key segments continue to witness strong demand momentum, and we will remain sharply focused on execution to keep expanding our market share and create significant value for all our stakeholders.

That’s all from me for now. I hope this has given you a useful overview of the overall business context, and our strategy and performance. I look forward to addressing any questions that you may have.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Swechha Jain from ANS Wealth. Please go ahead.

Swechha Jain — ANS Wealth — Analyst

Hi, sir. Thank you for giving this opportunity. I have few questions. So I…

Operator

Swechha, sorry to interrupt you. May I request you to speak through the handset, please.

Swechha Jain — ANS Wealth — Analyst

Am I audible now?

Operator

Yes, thank you.

Swechha Jain — ANS Wealth — Analyst

Okay, so I have a couple of questions, sir. I’ll just ask couple — a few of them now and then I’ll rejoin the queue. So first, if you could just give me the cash position and receivables as on 31st December. And along with that, if you could just help me understand what kind of orders, have you bid for in Q3, and how does the bid pipeline look like, if you could give a number to it? So, that’s my first question.

Ashish Rai — Vice Chairman

Okay, hi Swechha. Yes, thanks, good question. So look, overall — so we will — we published a half-yearly balance sheet that gives you the kind of cash position. We had a bit of issues with DSOs in Q2 as we mentioned in the last call. We’ve resolved most of those now.

And overall, I think the DSO has remained stable. And no, it’s not materially changed from where we were end of Q2. We will publish the balance sheet again end of March and there you will see the accurate positions, right. But I think some of the sort of execution issues that we had pointed to the last quarter have now been resolved and the DSOs are stable at where they were.

The pipeline and the order book, so as you would have seen, the order book has grown quite materially from 3 months back we were talking about. So, that points to how strong the execution has been. The pipeline has grown for us quite significantly. There is a reason why we do not publish pipeline numbers. In our business there tend to be some very large deal sizes that will, we believe, put a misleading sort of representation of where it is. So, that’s why we like publishing signed orders instead of pipelines. But I would say, the pipeline has climbed up significantly over Q3 and we see very strong momentum on a few places.

I think the transit side of the business is doing very well. The Fintech business in the US is doing very well. And some of the latest initiatives that we’ve had around banking products, both on the lending and transaction banking side, we see increased momentum on the pipeline. It’s also partly because our sales channel has expanded. So last-time around, we were talking about increasing the sales force on the ground.

Now as I mentioned, we’ve added more feet-on-the-street and experienced leaders in India, in Middle-East, in Southeast Asia and the US over the last 3 months or 4 months. And part of the pipeline increase is coming from that. I would say it’s materially — it’s become quite a bit bigger over Q3, but we will not publish a number.

Swechha Jain — ANS Wealth — Analyst

Okay, got it. Sir, my second question is actually if you could help me understand the order book split between Banking and TIG. And also, if you could give — if you could help me understand the order book split between software services and equipment and license.

Reason I’m asking is because we report our revenues in [Technical Issues], right; in the presentation we’ve given software business and equipment and then we’ve given revenue split in banking and tech innovation. So — and I’m sure there might be some overlap. So, if you could first give me the order book split and also understand what kind of revenue is billed [Technical Issues] because we report in these two ways and I’m just trying to understand as to what’s going where.

Ashish Rai — Vice Chairman

Sorry, Swechha, I got the first part of your question, you were asking for the order book split. Can you repeat the second part? I didn’t get it.

Swechha Jain — ANS Wealth — Analyst

Okay. So, second part was, in our presentation we gave a revenue split [Technical Issues], one we report as software business and equipment license, how we report in our [Indecipherable]. And we again slit the same revenue between Banking and tech innovation, right. So, I just wanted to understand, when we look at the revenues of these [Technical Issues] what exactly goes in software business and equipment, and what exactly goes in Banking and innovation because I understand there might be some overlap, correct, tech banking also would have software and equipment and tech would also have software [Technical Issues] right?

Ashish Rai — Vice Chairman

True, yes, so true. So look, I think, your line is a little bit off, but. I think I got it. So just coming to the software service and equipment and product licenses, that is more or a revenue type split. So, there are three types of splits that we publish. One is a split between the businesses, so that is Banking and Fintech and TIG.

Second is a split by revenue type, that is the other disclosure we do which is — the way to look at it is more of what is a one-off versus what is more of a continuing service more or less, right, so that is the second disclosure. And the third where we’ve been started disclosing now based on the last feedback was on geographies, right. So, the way to look at it is, these are three — the — every — all of these three overlap with each other in the sense that they are three independent, mutually exclusive distribution of revenue, right.

