Interview with Ashish Rai (CEO, Aurionpro) on NDTV Profit’s Small & Mid Cap show covering a newly announced State Bank of India order (~₹100 crore with ~12–14 months implementation + 6-year AMC), company order book (~₹900 crore as of Q3 Feb 2024), expected revenue recognition (roughly half in first 12–14 months), recurring/near-recurring revenue share (~55–60%), growth guidance (30–35% for year, ~37% YTD), geographic mix (~60% India, ~40% exports; US <10%), and product/R&D strategy.
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Good morning, welcome. You're watching NDTV Profit. You are watching the Small and Mid Cap show. I have with me very interesting management. We have with us Mr. Ashish Rai of Orion Pro and we're going to try and break down this business. But more importantly, they've had a new order win from State bank of India, 100 crore rupee order. And to try and give us more perspective and details on that one, we have Mr. I. Welcome to the channel, sir.
Hi Mike, thanks, thanks for having me.
Yes. So Ashish, break this down for us. 100 crore order executed over the next 12 months and a 6 year maintenance as well which you will be getting. Give us the breakup. What's the kind of revenue recognition you are expecting from this over the next 12 months and then over the next six years?
Yeah, so look, typically I would say half of most of the orders that we do would get done the first 12 to 14 odd months while we take the client's life and then the rest of it progressively comes in as we, as we enable the clients to use the solutions as we go. I mean this one would be no different in terms of enablement. Overall it's obviously a very, you know, working with, working with sbi, it's a, a pretty significant win for us and a good acknowledgment of the cutting edge stack that we have and our ability to work with other banking clients in terms of their transformation efforts on the transaction banking side. So this is not the only win we announced over the last several quarters. We've announced a number of wins in the space and we continue to enable clients. SBI of course is the largest bank in India. So that's a significant win for us.
Sure. Yeah, absolutely. So this is a big win definitely. Now to try and get more perspective on the overall book, you've got around 900 crore worth of orders as of Q3 of February of 2024. This obviously adds to that. So should one say thousand crore order book at the moment largely executable in the next 12 months? A majority of that a little out above 50% maybe on the balance over the next five years maybe as AMC.
Yeah, so look, we actually leave out a lot of long term AMC from the order book. I mean especially for clients who live with the solution for a long time. So our order book typically, I would say 70% or so, assuming we have the capacity, would be executable sort of over the next 12, 13 months. Yes, it was. So at the end of the last quarter it was, it was 900 crores. I'm not going to give a number out on, on where it's going to be but order book has been climbing up over time. As you know the business has been also growing at 3537 odd percent for the last several quarters. So we've been consuming from the order book as well. So the incremental addition to the order book we will declare at the end of the quarter. But it's, it's really strong for both sides of the banking business for us lending as well as transaction banking.
Got your point. And this 35, 37% kind of CAGR on top line. Continue to expect that as your top line starts to climb. Now you're nearly at thousand crore trailing twelve months. Yeah.
So look for this year we guided 30 to 35% for the first nine months of the, of the year we've grown 37. So the business continues to execute and have strong momentum. I think we feel fairly good about delivering around the high end of the guidance. I think this, this sort of strengthens that we do that. Yeah. I mean I would not really change any numbers on this interview but by and large we'll continue executing at the pace and it's not just this year. Right. I think for the last, since we pivoted to becoming a global products and platforms player three and a half, four years back, we've been growing at a CAG north of 30 for, for, for a few years now. So we, we do expect to keep up the momentum.
Sure. So momentum to stay ahead. Now I want to try and understand from you with regard to the revenue itself, roughly 902,000 crore. How much of this is recurring and how much of this is what you would call a one time implementation kind of service which are providing. Yes.
Recurring or near recurring rates. Recurring essentially would be streams like AMCs like the long term managed services kind of contracts plus, plus the near recurring work which is with existing clients, ongoing services etc. It's of the order of about 60% or so of the revenues between 55 and 60% and the rest of it is sell and deliver in the year. Right. So as we continue to grow at 30, 35%, you know, you'll need to continue to have a fairly large chunk of sell and deliver as we, as we go. But over time the recurring streams sort of, you know, they build up layer over other. Right. So, so the business would. Our ability to grow grow sort of keeps on increasing as you add more and more to the recurring streams with these new wins.
Understood. And your renewed Focus on global. How does this add to your mix? Because currently are doing 61% of your revenue mix is domestic versus 39 outside or rather export. So how would this evolve say over the next two to three years as you grow at 30% on top line? Reasonably. Yeah.
So look, we are one of the very few sort of technology players from India who are able to go and capture global deals whether it's on the enterprise application side or it's been slight on the transit payment side in California and in Latin America, etc. Right. So we are one of the few players who are able to export technology, were able to export banking software, transaction banking software, lending, etc. I think the we will continue to get competitive. The goal is to build out a tier one global products and platforms player. Each of the business lines that we have lending, you know, our products are squarely, you know, charters, respect leaders, quadrant products worldwide. We are very competitive in Asia. We are expanding into Europe and US Transit payments, we already expanded into US and now we are looking to expand into Europe as well. So most of our businesses will continue to get stronger product. Business tends to be, you know, harder to break in into markets, you know, compared to let's say IT services or outsourcing or things like that. But you know you, you build on your success. So we are already, so India is about 60% of the revenues as you mentioned and outside of India is about 40%. US for US is still less than 10% but continues to grow strongly. So I think as we, as we grow further, I think the global side of the business will become stronger. Last few years for us were about building out the product sets. We rebuilt the whole banking software suite across payments transaction, banking, lending, etc. We rebuilt the whole transit suite, launched brand new products. All of these take really hard R and D over multiple years for us to get the products out. Now that we've got refreshed cutting edge stock out in the market for most of our offerings, we expect the global site to become bigger and bigger as we go.
Sure. And that brings me to my next question. Very well. What's the kind of R and D spend that you're doing as it could be a percentage of top line and how do you account for it? Do you capitalize it? Do you recognize it as OPEX in the same year as you are incurring it? How does it work?
Yeah, great question. So what we at the moment we are clocking between 7 and a half and 8% of the top line in R and D. R and D spend. So between our sort of centers out of Singapore, Istanbul, India and Vietnam, bulk of our product development happens between those four places. That's roughly clocking at 8%. What we are trying to do is we are and all of it we expense out, right? So with some very minor exceptions, not in our core product lines but but elsewhere because of some regulatory related reasons. Otherwise we just expense out. So we don't really have much capitalization on the product. And the goal for us is to keep the profitability by and large where it is, which is now. So for this year my guidance is between 20 and 22% of the EBITDA. So we'll try to keep in the short to medium term EBITDA around those levels and increase the R and D spend as the economics of the business improves. Right. So what happens in the product business is as you scale, the economics will get better and better and as we get that, we'll pour the excess back into the R and D bucket, right? So at the moment it's about slightly less than 8%, but that will grow. Sam.
