IRIS RegTech Solutions Limited (IRIS) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to IRIS RecTech Solutions Limited Q4 FY26 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during this conference, please signal the operator by pressing star and then zero on your touchtone telephones. Please note that this conference call is being recorded. I now hand the conference over to Ms. Asha Gupta, E&Y LLP Investor Relations. Thank you, and over to you, ma'am.

Thank you, Faram. Good evening to all of you. Welcome to Q4FI26 Earning Call of Iris VecTech Solutions Limited. The results and presentations have already been mailed to you, and you can also view it on our company's website. In case anyone does not have the copy of press release or presentations, or you are not marked in the mail, please do write to us, and we will be happy to send you the same. To take us through the results today, and to answer your questions, we have the top management of Iris Rectech Solutions Limited, represented by Mr. K. Balachandar, co-founder, full-time director, and CEO. and Ms. Dipta Rangarajan, co-founder and whole-time director, along with other team management team members. We will start the call with a brief overview of the quarter and year gone by, which will be then followed by the Q&A session. Before we proceed, I would like to remind you that the discussion may contain certain forward-looking statements that may involve known or unknown risks or uncertainties and other factors. It may be viewed in conjunction with our business risk that could cause future results, performance, or achievements to differ significantly from what we have expressed or implied by such forward-looking statements. Having said that, I will now hand over the call to Mr. K. Balachandar. Over to you, sir.

Good afternoon, and welcome to the FIRI's fourth quarter earnings call. As usual, we are grateful for the time you are spending with us. And this time around, we advance the call to 4 p.m. from our usual 5 p.m. slot. If that is inconvenient going forward, please let us know. From the Irish side, we have Deepta, Thomas, and I attending this call, apart from our senior business leaders. We have uploaded an investor presentation on the Exchange website today, afternoon, around one o'clock, in fact, and we hope that some of you had the opportunity to see this as well. As usual, we have been mentioning that a business like ours is best examined through the lens of annual results rather than quarterly numbers, and we would like to talk more from an annual point of view on our financial and business performance. Now, coming to the commentary on our performance. We are pleased to report that over the past one year, both our sub-tech and rect-tech businesses have further strengthened. Obviously, the sub-tech segment has contributed materially in the growth of our revenues, while in the rect-tech segment, specifically for Irish carbon, this has been sort of a milestone year, where our foray further into the enterprise, which is also a largely non-mandated area, has borne fruit, and we have scored creditable wins. Our focus on the enterprise business, which is termed as our electric segment, is unequivocally to grow the annual recurring revenue. For the previous year, Iris Carbon ARR, the annual recurring revenue, grew at 33% on the back of several wins in the discussion management space. We also opened our account in the ESG reporting solution area, which is an additional module on Iris Carbon. On our BFSA automated regulatory reporting solution, Iris Ideal, the IRR grew at 17%, despite the fact that we faced some delay, especially in the first half of the previous financial year, in purchase decision-making at customer ends, especially in the Indian market. Going back to Iris Carbon, I would say that it's a business where we see substantial headroom for steady growth, and our efforts are focused on making this happen. Towards this, we are now working on multiple fronts, including direct sales, partner development, marketing, and new product features. We have also been able to break into large enterprise accounts, and which gives us a lot of confidence in competing with the best in the market. And we have articulated before, we plan to spend in a measured and well-thought-out manner as we increase investment in key areas such as sales and marketing, along, of course, with product enhancements. On the BFSA regulatory reporting business, which is Iris IDL, we are now actively exploring markets other than India, and we see potential slowly unfolding in both Africa and the Middle East. Let me now look at the subject business briefly. We added three new logos in FY26, which included the government of Qatar for tax reporting. This is an industry in a new area, and combined with the potential management segment. This opens new markets for iFile sub-tech reporting platform with new regulators. We are also expanding this product suite to offer more interim features for the regulatory customers, which includes risk-based supervision, licensing and decision management, and a few other modules as well. The idea is to expand the product suite, so we are a bit of a one-stop shop as far as regulatory reporting requirements are concerned for any financial regulator, and even people who are in. Financial and, you know, operational regulatory segments from a regulatory perspective. Coming to our financial performance, I would note that we're steady for the full year with total revenues growing at about 13 to 23%, while EBITDA margin coming at about 14%. We have mentioned before our endeavor is to partially balance customer acquisition expenses in the tax business with profits emanating from the sub-tech business so that EBITDA numbers are not severely impacted. Both the tax tax divestment, our balance sheet has sunken considerably, and cash right now in the book is at around 155 crores as on March 31st, while the net worth has moved to rupees 200 crores from rupees 76 crores as on March 31st, 2025, and the book value has gone up as well to about rupees 98 from rupees 37. Before I close, I want to briefly recap on a couple of global developments. We have been asked time and again by a few of you about whether the AI revolution that is speaking across the globe is an opportunity or a threat. Our honest take at this point of time is that it is both, but for us, we feel it opens significant opportunities in the space we operate, even as customer expectations move up proportionately. We see it as being critical for us to embed AI technologies in both our product stack and in the software development process itself, and we are doing that assiduously with speed and focus. Our initial presentation also includes a couple of slides which talks about our product initiatives on the ASY. On the whole, let me say that we are both watchful and excited. We have also been asked about the impact of the Middle East crisis on our business. It is possible that a prolonged Middle East crisis might have a possible adverse impact on the subject by playing. Having said that, so far we have not seen any indications along these lines, but it will be a fair to factor in this possibility if the crisis goes well beyond the first quarter of this financial year. And this applies to, I think, most businesses that are operating in the Middle East area. And from our point of view, we operate in Asia quite a bit, as well as in Africa. So if there is fiscal constraint with government experience at highly elevated oil prices, it might have some impact on government regulator budgets, No, we haven't seen it yet. Thank you. Now, we also mentioned our personally that after doing data tech business, we have called up in the subsidiary to give it sharper focus. And finally, I want to say that we are pleased to mention that we moved to a new office, which is in New Bombay itself. It's in the Turbay station, and you are welcome to visit us when you get an opportunity. Thank you so much, and now we can leave the floor open for questions and answers.

Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may enter star followed by one on their touchstone telephones. If you wish to remove yourself from the question queue, you may enter star and two. Participants are requested to please use only handsets while asking a question. We will wait for a moment while the question queue assembles. To ask a question, you may enter star and one. The first question is from the line of Samarth Nagpal. Please go ahead.

I am not audible.

Yes, sir.

Yes, you are. Yeah, thank you. Thank you for the opportunity. Sir, just a couple of queries. So, I'm a new shareholder. So, pardon me if I ask something which I'm not aware of. So, after divesting our business and building our healthy cash balance, just wanted to understand what's our aspiration going to be in terms of growing the business faster. I mean, I read somewhere that we are targeting 500 crores of revenue. So, what's the roadmap for that and by when latest can we expect that? Just some color on that.

Okay, this is something we mentioned the previous financial year, and we stick to this number. This is our aspiration, and we are setting the conditions for reaching this target, and this will require a little about 30% growth, I would say, at this point of time over the next four to five years. And our aspiration on the SaaS business is to definitely grow this at about 35%, and we expect the subject business is a combination of, you know, one-time, you know, revenues plus recurring revenues to move a little, you know, a little at a lower rate, but, you know, there could be surprises as we go forward. So the short answer is the target is 500 crores, and we feel we are getting into position with our new products also getting accepted in the market to grow at a higher rate compared to our previous few years where we grew in the mid-20s. Got it, sir. Got it, sir.

And first, I saw a couple of slides on AI initiatives. So, to a layman, how is AI helping us? And on the flip side, can it lead to any increase in the competitive intensity also for us? I'm in some color on that.

The second part of the question is about competitive intensity. Of course, there are theories going around saying that enterprises can create their own software or AI-native companies can come in. For us, we haven't seen that yet in the markets we operate, but our customers are getting excited about what AI can do to their requirements. So we're getting, you know, inquiries, and we're building offerings as we speak, and we expect this to, you know, deepen our, you know, value proposition for our customers, and that could help us go deeper as well as expand into, you know. into, you know, new customers as well. So, from the community in the city, software we haven't seen, but we know, you know, one has to be, one has to be very, I would say, cognizant of what is happening around us. So, we are making sure that we are adopting AI technologies

very quickly and making this part of our stack.

So, on the whole, we feel, you know, it's an exciting opportunity for us. AA could be an accident for us rather than, you know, constraining our business. Understood, sir.

And sir, on this Middle East crisis, I know we don't have a concrete answer to this, but keeping in mind that it extends into Q2 and all that, so how is the year looking for us? I mean, would we still be able to manage maybe a lesser conservative number, but would it hamper our business significantly?

So on the SaaS business path, which is enterprise-oriented business, we don't see much of an impact because our SaaS business is predominantly, you know, Europe and U.S. focused, and there's a much smaller action in India as well. We don't see much of an impact. On the subject side, there's a much more of a pipeline is linked to the Middle East, you know, with, you know, discussion with Middle East regulators as well. There also is progressing, but I wouldn't be surprised if there is some delay if this whole thing continues beyond the point. But so far, as I mentioned in my opening remarks as well, we are not worried too much unless this really prolongs. So I would start getting worried post-June, I would say. We are looking at, you know, three to four wins in the subtext side as usual every year, and this could be, you know, more or less, even the situation. And, you know, at this point of time, you know, it looks, you know, we have to be watchful, but not unduly worried.