Coming to the question on order book, roughly right now it is split 40% for Banking, 60 — for Banking and Fintech and 60% TIG. And the reason for that is Banking has a deeper base with more frequent — with existing base we sign orders more frequently, especially a lot of the AMC contracts and recurring service contracts that get signed every year. So, the size of the order book doesn’t need to be a lot bigger to deliver because the execution cycle is very tight.

On the TIG side, the size of the order book is bigger. And also, as you would have seen from the investor deck, but growth in the business is a lot more. So, that sort of explains the disproportionate share in the order book.

Swechha Jain — ANS Wealth — Analyst

Right. So — okay, so just a small clarification, sir. Between banking and TIG, can you give the revenue split, like into Banking, how much is on the software side and how much is on the equipment side? And in the TIG, what would be the software component and what could be the equipment component for this quarter?

Ashish Rai — Vice Chairman

That — we will have to come back to you on that.

Swechha Jain — ANS Wealth — Analyst

Okay, fair enough.

Ashish Rai — Vice Chairman

Let’s have a look. I think — honestly I think broadly the licenses component is a bit heavy on Banking — we will come to look at it, but I don’t believe that really will give you a materially different information in terms of quality because ultimately I think the split would more or less be the same across the businesses. So when we sell, it’s [Indecipherable] a part of sale ends up being one-off, which is especially when we are acquiring a new customer, which is where there is a license sale or an initial setup and then the rest of it is implementation.

Typically, you would split a third on the one-off, a third on the service and a third on the ongoing AMC, and more or less that split sort of adheres. But we’ll see if we can get a split on those lines for the sub-segments.

Swechha Jain — ANS Wealth — Analyst

Okay, no problem. Sir, I have two more small questions.

Operator

I’m sorry to interrupt you. [Speech Overlap]

Swechha Jain — ANS Wealth — Analyst

Okay, so I will join back the queue, yes, I will. Thank you.

Operator

Thank you.

Ashish Rai — Vice Chairman

Thank you. Swechha.

Operator

A request to all the participants, please restrict to two questions per participant. If time permits, please come back in the question queue for the follow-up question. The next question is from the line of Dhanush Jain from AC Capital [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Hello. Yeah, hi sir, congratulations for a good set of numbers. So sir, I have two [Indecipherable] questions. The first one is on revenue guidance for a range of around next 2-year to 5-year basis on the basis of the Company extending new employee base as well as the strong order book plus Company having a very robust pipeline. So, how long tax to convert into numbers, so overall if you provide the long-term guidance for revenue growth. This is my first question.

And my — the second question is on segment revenue side. So if you see, the sale of the equipment and appliances down in the December quarter. So, it’s like the company focusing more on [Indecipherable] or this is just one-off and it will improve in the coming quarters? So, these are two basic questions.

Ashish Rai — Vice Chairman

Hey, Dhanush, hi. I got the first question which was about the revenue guidance. I did not fully get the second question.

Unidentified Participant — — Analyst

Yes, sir. My second question is on the segment revenue side. So this is — the sale of that product license, down in December quarter, sir. So it’s like the Company is focusing more on [Indecipherable] services to maintain growth [Indecipherable] or this is only just one-off, this will improve in the coming quarter, sir?

Ashish Rai — Vice Chairman

[Speech Overlap] Well, let me attempt to answer that. So first, about the revenue guidance, so we do give out an outlook, especially in terms of our target, more in terms of our plans 12 months out, right, so that we’ve given, which is grow at about 30% Or thereabouts this year.

We do not really give out a long-term 3-year to 5-year guidance, but I think I’m happy to explain the philosophy that we have overall, right. So if you see, when we started the strategic pivot for the enterprise 3 years back, we had an ambition to create global IP-led products and platform vendor that is a leader in a few chosen spaces, not a leader in India or Southeast Asia, but essentially, a global leader in those spaces, right.

And we set about saying, one is my chosen space, the right space with the right size of the market and the — and a long enough demand and wait, right. Second, if I find that segment can I build an absolute Tier-one product in that space that can go and compete globally. Example, lending, we mentioned that last time around. [Indecipherable] squarely in the leader’s quadrant on corporate loan monetization [Phonetic], collateral management, limit management, right, so not leaders quadrant in Asia or leaders quadrant in India, leaders quadrant globally competing with the biggest vendors in the world.

Similarly on the transit side, like we mentioned, we win places like California, which are some of the most competitive RFPs in the world, tells us I can go and compete anywhere. So the idea was, Tier-one IP in segments which are big enough and then I want to get to a leadership position in those spaces, right. So, these are very large spaces and the leadership position in those spaces can very large numbers, hence the hesitation to really try and chalk out a 3 to 5-year thing.

