“Stickiness” isn’t a particularly reliable metric in this business; switching costs are low. Stickiness is driven by recall and the engagement experience during the earliest touchpoints of the sales funnel, alongside many other things. That, however, is a broader conversation for another day.
The only true North Star here is the number of Expert Calls made.
Can anyone explain me the meaning of point no. 4 in simple words? Not getting the correlation between inflation and 15-20% (ROE and ROCE) in the long run compared with the current 40%?
You are referring to the # of experts added? If so, the way I see this is adding new experts to the network. Addition of the experts should improve the network of experts and therefore might lead to improvement in expert discovery for potential clients. Better expert discovery is the real moat in this business.
I am not sure what did you mean by inflation and ROCE correlation. If it is higher price per expert session then yes, it will improve ROCE.
That is not what i was asking. I was referring to Point No. 4 of the text posted by kiran kumar in Feb 2024. I asked query in reply to that same text.
@Mannu : (Atleast at the time of posting - almost a year ago), the thinking was - company would see a constant increase in inflation of cost - few that can be noted are
(a) Employee cost
(b) Cost in acquiring the new experts (you need to reach out, engage them, understand their domain etc).
(c) Cost of building and maintaining IT systems etc
And many more.
Let’s say overall the cost is X per year and there are Y active experts, so cost per expert can be assumed as X/Y. Now these cost will raise, and this is a constant headline item.
In a very competitive market, my theory is that they cannot manage 40% ROE with these raising costs in long run - unless they
(a) increase the active expert, client base and the engagement far higher so that X/Y remains very minimal
(b) Or pass on the additional cost to the client.
So far (a) seems to be the answer until now. The real question comes in, when the growth starts to taper off.
Thanks @kumar_m_kiran for an elaborated reply.
Yes definitely the 40% ROE is not sustainable as saturation will come wrt expert acquisition and expert calls over a period of time given the competition and economic cycle play.
The increasing fixed costs with tapering of expert calls will result in margin erosion. Till now the business is growing thanks to the complementary and even better ratio of increasing expert calls with the acquisition and miscellaneous fixes costs.
Negative thesis: the business may not be able to grow foreign cleints with foreign expert or indian expert ( although indian expert business may grow if foreign cleint is analysing indian market). And the growth in indian business having indian clients with indian/ foreign experts will start tapering off in the years to come with the advent of AI (AI will eat up some amount of business for sure).
Infollion Business update QoQ
Does any one has insight why they have increased authorised capital from 10 to 50 crores. They already have 35 cr cash in their balance sheet. So curious if anyone understands what is going on here.