Understood, sir. And, sir, just one final question, if I can squeeze in. On the data tech side, I think the Peridot app, if I'm pronouncing it correctly, has a good amount of active users. So, what's the ambition here? In terms of catering to the MSMEs and all that, what's the ambition here and how do we plan to scale this up?

The first iris MSME is confirmed, which is now, you know, Now, we are catering to the Iris MSME market through Iris Peridot app. The idea is to increase the number of users on Peridot by offering a slew of weekly inablers for MSMEs, which includes invoicing, which includes government scheme mapping, and also now loan facilitation. The loan facilitation we have rolled out starting from February in a pilot basis. Now, we are slowly increasing the number of lenders, and we are also reaching out to MSMEs in a calibrated fashion. So the business model is linked to working as a loan aggregation platform for MSME loans, and we are at an early stage, but I would say that we are getting MSMEs on our platform. We are incurring about loans, and there are three lenders already coming. So this is a very initial stage, but we are quite hopeful that this can scale going forward. And we are trying to see how to scale it in a way which is not too on earth in terms of our spends.

Yes, sir. So, maybe in a couple of years, we can see the monetization part going up significantly and the revenues starting to trickle in, right? Is that fair to assume?

Yeah, I would be happy if it is earlier than that, let me say.

The internal target is earlier than that. Sure, sir. Okay, sir. Thank you, sir, for answering all the questions and wish the team the very best. Thank you so much.

Thank you. Participants, if you have any questions at this time, you may enter staff followed by one on your handset. The next question is from the line of Harsh Mulchan Dhani from Toro Wealth Managers. Please go ahead.

Yes, thank you for the opportunity. I understand that what is the plan with respect to the funds which we are owning? Are we planning for some acquisition or to develop some new product in-house or enter some new business vertical?

Of course, the first and foremost part we want to pursue really vigorously is organic growth, and we're also already deploying the excess money in carbon, sales, and marketing, and we want to do it, as I mentioned, in a measured and calibrated fashion. And we're already seeing every percent of our growth, and we want to opt it as we go forward. On the inorganic side, if you want to look at whether we can deploy it inorganically, nothing is of the table, but we'll be disciplined, and there's a lot of volatility in the market. We don't know how it is shaping up in terms of AI impact on enterprise software, so we don't want to do a deal just because we are the capital. We'll be open to evaluating opportunities, particularly in the differences that could... We are aggressively trying to enhance our stack of air offerings. So that is going on.

Okay, okay. So out of about 150 odd crores, you know, entirely won't be spent on marketing, right? So any number on your mind, how much would be spent on marketing say over the next one to two years, and how much of revenue we can expect coming from that or some thought process how you are planning and obviously understand the bulk of the money you are keeping as a reserve to see how things pan out and maybe in future you would decide.

So on the marketing side, especially for our SaaS offerings, we have said that in the previous conference course as well. We are well below the SaaS benchmarks where people spend at times more than $2 for $1 of net AR. We are at about the 1.1, 1.2 levels. We might go a little higher than that, but we don't want to be spending indiscriminately. And we are looking at net air growth of around 35% or more. So that will give you some indication of our marketing spend. And we could spend more aggressively if you see, for example, you know, the market, you know, market, you know, really shaping a well, for example, on the ESG side or even in, you know, data reporting across, you know, financial reporting on related energy reporting, et cetera. But there is some sort of, you know, I would say volatility in the market. So right now we are going with these numbers, and we will be a little more aggressive as a base growth for Iris Carbon. So we don't want to be doing this in an EBITDA negative mode. We want to make sure that we remain EBITDA positive and still grow the business. So there will be money left post the marketing expense, but we also, you know, keep that with us because there could be inorganic opportunities which might come up, and we don't want to be, you know, at that point of time, you know, be left with inadequate capital. And when things are anyway, you know, a little about 10 uncertain, which is the current environment, I think it is important to, you know, keep some capital with an eyes.

Absolutely fair.

Thank you so much for the detailed answer.

Thank you.

Thank you. Participants, if you have any questions at this time, you may enter star and one on your handset. The next question is from the line of Vikas Kasturi from Focus Capital. Please go ahead.

Good evening, sir. You spoke about a growth of 30% CADR going forward for the next few years. Could you just provide more clarity on, or could you just provide some more colour on how you plan to go about achieving it, are you, which are the market that you want to focus on, are you going to be adding new products to your current verticals, or are you going to add more salespeople, and so on, so could you just please throw more light on that?