So, our ambition right now as an enterprise is to grow in the range of 25% to 30%. We have now been doing it for 11 quarters and we expect to continue to do that. I do expect we will have an inflection point at which point our platforms are really ready to compete globally and are acquiring scale and the growth rates can go up. As and when we get to that inflection point, we would come in and advise the shareholders and investors on that. At the moment, I would say, a good ballpark in terms of our planning is to continue to try to grow at between 25% and 30%, both on the topline as well as earnings, right. So, that’s the first part.

The second part in terms of how much — and I will apologize if I did not get the question right, how much of this growth comes in from, for example, one-off kind of services, sales in licenses and in equipment, and if we saw the growth dependent on that. So typically, a lot of our growth comes in from the existing base, which is where, once we are in with the client, especially with, let’s say, a very large-size bank like the largest bank in Southeast Asia, for example, that we work with, and we are the widening of mission-critical system to them. They will need us to provide an ongoing service. And a lot of growth for us comes in from the existing relationships, just adding in terms of a new functionality needed or a service needed to maintain and things like that, right. So, I think there is less dependence on one-off.

But a part of the growth comes from new sales and new sales one-off is a portion of that, right. So, I would say, it’s hard to assign a number to it, but I would say roughly, let’s say, 35% to 40% of our revenues come in from new sales and a portion of that — with new sales as in net new sales and a portion of that comes in from the one-offs. It’s not a such a significant — it is something that will always be there, but it’s not a significant portion of the overall growth that one should think we will not be able to continue or will change in either direction by a huge number, right, either positive or negative. Hope that makes sense.

Unidentified Participant — — Analyst

Yes, sir. Thank you very much for detailed answer. All the best, sir. Thank you very much.

Ashish Rai — Vice Chairman

Thank you, Dhanush.

Operator

Thank you. [Operator Instructions] Next question is from the line of Neha Jain, an Individual Investor. Please go ahead.

Neha Jain — — Analyst

Hi, good morning, sir. Congratulations on good set of numbers.

Ashish Rai — Vice Chairman

Thanks, Neha.

Neha Jain — — Analyst

I just had couple of questions. So, the first one is regarding the TIG business. Can you throw some light on which are the new state governments we are planning to tie-up with for that business segment?

Ashish Rai — Vice Chairman

So, look, I think typically we will not talk about deals which are in place for various reasons, including both confidentiality as well as comparative reasons. As we have seen — so this is what I will say. We’ve had our share of success in the Indian transit space. The goal that we have for the transit business is to create the most integrated end-to-end offering in the transit space, and I think we’ve succeeded there. We operate today with probably the most integrated solution stack at probably the most — as being the most cost-efficient provider as well, including the hardware stack, right. So, I think that is very, very important, which makes us very competitive.

And you’ve seen the success in terms of on the metro side, Nagpur metro, Noida metro, Kanpur metro, the Haryana transport, UP transport. So, we are very competitive in India. We are seeing a lot of success globally now in — with — including US, including LatAm, including Africa, a lot of places. So we are — the success in Maldives that we talked about.

So, I think the trick with the business right now is to balance the growth out. And we will continue to win a share of the Indian deals. But we are also trying to balance that out be going out and competing a lot more on the global deals, especially expanding our channel out in the US and a few other places, right. So yes, I think — I can’t talk about specific deals, but we’ve been proven to be one of the most competitive players in India. We will continue to win some more business in India, but we are trying not — trying to go out and win a lot more globally now.

Neha Jain — — Analyst

Okay, sir, just adding on to this previous question, [Indecipherable] the government, is there any lag that we see in our payment cycle, I mean in terms of just receivable days? And is it like impacting the working capital as well?

Ashish Rai — Vice Chairman

So not so much on the mobility side, I think, mobility side the payments are pretty transparent, whether it’s the metro operators or the transit operators in the states. I don’t — there is absolutely no issue at all in payments. On the Smart City side, which is a smaller portion of the business, it is dependent on the payment cycles in the government, so yes. As a overall part of the business, it’s not large enough to really move the needle. But from time-to-time, you know, that may — the payment cycles may stretch in that business. But it’s not on the transit side, more on the Smart City side, which is smaller.

Neha Jain — — Analyst

Okay. Thank you so much, sir. That’s all. And good luck.

Ashish Rai — Vice Chairman

Thank you.

Operator

Thank you. Next question is from the line of Umesh Matkar from Sushil Finance. Please go ahead.

Umesh Matkar — Sushil Finance — Analyst

Yes, sir, thank you for the opportunity. Couple of questions. How are you seeing the global slowdown impacting the business right now? And so once the growth picks up globally, do you see growing at a much faster pace? And for that, have you done the investments — have you done with the investments in people and technology or it could be that it is — the investments are still at the initial phase. That is first.

