IRIS Business Services Ltd

An overview of where we stand and where we expect to go

It the world. t has not been a good year for The pandemic rages on, and there is no clear end in sight. Many of my colleagues were affected by Covid 19, with one of them, Saptarshi Sengupta, succumbing to it. Saptarshi, or SAP, as we called him, was a fantastic colleague, with a constant smile on his face, which is etched in my memory for good. He has been with us for well over a decade. A Chartered Accountant, Saptarshi, joined the company when we were still a KPO, creating documents that public companies in the US would then file with the US SEC. Recognising just how good he was, we had given him an opportunity to work on the Federal Energy Regulatory Commission mandate, which required US energy companies to file in XBRL. And Sap rose to the task. I dedicate this annual report to my good friend Saptarshi.

Given the situation around us, it feels uncomfortable and even perverse to write about how we are well poised to grow.

It is impossible to be not mindful of the suffering around us. But as a colleague said, life must go on. You will be relieved to know that almost everyone at IRIS and their families have taken the vaccine at a camp conducted in the office. We have also ensured vaccination for people who touch our lives daily, the vendors, the contract staff, and others, including professional services providers. After all, nobody is safe until everybody is safe.

We are excited about migration to the mainboard

Not long from now, we should be migrating to the mainboard from the SME platform, subject to exchange approval. There are two ways migration will change our life. On the SME board, the market lot was 4,000 shares, which will now be just one share. This will attract a whole new class of investors into the company. The second big change will be the need to report results quarterly, whereas, on the SME board, the results were reported half-yearly. There is a certain amount of seasonality to our revenues. In fact, an overwhelmingly greater share of our revenues comes in the second half of the financial year, as one can see from the numbers for the year gone by. We need to impress upon our investors that to interpret the signals every quarter may not be the most appropriate way to analyse the company.

Good governance is in our DNA

Having embraced best governance practices before we listed and even exceeded the prescribed norms, I anticipate no challenges for us on the corporate governance front as we migrate to the mainboard . Our seven-member Board of Directors has four Independent Directors, one of whom chairs the Board. The three founders make up the rest of the Board. Two of India's finest audit firms are associated with IRIS, one as a statutory auditor and the other as an internal auditor. The Founders of the company see our role as trusteeship, which guides us in everything we do and how we do it. Nothing speaks louder about our governance practices than how we became the fastest company to IPO in India, a record that will probably never be matched, leave alone be bettered.

The pandemic has slowed the growth of our business

IRIS is a global RegTech providing software solutions for compliance. While the pandemic has certainly slowed us down, our focus on building an annuity-led business has helped us not just stay profitable but also improve our financial metrics. In the year that has gone by, our strategy to move to increase our recurring revenues has paid off, as evidenced by the fact that recurring revenues reached a healthy 71% of the total revenues booked by the company during the year.

The impact of the pandemic was different in each of the three segments we operate in.

Collect: This segment was the worst affected by the pandemic and has shrunk. Our electronic disclosure platform iFile helps regulators collect pre-validated data from those they regulate. Of late, some analysts have started referring to this business as Suptech. It used to be that every year; a few regulators announced plans to adopt an electronic disclosure platform built around XBRL. Over the last two years, that has not happened, and we don't see that happening over the next 12 months. Governments simply don't have the resources to go down this path. It is an RFP-driven business and when RFPs dry up, so do new wins.

However, we still have a steady stream of revenues from existing clients who pay us fees towards AMCs. Hence, it is not a total washout. The good news, though, is that once the pandemic ends, most countries are expected to rush to adopt XBRL, and that is an opportunity we are confident of tapping into.

Create: While this segment more than made up for the loss of revenues in the

Collect segment, we could have done much better, but for the pandemic. Through this segment, we provide Software to enterprises to help them create their submissions ready to file with the regulator. Most of the products of this segment are SaaS offerings.