Okay, I'll tell you guys. So I would take a short exit. So primarily, you know, if you look at the product segment that we have, we have this enterprise product segment, where we have Iris Carbon as the, you know, flagship product, plus we have the automated reporting for banks. Iris Carbon right now is looking at financial reporting. We have venturing to EG reporting as well. So here, we definitely want to make sure that we grow. Good tip, and this could be, you know, 35% is the benchmark we have set for us. It should be more internally speaking, but this is, you know, what we are, you know, externally communicating. And on top of that, we are also looking at different markets in the, you know, SaaS reporting area, which we are now trying to explore, which could be, you know, in capital market later reporting, we could get energy reporting, but these are early days for that. Outside that, we have the bank reporting, bank automated regulatory reporting area, where we are very strong in the Indian markets. We are trying to expand outside. Here, it is a combination of suppression revenue and implementation revenue plus license revenue as well. We are looking at the African and Middle East markets more than other markets. Of course, we are also looking at Europe and see whether we can provide a compelling value proposition there. This is the second part. Then, you know, in terms of geographies, we see a lot of headroom in the U.S. and European markets, because the discussion management as a category is still fairly young, and, you know, when you speak to our customers, when you look at people who are doing such a data reporting, there are many prospects out there. So if you look at how we're going to focus our efforts, we could be certainly looking at this developed caucus first, then working our way downwards. And as far as iFile is concerned, which is our sub-tech offering, it is the regulatory reporting platform. We are expanding the product portfolio so that we are not just in data collection and analytics alone. We are looking at, for example, licensing registration management, which regulators need to do. We are looking at risk-based analytics. And we are also looking at, you know, case management going forward. But these are modules, you know, to build on the existing platform so we can go deeper. And we see, you know, the sub-tech platform going at a good clip may not be matching the fast growth revenues, but here there is, you know, there is the possibility of getting lumpy revenues as well. It is linked to, you know, the regulators' push for digitalization. And we see many regulators are still at a very early stage. And when we speak to some of them, we hear that many of them want to go digital very fast because they feel they'll go digital, they'll miss the air revolution, which is slowly taking shape in those countries as well. So we remain bullish on this, and we need to see how this plays out for the next three, four years. Our footprint is that we need to go deeper into existing subtext segments.

Would you also be hiring more in these markets, these developed markets? Hiring more?

Certainly, yes, we have plans to deepen our presence in sales and marketing, including, you know, on-ground hires in these markets. Clearly, yes. We have made, we have started looking at that activity now.

Got it, sir. Sir, one of the things that we saw, so I've been interested in following your company for a long time. So one of the things we saw was that the cloud adoption, so private companies would, let's say, adopt cloud much faster than the regulators. So, you know, given that, that, you know, they tend to be a little more cautious and so on. So would you, so would they be, would they be sort of late adopters as I'm talking about the regulators? Because they would say that this is all financial data, you know, we have to proceed with caution. So, you can't just trust AI to do everything because there are mistakes, then who owns it, all that. It might lead to other issues. So, would you say that the regulators are more cautious as far as AI adoption?

I think you are absolutely right. We have been speaking to regulators. In fact, we have actually one regulator already on the cloud, which is TFRDA in India. That's the private cloud that they're using. But when you talk about AI services and cloud-based architecture, there is reluctance on part of the regulators to embrace that completely. So there are multiple ways to overcome this. We are also looking at a small language model which can work, which is a structure where the data doesn't go out. So the LLMs which, you know, some of the regulators can use, this could be the private or sovereign LLMs. So that is a structure we are talking about. In fact, you know, in a couple of Middle East implementations, this is a subject which has been further, you know, explored. So I would say that, you know, when it's public data or report information, this needs to be further, you know, structured and taken into regulators. You can definitely use public AA services. When it is confidential data, there could be some reluctance, so there could be great reluctance by regulators to go back to, you know, Zendik AA services.

And one final question, sir. So, the gaze receivable has been trending downward. So, is it because of more efforts on our part to collect our money regularly? Is there something to call out there?

I think the combination of, I think, you know, of course, enterprise, part of the business has been slowly moving up. That's number one. And number two, on the subtext side, also, I think, you know, regulators have been, you know. I would say more amenable to making comp payments. It's a good situation. It's a good situation, but I would say that, you know, to improve, further improvement, you know, will become progressively difficult.

Okay. So, around 80 days is what we can expect, huh?

Yeah, I would say that, you know, 75 to 80 days is what we would be comfortable. But if the enterprise SaaS revenue is really gallop going forward, it could further improve. But we need to wait for that. Thank you for your answers and questions. Thanks, Vigas. Thanks, Vigas. Pleasure to have you.

Thank you. Ladies and gentlemen, if you have any questions at this time, you may enter star and one on your handset.

To ask a question, please enter star and one.

Participants, if you have any questions at this time, you may enter star and 1. As there are no questions from participants, I now hand the floor over to the management for closing comments.

Thank you so much. This time it has been a shorter call. I hope all of you are happy with the way we are progressing, and I hope we have been able to address all of your questions. Please feel free to write to us if you have further questions, and we are open to interacting with you on a specific basis as well as through emails. Thank you so much. Have a good day ahead. Bye.

Thank you very much. On behalf of Iris Rectech Solutions Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you.