And you also spoke about doing projects globally and also in India. So, how are the margins on both the fronts? Thank you.

Ashish Rai — Vice Chairman

Okay, hi Umesh. Okay, so first on the global slowdown, look, I think — so for us, we do not see a hugely material impact. Now, any global recession, if things are really tough, of course it’s a painful thing for the economy and we — I feel for people who get affected. But for us, from a demand standpoint, I do not think it materially changes anything.

So, there are two ways of looking at it. One is, if there is a widespread global slowdown, I think it affects everyone across. I believe it affects — given the nature of our model, which is where we are not a run-rate generic IT services company or a single-product software product company, we are essentially a — one, we are an IP-led products and platforms company; second, we are not just dependent on one product, we’ve got a diversified portfolio of products.

So I believe this model, regardless of what is happening to the industry, we will be able to outperform bulk of the players in the industry, purely because of nature of the IP-led business, which is higher margin, more stable, and our biggest challenge right now is fulfilling demand, not so much demand itself, right.

The second part is, we are today a very small player in very, very large segments. So, we happen to be one of the most competitive players in the segments we chose, but we happen to be also very, very small. So for us to keep growing, again is more a function of how much of demand can be fulfilled, not so much the overall segment slows down because the overall segment slows down I think the weaker competitors will lose share and we will get the opportunity to continue to keep on growing and hopefully you know the capacity also shapes up in terms of growth, so that we can continue to capitalize on it, right.

So, I believe, an overall slowdown, we will — it sort of allows the strength of the model to stand out a lot more compared to a normal situation where everything looks the same, right. So, I believe we’ve sort of filled the model to sort of outperform in situations like these.

The second is growth picking up globally, as I said, as and when that happens, very good. Right now, we don’t see a slowdown in demand in the first place. So, it’s not really a material question overall. Our bigger problem right now with capacity, not demand, right. And which — to address the other part to it, are the investments done, look, we are growing at 30% now for three years which puts a lot of sort of need in terms of expanding the scale. I don’t think we done. I think our expense line will keep on climbing as we keep on adding people. But the revenue line will keep on climbing as well proportionately. And we will continue to invest. It’s almost a continuous process.

If you keep on growing at 30% roughly, I would say 50% to 60% of the growth we still need to add capacity. The other 40% we don’t. So we will — it will not probably increase in line with the revenue growth, but it will increase. So, that’s one.

On the technology side, I think bulk of our investments are done. So, most of the products are fully built-out. We launched new versions of the bulk of our products including on the lending side, the cloud version, so that investment is done. The corporate and digital banking products, that investment is done. On the transit side, we’ve made bulk of the investments. So I would say, on the tech side, your position is correct. I think bulk of the investments are done. And what we need to do now is more incremental R&D investments by and large. It doesn’t mean we will not find a new sort of area to come, but I think our sort of R&D spend will remain stable for the next couple of years.

I hope that I have addressed all the points.

Umesh Matkar — Sushil Finance — Analyst

Hello?

Ashish Rai — Vice Chairman

Hope that answers your question.

Umesh Matkar — Sushil Finance — Analyst

Hello?

Ashish Rai — Vice Chairman

Yeah.

Umesh Matkar — Sushil Finance — Analyst

Just had one question on the margins. How are those compared — if you compare global projects versus the Indian? Thank you.

Ashish Rai — Vice Chairman

Okay, so look, at the overall level, as you would have seen over the last three years we’re probably one of the better margins in the industry, probably one of the best margins overall. At — we intend to keep that stable at around 22% on — 22% to 23% on EBITDA and 15% to 16% on net. The reason for that is we’ve been able to balance out the product lines and the geo split of the businesses.

So we do see the margins that we’re seeing in US and Southeast Asia and Middle-East, they tend to be better than what we get him India, right. So, I think that is one euro split. And second sort of marginal split across depending on the product and the service you’re talking about. So on the one-off license base, we’ll see a slightly better margin that quarter; on a recurring business, you will see a more steady-state margin overall, right. But balancing this portfolio out, I think today we are one of the highest-margin shops in the Indian IT and we intend to continue to where we are, right, so which is at about 16% net.

As I said on the last call as well, we expense most of investments, so typically, there is always a R&D spend as a percentage of topline, which is pretty significant, which goes on top of that, right. So as we get more room to scale-up the R&D spend, we will do that and we’ll try and keep the margin stable.

Umesh Matkar — Sushil Finance — Analyst

Okay, thank you very much sir and wish you all the best.

Ashish Rai — Vice Chairman

Thanks, Umesh.

Operator

Thank you. [Operator Instructions] The next question is from the line of Ganesh Shetty, Individual Investor. Please go ahead.

