Tanla Platforms Limited (TANLA) Q2 FY23 Earnings Concall Transcript

Tanla Platforms Limited (NSE:TANLA) Q2 FY23 Earnings Concall dated Oct. 21, 2022

Corporate Participants:

Ritu Mehta — Head of Investor Relations

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Deepak Goyal — Executive Director and Chief Business Officer

Aravind Viswanathan — Chief Financial officer

Analysts:

Anil Nahata — Individual Investor — Analyst

Tejas Shah — Laser Securities — Analyst

Jinesh Gandhi — AUM Advisors — Analyst

Balaji Subramanian — IIFL Capital Ltd. — Analyst

Miraj Shah — Dalal & Broacha Stock Broking Pvt. Ltd. — Analyst

Abhishek Anand — Centrum Broking — Analyst

Milind Karmarkar — Dalal & Broacha Stock Broking Pvt. Ltd. — Analyst

Amit Chandra — HDFC Securities — Analyst

Deepak Chokhani — Individual Investor — Analyst

Amit Mishra — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Tanla Platforms Limited Q2 and H1 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Ritu Mehta, Investor Relations at Tanla Platforms Limited. Thank you, and over to you.

Ritu Mehta — Head of Investor Relations

Hello, everyone. I’m Ritu Mehta and I lead Investor Relations for Tanla Platforms. On behalf of everyone at Tanla, I would like to welcome all of you to our Q2 earnings call. Joining with us today are Uday Reddy, our Founder, Chairman and CEO; Deepak Goyal, Executive Director and Chief Business Officer; and Mr. Aravind, our CFO. Uday Reddy will share his perspectives of business and strategic progress made by Tanla. After his opening remarks, we will be happy to engage with participants and address the questions.

Before I hand it over to Uday, let me draw your attention to the fact that today’s discussion may feature statements that are forward-looking in nature. All statements other than statements of historical facts could be deemed forward-looking in nature. Such statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. A detailed disclosure in this regard is mentioned in the results presentation that is uploaded on our website.

Now, I hand it over to Uday.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Thank you, Ritu. Good evening, everyone. Welcome to our Q2 FY ’23 earnings.

Let me share my thoughts before we go to Q&A. First, I would like to cover innovation. We have been investing our time and energies in Wisely platform, which is our platform of platforms for digital interactions. It has made a tremendous progress. I’m pretty excited to share a lot of evidences of Wisely success and will share this consistently going forward.

I’ve talked about my passion of building a platform company. So any platform company will have to demonstrate a few key metrics. A is, it should have high margins. B, should have tremendous customer stickiness. C is, we should able to scale. And D is, we should able to offer predictability of business. And the E is, it should be very, very asset-light, meaning to say that like now we don’t have to really invest tons of money on these platforms. So I’m happy to see Wisely check the box on each and every one of these metrics.

Let me drill down on each of Wisely platform now. On Wisely Communicate platform, three of the top banks are on this platform and delivering critical communication to their users. For one of the banks, 30% of their critical UPI messages are through this Wisely with to end-to-end subscription on the blockchain. And we have scaled up to this level in less than two months.

On Wisely OTT platform, 700 million plus transactions were delivered in Q2 for over 40 customers, including top banks and e-commerce companies. We have a huge opportunity for Wisely to scale up. Our sales funnel is looking solid for this platform.

On Wisely Network platform, just to give you a sense of scale, we have processed more than 35 billion transactions through our AI and ML engines in Q2. We are on track to reach INR100 crores gross margin run rate per annum. So a big trust is now to accelerate to Go-to-market on Wisely platforms. We have the many platforms now. We have many customers with us. Now it is a time for us to scale the business.

I would like to thank my team and our partners and our customers, who played a very important role in this journey. We’re just getting started and we are — and we keep innovating and improving relentlessly.

And in terms of Enterprise business, we are seeing improvement. Our big focus here is to accelerate our new customer acquisitions and gain wallet share in existing customers. Deepak will give more details on this business in his speech.

Let me now cover capital allocation and ESG. Our capital allocation has always been — has been very disciplined. During the quarter, we have announced our dividend policy of 30% payout of consolidated profit after tax and interim dividend — and paid interim dividend of INR6. We also announced our buyback of INR170 crores. We are building our business with a lot of focus on ESG, and Tanla Scored 32 in S&P Global score compared to industry average of 18. We would be in the top 90% plus percentile in industry, and we will continue to improve from here.

In summary, we have shown improvement in the quarter — in this quarter and we will build on this in Q3 and beyond, both in Platform and the Enterprise business.

Let me hand it over to Deepak to talk about the Enterprise business, post which we will take Q&A. And, Deepak would you like to take it from there? Deepak?

Operator

Mr. Goyal?

Deepak Goyal — Executive Director and Chief Business Officer

Yes, can — am I audible?

Operator

Yes, sir. You are.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Yes. Yes. Deepak, yes, yes, continue.

Deepak Goyal — Executive Director and Chief Business Officer

Yes. Thank you, Uday, and good evening, everyone.

I would give you some highlights on the Enterprise business, Tanla and Karix mobile. As you might have seen in the results, we saw an improving trajectory in both revenues and gross margins in the Enterprise business in Q2. Revenues grew by 6% and gross margin grew about 11% as compared to Q1. Overall, if you see we have grown — our gross margin grew by about 1% compared to Q1. That is despite we losing about 1% due to currency movement, primarily euro against USD, where USD brought us stronger. And we had an impact of about a 1% due to that.

As far as Q3 is concerned, we are entering Q3 with a lot of confidence and stability. We see a lot of opportunities ahead of us and I expect momentum to pick up in Q3 and beyond. If I talk about the opportunities, I would divide into two, one with our existing customers and what — and another with the potential customers.

So if you look at our existing customers, as you know, we are the industry leaders. We have — we are present at more than 60% of the customers in India, where the messaging business is getting originated and our wallet share is around 50%. So overall we are — we have more than 30% market share in India, right? And the opportunity in front of us is, as Uday said, we need to increase our wallet share there by providing continuous great services to our customers and the other one — big one is by penetrating with more products into these customers. And we are quite ready with that.

