This is big! endorsed by RBI.
“One of the largest and most complex central banks in the world with a balance sheet size of INR 57076.69 Billion”
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Outstanding! This directly places Intellect as a systemically important entity in India leading to multifold increase in trust score, reliability and continuity. Its likely that a number of central banks across ASEAN and Middle East Nations adopt the same technology. Kudos to the entire team for this win and thanks to RBI for trusting a budding Indian product company for its technology backbone.
AJ
Disclosure: Invested. Views are biased.
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Superb achievement. But as someone who long been in IT section, i can say it is a double-edged sword… Any government projects in India come with their own set of implementation issues as the user teams are not geared up to adopt and transition, leading to time-overruns, cost overruns etc. Generally it is ok as it may happen with any project, but it may come with its own unnecessary bad publicity, as it happened with Infosys recently. Intellect should be beware of that, but nevertheless a potential inflexion point for a relatively smaller player like Intellect
Disc: Invested in Intellect
Infosys revamp of income tax website was B2C since the filing was done by people like us. Hence any issue will get instant notoriety.
But with RBI project will there by any B2C activity?
B2G will increase receivable days.
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Great credential. All banks - global or local - are bound to take notice. This is likely to positively impact their ongoing sales proposals and future revenues.
IDA was already providing the core banking software for the RBI. The new deal is to move from traditional hardware based solution to cloud based modern architecture solution as well as analytics solution. One additional advantage may be usage based charges or subscription based charges(don’t see details of this in the announcement).
Most of these legacy to new system upgrades have to make sure they work with older systems, this is called backward compatibility. Since old and new systems both managed by IDA, its their responsibility and their good interest to make it work.
What happened in case of tax website is mis-management from govt/INFY and may be bad play by TCS as well. Such complex systems are implemented in phases. Usually Indian govt does this. While implementing Indian Accounting standards they first asked companies more than 1000 cr to implement it then slowly companies more than 500cr etc etc… Not sure why such a country wide deployment of the tax website. That’s for some other day.
At least in case of RBI core banking software there should not be any errors. If at all there will be tracking mechanisms to find when things go wrong. And also if there is problem may be other banking software will surely raise red flags(what I mean is since its core banking in case inter-bank transfer the other bank which receives or sends from/to RBI should also log the transaction details). Usually settlement systems are checked well before deployment.
If you check the 2020 AR they have clearly mentioned a deal to be implemented it takes anywhere between 12 to 18 months. So would not jump to conclusion that any issue in the software directly reflects in receivable days of the financial statement is far fetched.
NOTE: edited for spelling mistake and additional info
Disclosure: Invested and tracking
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Does anyone the exact reason for IDA’s low tax rate? If it rises to 22-25% then valuations on PAT basis become 15-20% higher automatically.
I’m assuming this is due to tax credit gained during their loss making phase, if so, anyone know by when these credits will get exhausted and normal 22-25% rate kicks in?
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Next year tax rates will go up
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I am glad u called out the point that they are already supporting the existing system and it is only an upgrade (I was about to post on the same as well). Hence it is not such a earth shattering achievement as some others might think it is.
My two cents worth of addition:
- Since they are already managing the legacy system, they are well entrenched and hence know the system, data, clients, politics and cultural challenges in and out. Hence risk of any Infosys like public drubbing for tax portal is low
- This is not like a new big deal in true sense. Also It may not lead to any big growth in revenue as they themselves are replacing their earlier systems. Unless it is transaction based. Also they would have quoted aggressively to keep RBI as their client
All of us want Intellect to succeed and succeed big, but we cant fall to the hype of narratives only (as is evident from some of the posts on the thread).
Thanks again for your detailed inputs.
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The positive i see from this deal is RBI has gone ahead with Intellect to deploy cloud solution, i am reading between the lines 1) Solution is good and RBI is happy with it 2) They did not select any other vendor which may be due to the stickiness of such critical platform, which is what a platform imply
Again, no party is mentioning this but just my thoughts and i can be wrong.
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If it is moving from traditional platform to cloud it is a big deal. It is not adding RBI into customer list but still acknowledging that IDA is right strategy wise, and the business is shifting to cloud. It will be revenue and profit accretive. With Government strategy to initiate into digital currency in near future will add more avenues.
Every IT vendor worth his salt (including all top Indian IT companies) are into cloud. Core Banking platforms from TCS, Infosys and other biggies are also on cloud and so are many more solutions in different industry verticals. So it is not something specific to IDA.
Kinda curious on your comment - “With Government strategy to initiate into digital currency in near future will add more avenues”. Would be great if you can provide some more insights on how this will be beneficial to IDA?
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Eventually Block chain and digital currency will change core banking and shape e-Kuber. Hopefully Intellect will be there to help them implement it.
Arun Jain Of Intellect Design Arena Speaks On The Cloud Deal From RBI | Bazaar Corporate Radar (msn.com)
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Cloud based core banking solution is a trend witnessed across the globe and is not specific to IDA. Temenos has scores of customers signed up for cloud implementation and so has others like Mambu, Finastra, TCS Bancs etc.
There are some significant advantages to IDA or any vendors providing cloud based core banking services since it opens up additional revenue streams e.g. Application Operations, Cloud Cost (Firms strike a better deal with Cloud providers but do not pass on the entire benefit to end customer), Customer Support etc. These revenue streams do not exist if the customer has just bought licenses for your product and implemented in their infrastructure.
Additionally, cloud based solution also create a little bit of restricted space and provides an opportunity for the implementation arm of the business to create integrations with bank’s other applications. Thus, any changes tend to be more sticky and revenue accretive in nature. Obviously, the subscription amount is also higher than license prices.
Thus, cloud based live implementations are not only about technical maturity of the product but it also talks about the overall process maturity of the organization and does provide better revenue potential on the same product. The challenges are no longer restricted to technical and functional capabilities but it increases to ensure that org has a capability of running the application end to end with all necessary support infrastructure established and governed.
It works as very good references and definitely helps vendors attract more customers and make the business even more sticky in nature.
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- FY22 guidance for revenue growth is 20%+ and PBT growth of 30% in FY22
- Has a goal of a 30% EBITDA margin in 4 quarters (26.2% as of now)
- Over the medium term can growth revenues at 20%+ and profits at CAGR 25-30%
Today a US$250mn revenues company and hopes to get to US$1bn. For this they need to continue to invest in R&D and sales & marketing. These investments can be funded via internal accruals without resorting to any equity fund raising. The company has only recently turned profitable so we will be formulating a dividend payout policy soon.
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Did they mention/ reiterate all this recently? A source link would be useful. Thanks.
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For Intellect, consistent disposals are observed from designated people.
https://trendlyne.com/equity/insider-trading-sast/all/INTELLECT/1553/intellect-design-arena-ltd/
Does that indicate anything or they are just booking some profit on their long-term investment/association?
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