Ganesh Shetty — — Analyst

Congratulations for a great Q3, also for taking the Company to [Technical Issues]. Sir, my first question is regarding our acquisition in the US that is Hello Patients, is it contributing in the [Indecipherable] of our revenue this quarter or we may have to wait for some more time?

Ashish Rai — Vice Chairman

Hi, Ganesh, yeah, good question. So, Hello Patients is more of a strategic long-term bet for us and that’s why we represent that as a part of the Fintech platforms. It’s not material to our revenue at the moment.

In terms of strategy update, what we are doing with Hello Patients is we believe Hello. Patients has an opportunity to fundamentally change the patient management practice management space in the US. We’ve got a very experienced management team in that business and we are working together to create the next-generation experience in that space.

We are — so we’ve got some sort of clients live on the platform, but we are looking at creating a next-generation of it and launch it very soon. As and when we are ready to launch the next-generation of the product out there, we will announce that. I think we are a few months away from it.

Ganesh Shetty — — Analyst

Sir, my next question is regarding the — our contact center business. As we are experiencing demand for data center across Banking, so can you please explain where you exactly stand in this business and how the margins should look like [Phonetic].

Ashish Rai — Vice Chairman

Hey, Ganesh. I did not get the question. Can you be a bit closer to the mic?

Ganesh Shetty — — Analyst

Yeah, can you hear me, sir, now?

Ashish Rai — Vice Chairman

Yes, just go a bit slow. I think the line is not great.

Ganesh Shetty — — Analyst

Yeah, hello sir. I just wanted to know about our the data center business. That — and seeing great demand across the country, so how that business is shaping up and what is the margin picture over there? Can you please…

Ashish Rai — Vice Chairman

Okay, so fantastic. I got that. Thanks, Ganesh. So look, data centers, we believe we now have one of the strongest teams in the business in this industry. We have invested heavily in that space. And I think it is showing up in terms of some fantastic wins that we’ve announced from time-to-time, including some highly competitive very, very prestigious wins where we’ve probably not been able to announce the client name because of confidentiality reasons, but like the most prestigious wins in the industry. So, I think we are very well-placed in that business I believe for quite some time. So, that business will win more market-share than what’s in the peer group.

And the other thing is, you are totally right. I think there is an explosive demand in the country in that space in terms of new investments coming in, multiple players coming in, and a specialized player with very high-end consulting skills like us has a lot of share to win. So, I believe for the short-to-medium term, that business will grow way above the enterprise growth rate that we have.

Ganesh Shetty — — Analyst

Sir, one more question if the time permits.

Ashish Rai — Vice Chairman

Sorry?

Ganesh Shetty — — Analyst

Can I ask one more question if there is a time permission? Hello?

Ashish Rai — Vice Chairman

Talk to the moderator. I mean, okay, let’s…

Ganesh Shetty — — Analyst

I will go on with the question. Sir, as — we all experienced that our rate growth [Phonetic] is moving from one stage of growth to the next to the third stage. So now, we can see a very explosive growth in all our products as we have array of software products [Indecipherable]. So how we position ourselves to make ourselves equipped to handle those challenges where the Company is shaping from a small company to be company to add large — very large company, so all these come — all these planning are — whether we have certain plans for these initiative with us or we are yet to make all those decisions? This is just qualitative questions regarding our business.

Ashish Rai — Vice Chairman

Okay, yeah, I got it. So, look, I think that’s a great question. So we are being very deliberate in where we want to be. As I’ve said, we started this strategic pivot 3 years back. We were very, very careful on where we want to be, the kind of business we want to build. We are looking at the very long-term what is the goal overall, right. So, we want to build a business that really materially enhances the long-term intrinsic value of the firm over an extended periods of time, right.

So, we went in and carefully selected the segments we want to be in and then we carefully selected the model that will allow us to perform over the long-term, which means there were issues with the pure-play single product software, we said okay, we will diversify the portfolio out. There were issues with the pure-play services game, obviously in terms of increasing costs, and also we said okay, we will be very, very IP-focused so that we can always have a pricing power way above the commoditized IP services player, right.

So, we very deliberately chose the current model, which is where I am in, the focus segments, whether it’s Banking, whether it’s transit. I am creating multiple levels of leverage. Leverage number one, we create. Absolute Tier-one IP in the product space that we are in, that itself will allow us to win a lot of business.

Then leverage number two, we wrap that IP up in a whole set of services, whether it’s cloud, whether platform services, to create platforms. For example, if you look at transit, it’s an end-to-end platform, not just a single-product like an AFC or something, and across both hardware and software, right. So, that’s a second leverage which allows us to get an even bigger pricing power and margin power overall. And then a third level of leverage where we say, we will bet on the convergence of these platforms, so we’ll build go and work with industry leaders worldwide to create the ecosystem leverage, which explains the Fintech platforms we have like Aurobees, like AuroPay, like Hello Patients, which is where the IP is ours, we’ve lapped it with services and then we are collaborating with industry leaders to make it even wider, right.