I mean, just to give you example, WhatsApp. I mean WhatsApp is a success story with revenues going up by 4x in last four quarters. We have been winning a lot of business on WhatsApp. In fact, 45% of my new wins have come other than SMS, and primarily on WhatsApp. And on top of it, we have won the largest bank in the country on WhatsApp. And we are hoping for them to go live. In fact they have gone live with some use cases in this quarter.

And on top of it, as you know we have partnered with Kore.ai for conversational capabilities that is helping us a lot, because now we have world’s best conversational platform in with us, along with our expertise on WhatsApp and along with our — such a great existing customer base.

Other than WhatsApp and Kore.ai, definitely there is Truecaller. We have started winning customers on Truecaller as well. And you would see that the number of messages and revenue going up on Truecaller as well.

When I talk about new business — net new customers, so, as I said, we are present today at around about 60% of the customers where business messaging is getting originated, but we are not present at 40%. So we are going to be go very, very aggressive to acquire these customers. We have a plan in place and we are very confident that we would be — next few quarters, we would be able to increase our market share significantly.

Another data point I would say — I would give you that about — compared to our last year, we have moved from 175 to 208 customers, who are giving revenue more than INR1 crore. So it shows that we’ve kind of deep relationships we have with our customers.

So in summary, I would say that we have a lot of opportunities ahead. We are — and we expect lot of growth and margins, and margins will show improvement in the coming quarters.

Thank you. Operator, maybe you can [Technical Issues]

Questions and Answers:

Operator

Thank you very much, sir. [Operator Instructions] Our first question is from the line of Anil Nahata, an Individual Investor. Please go ahead.

Anil Nahata — Individual Investor — Analyst

Yes. Hi. My question is to Deepak. Deepak, in the presentation we’ve saw that out of the top 20 customers, in three we have lost market share and three have completely dropped out. I mean, from the last quarter, we did understand that one of the larger banks probably has gone away in all. But this seems to be quite deep — beyond what we’ve understood in the first quarter. May be you’d like to elaborate on that?

Deepak Goyal — Executive Director and Chief Business Officer

Yes. So Anil Ji, first of all, we have not lost the bank. Yes. We have lost certain volumes to the competition, so the bank is still with us. And some customers dropping out of the top 20, maybe the other customer must have taken the — their place in that top 20. So that — the moment keeps happening.

Anil Nahata — Individual Investor — Analyst

No. But I would like to persist with that question, because if you see the wallet share that came from the top 20, actually has shrunk. And if I see the market would have grown 20% year-on-year, that basically means that we have lost close to our 20% of our market, so we are at 40%, maybe we are at 32% now. I mean that is the kind of impression I am getting.

Deepak Goyal — Executive Director and Chief Business Officer

No. So Anil Ji don’t [Speech Overlap]

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

So, maybe — Anil, let me kind of give you a perspective on the numbers. And on the business, Deepak can add, right? So if you look at it, we’ve been talking about continuity of customers, but obviously is always a churn in terms of who remains in top 30, and some of them. So the balance customers even in this case, right, are — 14 of them are consistent, three of them are slipped from top 20 to 20 to 30 and the balance three are between 30 and 40, right? We’ve not called out all of them, but that’s really what it means, right? Having said that, absolutely our customers greater than INR50 crores has shown a decline on a Y-o-Y basis, because we have lost some share and volumes with some customers, and that is something that Deepak mentioned in terms of how to bring back, right? But they have not gone out of the system. They are continuing to be our customers, but obviously at smaller scale than what it was one year back.

Anil Nahata — Individual Investor — Analyst

Okay. And my second question is again on the matter of international forays. How good are plans on the international diversification of taking Wisely and the Enterprise business international?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Hi, Anil, Uday here. So in terms of the expansions like now, we’re not in a great hurry to expand in the sense like we have seen tremendous success for Wisely in India. We would like to seek for a couple of more quarters, but meanwhile like we are doing bit of groundwork in other markets. So I think by end of this year, we would be interested — we would be — who should be in one more country, which probably will — we should able to share by the end up of — in Q3 or Q4, but that’s where we are right now.

Anil Nahata — Individual Investor — Analyst

Okay. Thank you.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Yes.

Operator

Thank you. Our next question is from the line of Tejas Shah from Laser Securities. Please go ahead.

Tejas Shah — Laser Securities — Analyst

Yes. Whatever opinion in terms of the volumes of the festival businesses, which are normally predominant and only last time [Technical Issues] month of October. This time it is starting a little earlier.

Operator

Sorry to interrupt sir. Mr. Shah, it’s — your voice is kind of breaking up sir. So if you can use the handset and speak. And please repeat the question for the benefit of all participants.

Tejas Shah — Laser Securities — Analyst

Yes, yes.

Operator

You may go ahead sir.

Tejas Shah — Laser Securities — Analyst

Hello? Yes, can you hear?

Operator

Yes, yes, Mr. Shah.

Deepak Goyal — Executive Director and Chief Business Officer

Yes, yes.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Go ahead, Tejas.

Tejas Shah — Laser Securities — Analyst

Yes. Hi. See normally, last time, I think the Diwali and other festivities were in the month of October to December, if I’m not wrong. So how much of the business which is free clone this time? And what is the business looking like in terms of the festival business, which is normally — third quarter is always the best for us. Now I think some businesses must have rolling the July to September. So how do you work on that, right now, if you can throw some light on that?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Deepak?

Deepak Goyal — Executive Director and Chief Business Officer

Hi, the — is the question is around how do you see Q3 in terms of festival?

Tejas Shah — Laser Securities — Analyst

Yes. Because I think December festival started much prior. So I think all sales and everything is much prior.

Deepak Goyal — Executive Director and Chief Business Officer

Yes. Absolutely. Absolutely. So Q3 is always our best quarter and this quarter also would be no exception. I mean, yes, we are — we started well, I would say. And you would see that Q3, we would have a much, much better numbers.