The impact of the pandemic has come from two quarters. Firstly, the pandemic has caused a delay in the rollout of XBRL mandate by various countries in Europe. Several countries announced a postponement by a year, reducing the size of the opportunity available to us. Secondly, the pandemic did not let us go out to meet customers. Our experience is that while we are successful in converting customers who we can meet, the pandemic has forced us to try and engage digitally and over the phone. That has not been easy. Even so, we are satisfied with what we have achieved under the circumstances.

Consume: This is our data and analytics segment. With the pandemic in play, we chose not to make any major investment in this segment for now. Now that we have turned profitable and hope to stay that way, we will work to monetise the assets that this division houses.

As my colleague says, the present is tense, but the future looks good, even if not entirely perfect.

The post-pandemic world will favour us.

The most important fallout of the pandemic is that the pace of digitisation has increased around the world. This augurs well for IRIS, as you can imagine. I want to offer two examples of how the world has changed in ways that we may not have expected.

In India, GST adoption has forced every business in India to go digital. If initially, they did so because they were forced to do so, they are now waking up to the benefits of going digital. The opportunities that stem from this are enormous. By the virtue of being a GST Suvidha provider, IRIS is well-positioned to benefit from this.

The second example I wish to cite is from our experience in Malaysia. From living in a world of paper filings, the country has effortlessly moved to digital filings with an ease that many countries in the world can learn from. The argument that relatively less developed countries will find it a huge challenge to go digital stands demolished.

Compliance is going digital

As the world goes digital, inevitably, all compliance will also go digital. More departments in more countries will need solutions, a demand that IRIS is well-positioned to serve. While we have a handful of competitors who can compete with us on the Collect segment and several on the Create segment, practically none can provide solutions that straddle the entire information supply chain: from Collect to Create and to Consume. Therein lies our competitive edge.

We need to invest heavily in sales and marketing

While being an Indian company with an Indian cost structure also helps greatly, the challenge before us is to be a strong marketing company. Many of our global competitors are well-funded and have a huge war chest to battle it out in a competitive marketplace. It has been our experience that most Indian investors do not understand the importance of investing in marketing and sales and look askance at initiatives focused on gaining market share. This kind of approach will mean a tradeoff of the present for the future.

We face a similar choice before us. Our products are in place, and we need to mount aggressive campaigns to grow. We need to do this in the USA, in Europe, and elsewhere. We need to grow our recurring revenues.

Eight years ago, we saw the writing on the wall that led us to pivot away from knowledge process outsourcing, or KPO, to software products. Today, our focus is even sharper. Even as we continue to grow our business around compliance, we recognise that delivering Software as a Service, or SaaS, is the way to go. We will continue to have software products sold in the conventional mode as on-prem solutions. We will also have a small services revenue stream from the company's KPO side, but the company's overwhelming revenue driver will be SaaS.

The time for SaaS has arrived

Earlier this week, global consulting major Mckinsey released a report on the outlook for the Indian SaaS players. They expect the Indian SaaS companies to hit a trillion dollars in value by 2030. As India's only listed RegTech SaaS, this should give investors in IRIS great comfort. We are in the right place at the right time. The question you may have is whether we can execute. As managers of your company, in our capacity as your trustees, our responsibility is to keep your company relevant in these rapidly changing times and deliver growth while sticking to the core proposition that defines our business. Staying relevant is our mantra. Fifteen years ago, we embarked on our XBRL journey. Today, we stand vindicated, with 70 countries accounting for over 96% of the world's GDP having adopted XBRL. Ten years ago, we pivoted from KPO to products and sacrificed services revenues to focus on products. Today, we are still in the same RegTech solutions space. We have demonstrated our ability to spot trends early and stay relevant by moving to SaaS. We continue to have a resource constraint that will affect just how fast we can grow, but sustainable growth for us is a way of life.

Before I conclude, I have a request. This year, like in the year preceding, we will have a virtual AGM. I would be grateful if each one of you finds it convenient to participate. That would mean a lot to us. I thank you for giving this a patient read. Please do not hesitate to contact me or any of my colleagues if you have any suggestions to offer or questions to ask.