So, those three levels of leverage in the chosen segments will allow us to command both growth as well as pricing power disproportionate to pretty much anything else we see in the market, right. So, that is the game.

Now, are we ready for it? I think we’ve got 3-years track record to — in terms of what we’ve delivered. Second, we’ve shown some of this, we have a top-class management team that we’ve — that we announced. We’ve had a significant expansion in capacity. And we believe, now we see increasingly we become a magnet for the right kind of product talent to come in, because there are not so many alternate options who are doing anything similar, whether it’s Banking or transit, right.

So, I think we are going about this in a very deliberate way. We are not trying to overstep by trying to grow at 50%, 60% because it’s not a services game. We need to protect our delivery reputation, we need to protect the scale. So we are going about growing in a very, very balanced fashion, grow at 25% to 30%, grow our capacity. The management team is in place. I believe we now have the structure to support a bigger — a much bigger business than what we have. So, I feel — as a management team, we feel very good about our preparation for scale, our preparedness for it, and I think we — and our goal is to continue to log the growth rates and continue to show that we are ready for that leadership position that we aspire to.

Ganesh Shetty — — Analyst

Thank you very much, sir. It was a pleasure talking to you, sir. Have a great day, sir.

Ashish Rai — Vice Chairman

Thanks, Ganesh.

Operator

Thank you. Next question is from the line of Keshav Garg of Counter Cyclical PMS. Please go ahead.

Keshav Garg — Counter Cyclical Investments — Analyst

Thank you very much for providing me this opportunity. I wanted to understand that — what is our capex plan for the next one year, two years and what is the net cash that the Company has as of 31 December, 2022?

Ashish Rai — Vice Chairman

Okay, so hi Keshav. So, look, capex plan, first, we’re not really capitalizing any of software investments, right, so we basically expense them out. We are at the moment expensing at the rate of roughly about 7% of our topline. That may go up or down, you know, a little bit as we go. But as we said, we want to sustain the margin levels we are at. So, it will typically be 6.5% to 7% and climb up slowly as the economic profile of the products keep on improving, right, as we get scale. So, no capitalization on the software side barring some very specific situations which are non-material in nature.

The — on the actual other capex, I think it’s more or less scaling with the expansion in capacity, so it’s not something abnormal. We will publish — so we published half-yearly — we published balance sheet half-yearly and we’ll publish at the under full-year, so I will — we will not get to end of Q3 sort of announcement on where it is, but I would say we have — if you go back 2 years, 3 years, we had a large amount of debt sitting on the balance sheet, now that debt is very, very low compared to the size of the business. We’ve been publishing the debt-to-equity number, it’s 0.12 or 0.1 something, it’s not material in any case and the cash position has steadily been building up, right.

So, I would not answer a specific question, but we will do a disclosure as we normally do with the full-year balance sheet when we publish. And I think overall, the debt position in the business has reduced over-time and the cash position has gone up.

Keshav Garg — Counter Cyclical Investments — Analyst

Great, sir. Also wanted to understand the tax rate. In 9 months, our effective tax-rate has been 15%. So going forward, what is the tax rate that one should expect? Hello?

Ashish Rai — Vice Chairman

Yeah, can you repeat that, your question on the tax rate?

Keshav Garg — Counter Cyclical Investments — Analyst

Sir, I’m trying to understand that in this third quarter our tax-rate was 14% and for the 9 months of this year it was 15%. So sir, going forward, what will be the effective tax rate applicable to our Company on consolidated basis?

Ashish Rai — Vice Chairman

Yeah, so look, I think typically the tax rate, we will be between [Technical Issues] 20%. It will show a little bit up — you’ll see a little bit of variance quarter-to-quarter, I mean especially global — so depending on the skew of the global business. I would expect, let’s say, getting to 17%, 18%, but it depends on the mix of business over the quarter. And what is happening to the business overall is. I think — so last few quarters we’ve been overall steady, but as we increase the size of the global business, you probably see us climb down a little bit. But historically, I think we’ve typically budgeted for being at around 17%, 18% and going up to 20%.

Keshav Garg — Counter Cyclical Investments — Analyst

Great sir. And lastly, I just wanted to touch upon one thing that — like you mentioned that our operating margin and other parameters are amongst the best in the industry. Sir, but if you see at our valuation then, despite being almost debt free and with constant improvement on all parameters, we are still trading at single-digit price-to-earnings, which is the cheapest among the industry. So — and plus we are expecting a glorious future and we are showing steady growth rate of 25%, 30%, so that make the stock even more cheap.