Tejas Shah — Laser Securities — Analyst

Okay. I missed out the starting commentary. So I’ll just ask a simple question. How are we trying to increase the bottom line and top line because now, I think — again we are coming in a stage where we are [Indecipherable] basically, we are not going to grow top line to the levels that we are growing earlier.

Deepak Goyal — Executive Director and Chief Business Officer

So, as I said, we have plans to grow top line, okay. And we have plans to improve our margins as well. So, when we — as I mentioned, we are working on penetrating our existing customers with a lot of new solutions, new products, which are high margin business. And I’m — here I’m talking on related to Platform business as well. And on the other side, we are going on aggressively drive to acquire new customers. So there is still a big market, I mean India is a big market and you would see the growth coming in.

Tejas Shah — Laser Securities — Analyst

That will still take two quarters?

Deepak Goyal — Executive Director and Chief Business Officer

Sorry?

Tejas Shah — Laser Securities — Analyst

That will still take two quarters or odd?

Deepak Goyal — Executive Director and Chief Business Officer

I mean, see, this is working progress, okay.

Tejas Shah — Laser Securities — Analyst

So basically, when we say roadmap, so what we are trying to understand is, okay, fine, yes, you’ve got the vision to what you want to do, okay, but normally that execution acquisition. Normally — what is the time lag that we normally look at, three months, six months, what?

Deepak Goyal — Executive Director and Chief Business Officer

See, that’s like this. We have acquired a few good customers, I would say, in last couple of quarters, okay. And their onboarding is completed. It takes time to onboard the customer, technical integration and stuff like that. So it takes its own time. We have done that with a few large customers and they would start kicking in and from this quarter itself, as well as we would be acquiring more and more new customers. So yes, it’s an ongoing process, but you would see improvement every quarter.

Tejas Shah — Laser Securities — Analyst

Okay. Thank you. Thank you.

Operator

Thank you. Our next question is from the line of Jinesh Gandhi from AUM Advisors. Please go ahead.

Jinesh Gandhi — AUM Advisors — Analyst

Hi, sir. Sir, I didn’t hear the initial comments. So if you would give us a picture on the margin, and how would be scaling it up back to our 22%, 23% levels?

Aravind Viswanathan — Chief Financial officer

Sure. So let me take that question. Aravind here, Jinesh, right. So if you look at from last quarter to now, our gross margins went up by about 1.1%. Our EBITDA went up by 0.1%, but there was a big impact as far as Forex is concerned, both on gross margin and EBITDA, because a lot of our international business almost, I would say, 50% of our international business is billed in euro and the euro depreciated very, very sharply against the USD. In fact it’s two quarters in a row where we’ve been having this Forex challenge. And that has contributed on an EBITDA level of almost 1.5% on a sequential basis in terms of incremental Forex impact that we’ve had, right?

So, so if you look at it — if Forex had remained where it was last quarter, we would have probably been at about 18% EBITDA, right? So that’s a little bit of a structural challenge we are working on, changing our billing relationship with our customers to USD. So we will minimize this impact maybe in Q3 and Q4, more in Q4 than in Q3. But that’s an impact that we have, right?

From an improvement standpoint, Deepak talked about in many ways how to drive the Enterprise business. And as we scale that up, we will typically bring back the profitability. We’re investing big on Wisely. Uday, had kind of covered multiple platforms within the Wisely platform of platforms to see where we are seeing traction. As those scale up, you will again see that reflect positively as far as our margins are concerned. So the idea is that we will keep building on our margin trajectory, and that’s really how we are looking at profitability, Jinesh.

Deepak Goyal — Executive Director and Chief Business Officer

Jinesh, does that answer…

Aravind Viswanathan — Chief Financial officer

I think he…

Operator

We’ll take our next question from the line of Balaji Subramanian from IIFL. Please go ahead.

Balaji Subramanian — IIFL Capital Ltd. — Analyst

Yes. Hi. Good afternoon. Thanks for taking my question. Hopefully, I am audible?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Yes, you’re — we can hear you clearly, Balaji. Go on.

Balaji Subramanian — IIFL Capital Ltd. — Analyst

Okay. Okay. Fine. So my first question is on the revenue improvement trajectory. So we used to do 30%, 40%, not very long back. And this time, we have seen — it’s almost becoming flattish. So you did mention some of the initiatives that you are taking to ramp up the revenue growth. But when should one expect revenue growth going back to the 18% to 20%, which is what the– typically the industry is growing at? That is number one.

My number — second question would be on one aspect, which probably drag due in the last quarter was your lack of geographical diversification. So any plans in terms of kind of diversify your revenue mix, so that you are not susceptible to the pricing pressure even like what we saw last time? That’s it from my side. Yes.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Deepak, do you want to give the color on revenue?

Deepak Goyal — Executive Director and Chief Business Officer

Yes, yes, sure. Hi, Balaji. Balaji, as you are aware we shared the reasons of our revenues going down in Q1. And we are working on. It’s not only wherever we lost the revenues, we are working to regain those revenues from the same set of customers, we are also going after new set of customers. So we are very hopeful, I mean, that’s much I can say as we don’t want to give any forward-looking guidance. But we are very hopeful to bring back the growth soon, that much I can say.

And as far as the geographical diversity is concerned, see, I would say one thing, first of all, we need to — as I said, India is a very, very big market, okay? And our customers are looking for lot of value-add from the industry leaders like us. And we are working on that. And you would see in the coming quarters that how and — how we are improving our margins and stickiness and revenues in India. Your point is very valid that we need to have a geo diversity just to — I mean, just for the [Indecipherable] our business. We are — I would say, our UAE business is showing a lot of growth. And in the next quarter, we will give you more details about it. We are benefiting lot of new customers out there. We are focusing on — as I mentioned on a previous call, we are focusing on MENA region. Uday has given some hint today. And you would hear on that as well, when we make some substantial progress. But yes, we are working on that.

Balaji Subramanian — IIFL Capital Ltd. — Analyst

Thank you. So that’s helpful and all the best.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Thank you, Balaji.

Operator

Thank you. Our next question is from the line of Miraj Shah from Dalal & Broacha. Please go ahead.

Miraj Shah — Dalal & Broacha Stock Broking Pvt. Ltd. — Analyst

Yes. Hi. Thanks for taking my question. Sir, I wanted to understand one part that when we see our margins on the Enterprise and gross margins. We have recovered slightly compared to the previous quarter. But now — as on the last quarter also, you had mentioned that you would do much better in Q3 and Q4, in the second half, and probably reached 20%. So just wanted to understand what are our pricing power triggers over there? How are we able to regain what we’ve lost? And what was the — what could be the trigger that we will be able to sustain that going ahead? That’s my first question.

Aravind Viswanathan — Chief Financial officer

Should I take that?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Yes, yes, please.

Aravind Viswanathan — Chief Financial officer

Yes. Okay. So as far as regaining the business is concerned — okay, see, I’ve been in this business for more than 15 years now, okay. And if you see the history of Karix and our Enterprise business at Tanla, right, we have seldom lost any customer, okay. And there would be some blips here and there where customers have maybe moved away for six months or one year, but they have come back to us, and that is primarily because when they go out and they try other vendors and then they see the difference. So this is — here the services are very, very important and kind of services what we provide. So we are — so that is one.

The another thing is, as I said about what value add we do to our customers. I just mentioned, the largest bank. We have just signed up and started for WhatsApp. So I would see that even though you might have lost certain revenues on SMS, but that would get compensated to a certain extent from my WhatsApp business. And on top of it, we are working on even newer services and solutions with our customers, which we are going to give us additional business.

Operator

Mr. Shah, do you have any more questions?

Miraj Shah — Dalal & Broacha Stock Broking Pvt. Ltd. — Analyst

Yes. I thought — sorry, I thought the line was broken. My next question is, sir, in the presentation, you’ve mentioned with Wisely Network — if I’m not wrong, over there you’ve mentioned that roughly INR100 crores of gross profit is something that we can do from there per annum. And that’s a exclusive deal. Can you just throw some more light on that? I just wanted to have some clarity on that, what exactly — how are we exactly going to get that gross profit and the consistency of it going ahead?

Aravind Viswanathan — Chief Financial officer

So maybe I will take that Miraj, and Uday can jump in where needed, right? So we’ve talked about this partnership on the international messaging space, right, and we have deployed our hub and firewall. And it’s operating — it’s an AI, ML enabled firewall, I would say probably unprecedented scale in the industry where we find a processing over 35 billion messages a quarter, looking for anomalies and preventions, et cetera. So it’s a humongous platform. And that’s just kind of in early days here, right? So what happens as part of the deal construct is we get a revenue share from the Telco, and that has a huge potential as your firewall works and your up scales. You get a revenue stream, which is very predictable, very consistent and very long-term, right? So that’s really the revenue stream that comes in from there. And that’s how we are confident that this platform under Wisely will scale up to that kind of gross margin run rate.

Miraj Shah — Dalal & Broacha Stock Broking Pvt. Ltd. — Analyst

So as the number of messages increase, would the number that we stated, would that also increase, if that is the correct understanding, right?

Aravind Viswanathan — Chief Financial officer

Yes. That is a correct understanding. The only point I will make is the 35 billion that I talked about is the universe of messaging, which is being processed through the firewall and processed through our AI, ML engines, right? So it’s not linked to that, but it’s linked to the messaging that goes on the international messaging space.

Miraj Shah — Dalal & Broacha Stock Broking Pvt. Ltd. — Analyst

Understood. And sir, on the — my final question on the ILD messaging side, how were the costing moving right now? Is there still room to increase the costing over there?

Aravind Viswanathan — Chief Financial officer

When you say costing, are you referring to customer price or are you referring to Telco cost, Miraj?

Miraj Shah — Dalal & Broacha Stock Broking Pvt. Ltd. — Analyst

Customer price, sir.

Aravind Viswanathan — Chief Financial officer

So we’ve seen a price increase, right? We saw some price increase come through in Q2. Structurally India still continues to be one of the lowest cost market in the world, Miraj. We’ve kind of seen a big price uplift. Last year, in Q2, we saw another uplift in Q2 of this year, right? So I don’t think you will see a further increase in the near term, but we’ve seen two rounds of increases in the last 12 months. So that’s really how this market is playing out.

Miraj Shah — Dalal & Broacha Stock Broking Pvt. Ltd. — Analyst

Understood. Understood. And sir, I may have missed this one point, but if can just help me with this. The CapEx that we’ve done this time in this quarter, what is that towards?

Aravind Viswanathan — Chief Financial officer

So we capitalized our Wisely OTT platform. We’ve also seen an update. We’ve started to see the commercial traffic go on that. It’s a balance sheet item. It’s moved from assets under development to the CapEx, right? So it’s not a new balance sheet item. It’s not moved from P&L to balance sheet in this quarter. It’s moved from balance sheet to balance sheet in this quarter. So that’s the capitalization that has happened in the current quarter, Miraj.

Miraj Shah — Dalal & Broacha Stock Broking Pvt. Ltd. — Analyst

Okay. I understood. I’ll get back in the queue. Thank you.

Aravind Viswanathan — Chief Financial officer

Okay. Thank you.

Operator

Thank you. We’ll take our next question from the line of Abhishek Anand from Centrum. Please go ahead.

Abhishek Anand — Centrum Broking — Analyst

Yes. Thank you for the opportunity. One is the previous question, when it was asked INR100 crore annual run rate of gross profit. Is there any timeline that this will be achieved by when? That is my first question.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Sorry, what is that?

Abhishek Anand — Centrum Broking — Analyst

The Wisely Network, what is the timeline to reach a INR100 crore gross margin?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

I think we are more or less there, around INR95 crore INR96 crores something like that. Yes. So we are quite on INR100 crores per annum now. Yes.