So if the Company can buy back shares and extinguish the same, so our EPS going forward will increase faster than the profit and it will be a permanent thing for all times to come. Sir, if you could kindly consider that suggestion, it will be very beneficial for the shareholders. Thank you.

Ashish Rai — Vice Chairman

Yeah, so look, I think we would consider it. That’s — thanks for that. It’s been around — look, valuation — ultimately market is the determinant of valuation, so the management has no contribution to that fact. Our goal is to play for the long-term. Our goal is to enhance the long-term intrinsic value per share for the shareholder of Aurionpro, and we will continue to work on that.

You are right. I think if — we could get to a stage where we saw the best use of cash to go and buy-back the share, but I think we are as a management team around the Board of Directors table I think there is absolute clarity that we are managing this business for the long-term. There is really — there probably is a short-term benefit to buying back shares, but the rate at which we are going and the size of opportunities that exist in front of us, at least in the near-term we believe the best use of our investment is to invest in growth. I think that is what serves the interest of the shareholders the best, if you see over the last 12 months, even on the inorganic side, right, whether it’s our investments in Toshi, our investments on SC Soft, our investments on Hello Patients, right, the inorganic side, they have been to finish off the product stack, they have been to finish off the offering so that we can generate that incremental intrinsic value for our shareholders.

I don’t think buyback would have — I mean, did we have cash to do that? Of course we had, but we would much rather go and use that to invest in finishing up the product stack, completing that end-to-end offering. So essentially, in any part of the value proposition, we go for what is the adjacency, can I backward integrate. And whenever we do that, we extract more margin. That is the reason why we have one of the best margin shops today. We extract more margin and we become more competitive on the chain.

So, I believe — for at least the short-to-medium term, the management beliefs that is the best use of our investments. I think if we got to a stage where we really had growth slowing down or we had no other revenue to invest, I do agree that, that may make sense, right. But ultimately, I believe the market would over the long-term value all prices fairly. Over the short-term, I don’t think that valuation really matters a lot to the management team.

Keshav Garg — Counter Cyclical Investments — Analyst

Okay sir, thank you very much.

Operator

I request all the participants, please restrict to one question per participant. The next question is from the line of Ankit, Individual Investor. Please go ahead. Ankit, may I request you to unmute your line from your side and go ahead with your question please.

Ankit — — Analyst

Good evening, sir.

Operator

Go ahead.

Ashish Rai — Vice Chairman

Hi, Ankit.

Ankit — — Analyst

Hi, good evening sir and congratulation on the good set of numbers, sir. So, sir, I have two questions basically. Hello?

Ashish Rai — Vice Chairman

Yeah, Ankit, go ahead.

Ankit — — Analyst

Yeah, so what is the current debt on the books? And are we planning to raise the funds?

Ashish Rai — Vice Chairman

Sorry, what is the current debt on our books and are we planning to raise any external funds?

Ankit — — Analyst

Yes.

Ashish Rai — Vice Chairman

Okay. So look, debt number, as I said, we have progressively brought that number down. We will still continue to have, I suppose, some — there’s a bit of long-term debt that we have a problem retiring, as well as we’ll continue to have some short-term debt to manage the growth, just the growth in working capital. But it’s not material to the size of the business now.

The — look, I think — so the thing is at the moment, we find no real need for excess capital to maintain our current growth rates on each of the lines of the business. So as I said, product investments largely done, inorganic investments largely done. So, unless there was a specific opportunity to significantly expand value somewhere, we don’t really see any use for excess capital. The business is kicking up enough capital to reinvest back and continue to compound the growth in the business overall. And as I said, bulk of our investment cycles are done, so now it’s more execution mode for us to capture as much growth as we can. So, there is no immediate plan. I mean never say never, but I — unless — it has to be some significant opportunity for value creation. So at the moment, we don’t see any need for it.

Ankit — — Analyst

Okay, got it. So sir, my second question is, as you mentioned about the global environment being recessionary, so as far as our business is concerned. What kind of slowdown are we seeing? And is it impacting our run-rate for achieving our target for next 2 years?

Ashish Rai — Vice Chairman

Yeah, look, honestly, we don’t see any material slowdown anywhere. We hear talk like everyone on this call does about a recession possibility globally. If it happens, very good — like, Mr. Mangat [Phonetic] says, right, I mean, the goal of the management team is not really to judge whether it’s high tight or low tide. The goal is to swim as easily as we can. I think we are executing well. We don’t see a slowdown in demand. As and when there is a slowdown in demand, I believe we will outperform our peer group. So, we will continue to convert when the weaker players have stopped converting. That is what we believe.