Aravind Viswanathan — Chief Financial officer

We are on the trajectory. Maybe by Q4, we would be at that number, Abhishek.

Abhishek Anand — Centrum Broking — Analyst

Okay. And is there any sense we can get that — currently, what is the overall Wisely contribution which we have?

Aravind Viswanathan — Chief Financial officer

Can you repeat that? You’re saying what is the Wisely contribution on revenues?

Abhishek Anand — Centrum Broking — Analyst

Yes.

Aravind Viswanathan — Chief Financial officer

So we’ve not called that out. We’ve started to give additional disclosures on the Wisely platforms in this quarter. But maybe in the next couple of quarters or so, as we refine it, right, we would probably call out this separately.

Abhishek Anand — Centrum Broking — Analyst

And thirdly, when we go to the website, we see now five customers within Wisely side, three banks and few other service — financial services company. So are they all live and how do we see, it’s like for instance Wisely Communicate, we say 30% of the critical UPI messaging flowing through now under Wisely end-to-end encryption. If you could just explain how — in terms of ramp up, we are seeing with our customers when we are actually implementing these platforms, say within Communicate or OTT? So just to understand that, when we actually onboard a customer, how is the ramp up happening and therefore potential to gain business from them?

Deepak Goyal — Executive Director and Chief Business Officer

So Abhishek, basically like now for — if you look at any customer like now, be it bank or e-commerce or payment companies side, so they have three kinds of the transactions like. The first one is OTP, which is pretty critical. The second one is transactions like and the third one is promotional like, okay? The promotional is the biggest and highest and the OTPs are the smallest, but pretty, pretty critical, okay? So the banks would like to test Wisely capabilities mainly by pushing the critical messages and that’s where it’s doing phenomenally well. And once they see the success, probably they — we would like to or they would like to use Wisely platform for even other transactions like, be it promotional or be it transactions like. So we have — as I told you in my speech and my letter to shareholders like, we have a huge opportunity to scale. It’s only beginning. We just started. So we’re pretty excited about this journey on communicate the platform.

Abhishek Anand — Centrum Broking — Analyst

Just one clarification. Wisely would have say five customers and all would be like — we would have been billing them.

Deepak Goyal — Executive Director and Chief Business Officer

Yes, of course.

Abhishek Anand — Centrum Broking — Analyst

How should we look at it?

Deepak Goyal — Executive Director and Chief Business Officer

Yes. We started billing. We started billing, of course.

Abhishek Anand — Centrum Broking — Analyst

And all the five customers. We have five customers. Just a clarification here?

Deepak Goyal — Executive Director and Chief Business Officer

Yes. But three of the largest banks — some three of the largest banks on this platform and the total customers are five, okay? So three are in bank and two are in other industry. That’s what we meant there.

Abhishek Anand — Centrum Broking — Analyst

Yes, yes. Thank you so much. Thank you. It is very helpful.

Operator

Thank you. We’ll take our next question from the line of Milind Karmarkar from Dalal & Broacha. Please go ahead.

Milind Karmarkar — Dalal & Broacha Stock Broking Pvt. Ltd. — Analyst

Hi. Thank you for taking my question. Most of my questions have been answered. Just one is that I find there is an increase in working capital requirement. So just wanted to understand where is it coming from? And the free cash flow also has been impacted. I’m sure that must be because of the investments made. So if you could clarify a little bit on that?

Deepak Goyal — Executive Director and Chief Business Officer

Sure. Sure, Milind. So if you look at operating cash flow, right, we had made — our DSO actually improved in the quarter, which helped us.

Milind Karmarkar — Dalal & Broacha Stock Broking Pvt. Ltd. — Analyst

Yes.

Deepak Goyal — Executive Director and Chief Business Officer

DSO improved [Indecipherable] days, but our DPO went down, which is adverse by close to 17 days, largely because we had to make an investment with in terms of better payment terms with one of the Telcos that we are working with. So that is something that we had done, and that has impacted the operating cash flow.

On the free cash flow side, you’re absolutely right. We’ve made investments. We talked about two, three types of investments. If you remember in the last call, we talked about our platform modernization and that required a certain amount of CapEx, which we have done. And we’ve also investing in platforms. Uday talked about innovation. And we have very, very aggressive plans on it. Obviously, these investments will — are very small in kind in contrast to their potential, but those are happening right now. So there is a little bit of higher investment in CapEx as well as some working capital investments that we’ve made.

Milind Karmarkar — Dalal & Broacha Stock Broking Pvt. Ltd. — Analyst

Okay. Okay. Got it. Well, thank you very much and wish you all the best for reaching the Rule of 40 as fast as possible.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. We’ll take our next question from the line of Amit Chandra from HDFC Securities. Please go ahead.

Amit Chandra — HDFC Securities — Analyst

Yes. Hi, sir. Thanks for the opportunity. Sir, my first question is on the impact of the ILD price increase. So, have we seen the impact of the ILD price increase in this quarter, because it happened I think two months back. And also if you can — because there has been not too hikes in last two years, so — on an Y-o-Y number, if you can provide what has been the volume impact, ILD volume impact, roughly if you can give an estimate?

Deepak Goyal — Executive Director and Chief Business Officer

So your — the ILD price impact happened in — for a large portion of Q2, right? There was a little staged manner, Amit, in terms of how the infuses happened. But most of it happened within July, right? So we had two months of benefit as far as the price increase is concerned. We’ve got called out an exact number or breakdown into volume and price, but there was a positive benefit of that in the revenues.

Amit Chandra — HDFC Securities — Analyst

Okay. No, sir because, as you mentioned earlier that ILD would be roughly 35%, 40% of your revenue and in terms of volumes it would be less than 10%, maybe 5% to 8%. So can we see further volume decline in the ILD messages, because there has been steep price increases that has happened in the ILD side. And also, if you can quantify in terms of the Enterprise business and the gross margins. So we have seen some improvement and you have said that 1% impact has been there to cross currency. So we are at roughly at around 18% adjusted for that. So are we on track to improve that to maybe 19%, 20% as you’ve — as you said earlier, or we can see some kind of elongation to that in terms of timelines?

Aravind Viswanathan — Chief Financial officer

So there are two questions there, Amit. One is the impact of price increase on volume, and maybe I will ask Deepak to kind of answer that side because there is a historic trend line on it. There are always some near-term impacts, but I’ll let Deepak answer that.

Clearly — I think Deepak kind of answered the second question also in one of the earlier questions, but clearly the idea is to kind of drive profitability also, right, on the Enterprise business, right? We’ve improved a certain amount, as you rightly said, in Q2 vis-a-vis Q1. And there was an adverse Forex impact of euro improved more. I think, if the currency is kind of remain constant, we have headroom to improve there, right? The exact quantification. We’re not calling out a specific number, but clearly that is on an improving trajectory.

In terms of the impact of volume and price equation, maybe Deepak you can give some color on that.

Deepak Goyal — Executive Director and Chief Business Officer

Yes, Aravind. This is about ILD business, right?

Aravind Viswanathan — Chief Financial officer

Yes, yes, yes.

Deepak Goyal — Executive Director and Chief Business Officer

Yes. So as Arvind said, whenever there is a price increase, there is — we see some percentage of volumes getting compressed by the customers and they try and optimize their traffic. But then there is a natural growth in the business and inorganic growth and all that and that gets compensated within no time. So this is the trend what we have been seeing.

Amit Chandra — HDFC Securities — Analyst

Okay. And on the question of margin trajectories, if you can give some clarity, how we are seeing the improvement going in the next two quarters?

Aravind Viswanathan — Chief Financial officer

Yes. So Amit, like we said, right, we are very, very focused on margins, right? Obviously we are betting on both Enterprise business as well as Platform business as Platform business scales up, and we’ve kind of talked about a lot of evidence in terms of what’s happening on Wisely. The objective is to improve, right? Frankly, if we didn’t have incremental Forex impact, we would have probably been at about 18% EBITDA in the quarter, right? So I think there are certain levers is are beyond our control, but we will continue to show an improving trend as far as margins are concerned.

Amit Chandra — HDFC Securities — Analyst

Okay. And sir, on the capital investments that we have done around INR109 crores in this quarter. So out of that, roughly around INR50 crores, INR55 crores odd is for the Wisely OTT. So the rest is increasing — like increasing the just in work in progress. So what is this, if you can clarify on this?

Aravind Viswanathan — Chief Financial officer

So you’re talking about from a cash flow standpoint, or are you talking about the balance sheet standpoint, Amit?

Amit Chandra — HDFC Securities — Analyst

Yes. So if I try to reconcile is INR109 crores, so around INR50 crores is for the OTT and the rest there is some INR40 crores of CapEx on some campus investment in a new R&D center right? So just the…

Aravind Viswanathan — Chief Financial officer

See, I’ll tell you. The capitalization that has happened is not capitalization of this quarter, right? In the sense, it has moved from assets under development to — it has moved from assets under development to CapEx, right? So if you look at it, it’s a Y-o-Y number that you’re talking about Amit, not for the quarter, right? We are looking at cash balance movement between last year, if that is the slide you’re referring to, right? This is including — the entire INR56 crores is included here. There are assets under development that we have. And there are other kind of CapEx investment, is just normal CapEx investments in terms of your physical infrastructure, et cetera. So that’s really the breakdown. So it is four quarters of CapEx that is getting covered as per this INR109 crores is concerned.

Amit Chandra — HDFC Securities — Analyst

Okay. No because I was referring to — because if I see the capital work in progress, increased from — if I see from like March end to September, from INR13 crores to INR50 crores, so increase of INR37 crores there, and intangibles and platforms roughly a growth of around INR40 crores or so. If I compile that, then it comes INR180 crores, right? And the — apart from that, the investment in infra you’re saying, right? So this is one of the…

Aravind Viswanathan — Chief Financial officer

Yes, if you see — the other line, Amit, that you should also look at is assets under development, which has shown a steep decline, okay? So you would see that decline by INR56 crores or INR40 crores actually, right? So you — because it’s actually a balance sheet to balance sheet transfer, right, we are also making multiple investment as we talked about. So if you look at a company of our size with the kind of platforms and revenue streams we are having, Amit, it is still a very, very thin balance sheet in terms of where we are, right? So we are making those necessary investments. We’ve been talking about it. And it is largely in the nature of platforms, certain amount of physical infrastructure and innovation. Those are the areas, right. And I think they are well within the normal run rates of our business.

Amit Chandra — HDFC Securities — Analyst

And sir, my last question is on the Wisely OTT capitalization. So are we done with the capitalization or — and over the last — like over the last two years, how much we have capitalized for or how much you have spend on the R&D for this…

Aravind Viswanathan — Chief Financial officer

So I would say we’ve spent close to over INR120 crores across Wisely over 24 months, or slightly longer than 24 months.

Amit Chandra — HDFC Securities — Analyst

Okay. And the Platform business gross margins that we’re showing, just 96%. Do you see any risk to that in terms of that going down, onceWisely scales up?

Aravind Viswanathan — Chief Financial officer

See Platform business will be substantially higher, right? But 96% is at current levels because of the tremendous profitability of through block that we have, right? So there can be some normalization, but it will still be very, very high. So that’s how you should look at it.

Amit Chandra — HDFC Securities — Analyst

Okay. Okay. Thank you, sir. And all the best for the future. Thank you.

Aravind Viswanathan — Chief Financial officer

Thanks. Thanks Amit.

Operator

Thank you. Our next question is from the line of Deepak Chokhani, an Individual Investor. Please go ahead.