The other thing is, if you see what is causing this global sort of noise around recession, a large part of it is around increased interest rates in the Western world. Now, as the cost of money increases, as interest rates increase, a large part of our offering, if you see, for example, the corporate lending side, right. We believe banks will normally do well in a high-interest rate environment. Corporate loan to the heart of a wholesale bank. So, we believe banks will continue to spend on transformation there, banks will continue to spend on the — for example, the corporate banking products that we have. So, we don’t believe a high-interest rate environment is necessarily bad for the parts of the banking industry that we address. I can understand it’s bad, for example, investment banking, the transaction volumes have dropped. There is no M&A and I get that. But it’s not necessarily bad for the corporate bank that we serves.

So, I would expect that demand to continue to hold. We would expect the transit demand to continue to hold. So, we honestly right now don’t see a reason for slowdown. If we see one, we will come and talk to the shareholders about it.

Operator

Thank you. Ankit, may I request you to come back in the question queue. I request to all the participants, please restrict to one question per participant. The next question is from the line of Swechha Jain from ANS Wealth. Please go ahead.

Swechha Jain — ANS Wealth — Analyst

Hi, sir. Am I audible?

Ashish Rai — Vice Chairman

Yes, Swechha.

Swechha Jain — ANS Wealth — Analyst

Okay. I have a follow-up. Sir, I wanted to understanding, what was our investments in SC Soft and Toshi Auto that we have done? I wanted to understand how do you think these two investments are going to help us strategically?

And another question was a follow-up I had, was from your commentary that you said that we’ve been maintaining a growth of over 30% over the last 11 quarters. So I wanted to understand, how long — like how many more quarters do you see us growing at 30% kind of a number?

Ashish Rai — Vice Chairman

So we don’t see a slowdown at all. So, we expect to continue to grow at 25% to 30% in the next several quarters and beyond. So, the goal of the management team — so what we don’t give is a forward guidance going several years out. So, we don’t want to do that. What we share is an insight into our planning for the next several quarters and our performance target for the next several quarters is to continue to grow at the same rate as we’ve been growing the last three years, right. So, we don’t see a need to slow down the growth rate at the moment, either from a demand standpoint or a capacity standpoint. We believe we can keep scaling capacity at the current growth rate.

Of course, if it were to accelerate, it can become a challenge, and hence our choice of growing 25% to 30%, which is where we believe capacity can keep up with our conversions. So, that’s essentially the story there.

SC Soft and Toshi, that is a great question, Swechha. Look, I think it’s important to understand what we are trying to create on the transit side, right. Under leadership of Sanjay who is the President of the business, we promoted — we have built-out today one of the most integrated end-to-end stack in the transit space. Why are we doing that? We believe it is a multi-billion dollar space globally. We see a huge momentum across the world in terms of transformation of transit payments from the legacy closed-loop systems to open-loop systems where we happen to have a cutting-edge tech stack.

When we say we want to build-out the most end-to-end offering, it means we need to capture parts of the value chain where we are not there, right. And that explains SC Soft. SC Soft is a Singapore-based provider, very strong — most of our — a lot of our transit technology has come from there and being developed out of our R&D centers in Singapore and Istanbul as well as in India. This is where the hardware that comes in, which is being validator. And we are increasingly backward integrating that piece going down to a lower level, building more-and-more of our stuff and replacing the component side. So, we will continue to build-out global class validators and tech stack from the Singapore set-up, that’s where SC Soft off comes in.

We’ve more or less finished the acquisition. We’re acquired 90% of it with a 10% back [Phonetic]. We will put in the cash over the next couple of quarters, right. So, that is a the SC Soft.

Toshi fits in again in terms of completing out the offering stack in that business. So there Toshi comes it. A lot of the contracts come out, not just for technology, but also for things like the turnstiles and the gates and the actual core hardware component. And Toshi will help us capture that portion of the contract, so when we go out we can actually have an opening for pretty much everything that a bid is coming out.

So some bids come out purely for portion of the stack, so like just the validators, for example, or just the software, AFC, or the larger transformation contract comes for everything end-to-end. So, it gives us the ability to play in the large turnkey contracts as well as play in any part of that chain. So, Toshi takes up the manufacturing side, hardware core fracturing side. SC Soft provides the electronic manufacturing, the hardware and the tech stack, right. And we bring it together with — wrap it around with a set of services that we have and that is what allows us to go in and win a disproportionate share of business in that space.

Operator

Thank you very much. I now hand the conference over to Mr. Ashish Rai for closing comments.

Ashish Rai — Vice Chairman

Okay, so thank you everyone for joining the call. Hope it has been useful. And. I look forward to seeing you back next quarter. Thank you.

Operator

[Operator Closing Remarks]