Deepak Chokhani — Individual Investor — Analyst

Thank you. So the message from the Chairman is very impressive and seems to lay a strong foundation for future. This is the first time in the message I’ve seen that you’ve segmented Wisely into four segments. And the last statement, of course, says that each of these segments has a potential to have gross profits of INR100 crore each. Could you just elaborate broad timelines? And I’m a bit confused about each of these segments. So where does — which one fits where? Could you just quickly explain me or throw some light on that, please?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

So hi Deepak, Uday here. So in terms of the — see let me step back and try to explain what the platform is platforms, right. So we keep saying Wisely is platform of platforms, meaning to say that Wisely is our core platform, which we keep talking about as a single platform strategy, okay? And either we develop other platforms, which are going to ride on this main core platform. Sometimes like — most of the platforms are developed internally or sometimes we partner with third party. In this example like — in Wisely OTT, okay, right, we have tied up with — mainly with the Truecaller, okay. The Truecaller is riding on Wisely single platform. And so that — that’s where we see a huge potential there. So that went live last quarter. And so it is increasing and we see a huge opportunity there, right. That’s on OTT.

Deepak Chokhani — Individual Investor — Analyst

Okay.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

In terms of the Wisely Network, which we deployed with BAL couple of quarters ago. So that has — so that was the first one to demonstrate our full potential. So it has kind of reached around INR95 crore and INR96 crores ARR in terms of gross margin. And so the way I see it, don’t hold me, but each of these platforms have got the capabilities or abilities to generate INR100 crores gross margin, I mean gross margin per annum like, okay. So that’s about Wisely Network.

And Wisely Communicate is mainly for SMS where we went live with five customers, three of the banking customers and two of the other customers. And so we also see a huge potential over there. And, so I cannot really give you the timelines, but it could — this Wisely Communicate platform has got a huge potential like, because the volumes in India are around 50 billion, 55 billion per month, okay. And we just — we’re not even processing even 2% of the 50 billion, 55 billion transactions per month like. So we have a few potential for the Wisely Communicate. But first Wisely customers, we need to ensure that they see the value on Wisely Communicate, which we demonstrated with a couple of large banks. So we’re pretty excited about this platform too.

Did I cover all your points Deepak?

Deepak Chokhani — Individual Investor — Analyst

Yes, sir. And so Wisely Engage will be Kore.ai right? That’s where it is fit?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Absolutely, absolutely. It may take a little longer than what we expected because it needs a lot of — it’s again — it’s a — it is on the — the Kore itself is a very large platform. It is riding on our Wisely platform. It takes — it is little — it is — it will definitely take a little longer than what we expected. But other three platforms are — should able to scale up quite quickly.

Deepak Chokhani — Individual Investor — Analyst

Got it. So these are the modules basically which we keep referring to that will keep on adding modules on the main Wisely platforms, right?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Correct. Absolutely.

Deepak Chokhani — Individual Investor — Analyst

Sir, one more question on Wisely Communicate. What does that drives the customer to engage on Wisely versus the normal? Is it just a pricing pressure? Is it the technology? Of course, last time also I had asked this question. The answer was broadly the technology. So I mean, let’s take for example, HDFC Bank is through Wisely. Some other banks doesn’t on Wisely, which is why they’re going for the cheaper options. What can propel these other banks or other customers to move to Wisely? Is it because — of course, technology is there, but is it also a pricing factor? Can we throw in some incentives and you said…

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Deepak effectively we are talking about Wisely proposition here, Wisely communication — Communicate platform proposition here. Let me explain about proposition here, right. See data field is around the corner in India. It may be tabled to the parliament very soon in the next, probably one or two quarters, wherein data security and data privacy is going to play very important role in our lives. That’s where Wisely comes into picture. We keep talking about encryption and decryption in the sense like each and every communication of the user is encrypted at the bank level and decrypted at the telco level, okay? Sometimes we can go as far as the handset level also. So in the sense like, this platform is primarily to — is there to protect data privacy and data security of the users — of the banking and e-commerce users. That’s one of the biggest propositions.

Secondly, like we use blockchain technology to go back and look at the — to — for the — to address the audit trails of each transaction like. So the banks get an opportunity to go back and look at how the message is delivered, why there is a lot of latency and so on so forth. So it captures all the audit trails of the transaction from A to B. So that’s the second largest proposition like.

Third one is, nowadays like — each of these platforms are transacting in billions of transactions every month in India, okay? The settlement is settlement between the two parties, whether it is aggregators or enterprises or the operators, between the operators and enterprises. It is taking longer than what we expected. Sometimes it can go as high as two months, morely in terms of recancellation like. This is where Wisely is going to come into picture in the sense like whenever you want, it we’ll do it in next 30 seconds, settlement reports. But because of settlement, these transactions are since written on the blockchain and one can have the settlement reports immediately. Whenever the telco or aggregator or enterprise wants a settlement report, they can fetch from the blockchain as we speak like.

So these are the some of the large propositions from the Wisely. And I have every reason to believe that, it is pretty scalable and it got a huge potential going forward.

And also one last, but not least proposition on Wisely is, the telcos — all the telcos are in this platform and also the enterprises or aggregates have an option of choosing to work with various telcos, and also telcos have an option of reaching out to the enterprise directly, okay? So it has — these are the one of the — these are some of the propositions of this platform. And we are pretty comfo about this platform.

Deepak Chokhani — Individual Investor — Analyst

This is wonderful, sir. Thanks for explaining, because every time I, let’s say have an account with a bank, which doesn’t use Wisely. My question is, can I kind of — because I’m getting SMSs or OTPs from them, can I ask them to send me encrypted message or will the government at some stage kind of force them to do it?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Deepak, if I have to be honest, like the bank is the one who has to take the decision. I think I’m sure they have to protect their users’ confidentiality. And it is — and I’m sure they will see the value in Wisely, once we see the — when we demonstrate the success of these three banks, large banks. And I’m sure other banks will follow or other enterprises will follow.

Deepak Chokhani — Individual Investor — Analyst

Perfect, sir. Thank you so much.

Operator

Thank you. Our next question is from the line of Amit Mishra, an Individual Investor. Please go ahead.

Amit Mishra — Individual Investor — Analyst

Hello. Am I audible?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Yes, Amit. Please go ahead.

Amit Mishra — Individual Investor — Analyst

Good evening, everyone. Hi. So most of the questions are already answered. So there is a question to Uday. Can you please give some color on Kore.ai? And some sort of, let’s say timeline, if you can. Basically they have five geographies with us on exclusivity. So, wanted to understand the business and revenue model with them and also the timeline entities?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Yes. Amit, in terms of the conversation platform, the Kore.ai is the best platform available in the worst according to Gartner. So there we have exclusive partnership with us for five markets, as you rightly said. So it’s a revenue share opportunity where it writes — a, it writes on Wisely platform, b, whenever we win a business, we jointly pitch the business to our potential customers in this market. So whenever you generate, it — wherever we signed is all long-term contracts — it’s pretty long-term contracts because it’s very difficult — it takes lot of — whole lot of time to integrate with Enterprise platform. Deployment itself takes minimum six months. But once we are deployed, we are almost there for — at least for a decade, okay? So in terms of revenue share…

Amit Mishra — Individual Investor — Analyst

Who goes to the market and basically wrap supply in their — in new geographies? I’m sure, in India, we will do the legwork, but in other markets where we’re not present, are we going to open offices there? Or it’s through Kore.ai setup? How we are going to approach?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Yes. A, as I told you, Amit, like it writes on our Wisely platform. So our GTM team takes Wisely as a platform of platforms to our enterprises like. They are going to offer a lot of — a whole lot of services on Wisely whether it is Communicate, whether it is OTT, whether it is Engage, or whether it is Compliance, okay? So they take — our GTM takes, headed by Deepak, like they take Wisely proposition to the market, be it India or outside India. And it all depends on who we are pitching. Some people are interested to look at Engage platform, which — here we’re talking about Kore.ai. Some may — so it all depends like. So to answer your question like, we are the one who’s going to address in terms of building the solutions and also taking this to the market in terms of GTM. This is what we’ve done. This is the responsibility of Tanla, right.

Deepak Goyal — Executive Director and Chief Business Officer

So Deepak just to add, we have a full-fledged business team based in UAE and through that — so we are reaching out to all the large customers in UAE and other countries in the MENA region. And we also — we’re not talking to few customers in Indonesia. The Kore.ai is such a product that you have to go to a very large kind of enterprises, who have a very big consumer business, primarily banks and BFSI sector and so on. So it’s a very — we have very targeted approach, but we have particular taking, and you would see some good results coming in.

Amit Mishra — Individual Investor — Analyst

Right. Thank you. Just on the second — on the Wisely Network. So these SMSC servers and AI ML firewalls, are we planning to go outside India and go to telcos in different countries and for there to increase our network? And eventually bring small business basically, if we have the servers in multiple telcos around the world. So, is that the ultimate plan with this or something else? Can you please elaborate on that, please?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

So Amit, as we rightly suggested like, most of our platforms would like to test with our existing customers in the existing market. Once we see the success, I don’t see any reason why we look at other markets, right? So, but we’re not in a great hurry to expand in other market to just impress the market, absolutely no. We’d like to test our home ground before we look at the international market. But Wisely Network is a huge success. I don’t see any reason why we should not look at global markets.

Amit Mishra — Individual Investor — Analyst

Okay. Understood. So, just last question, if I can please. On Trubloq, there is — we talked about the module consent management and its like basically on Trubloq, but it hasn’t been implemented. So do you have some timelines basically to — from all the stakeholders, regulators, telcos, are we heading there soon or it’s going to take time? I understand voice is not on the horizon right now, but in the consent management, I wanted to be.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Yes. So Amit, it’s a good question. In fact, the DLT — our product name is Trubloq, it’s a massive success in India. One of the — probably the one largest blockchain platform in the world in terms of volumes that we handle every day and every month. And it — we have to switch on couple of more modules be it the content management, there are couple of more volumes, which we’ll talk about later. As far as the product readiness, we have been ready for quite some time. Our platforms are fully geared up. As you know, like we stay ahead of the curve. Our modules are pretty ready on our platform. But it is a regulator, MCRA [Phonetic], in this example, who has to decide on the timing. So that question is to the regulators and operators, not to the Tanla. But as far as product is — we are ready in terms of product, right? And say well placed voice also. So the product capabilities we have already built, we have — it has been ready. And it is — Indian telecom regulator has to take the call on these modules.

Amit Mishra — Individual Investor — Analyst

That’s very good. Yes, just the timeframe, I’m not sure because it’s keep on delaying from the regulator side. Okay. Just one last question…

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Amit, let me — let me answer the question like. I think if you go back and look at the tweets in the market in the last one week, I don’t want to drop the names here, everybody is referring to the consent, everybody is referring to scam, fraud in India.

Amit Mishra — Individual Investor — Analyst

Yes.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

I think regulators are hearing that. And I have every reason to believe that they will definitely ask us to go live as soon as possible.

Amit Mishra — Individual Investor — Analyst

Very, very good. So, just one last question, Uday. We talked about the five, six platforms after Q4 to be launched. So we saw post that Kore.ai and Truecaller, Wisely inside was before then. So, like — you said like still within FY ’23, so are we planning to launch some new products in the — is still in the plans or like delayed?

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Amit, I don’t want to hijack this sense on this call. It’s a good question. I committed. Stay tune. Let’s hope for the best.

Amit Mishra — Individual Investor — Analyst

Okay. That’s great. Thank you. Thank you, everyone. Best of luck.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Yes. Thank you. Thank you, guys. Thank you for joining.

Operator

Ladies and gentlemen, that was the last question. Over to you Mr. Uday Reddy, for closing comments sir.

Uday Kumar Reddy — Founder, Chairman and Chief Executive Officer

Okay, thank you. Thank you. Thank you for joining our call. Wish you all a very happy and prosperous Diwali. And thank you very much. Bye.

Operator

[Operator Closing Remarks]