Ladies and gentlemen, good day, and welcome to the Tanla Platforms Limited conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing S then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Ritu Mehta from Tanla Platforms Limited. Thank you, and over to you, ma'am. Hello. On behalf of everyone at Tanla, I would like to extend a very warm welcome to our investor call. Joining with us today are Uday Reddy, Chairman and CEO, Deepak Goyal, Executive Director and Chief Business Officer, and Aravind Viswanathan, CFO. Uday will share his insights and strategic rationale behind these acquisitions, followed by Arvind, who would delve into financials. After opening remarks, we'll be happy to engage with participants and address their questions. Before I hand it over to Uday, let me draw your attention to the fact that today's discussion may feature statements that are forward-looking in nature. All statements other than statements of historical fact could be deemed forward-looking in nature. Such statements are inherently subject to risk and uncertainty, some of which cannot be predicted or quantified. A detailed disclosure in this regard is mentioned in the presentation that was uploaded on our website. Audio recording and transcript will be available on website soon. Now I'll hand it over to Uday. Thank you, Ritu. Good evening. Thanks, everyone, for joining the call. I'm sure you have seen our presentation on ValueFirst acquisition, and I'm very excited about the opportunity here. While I will ask Aravind to take you through the acquisition details, let me share my thoughts on the acquisition and what it means to Tanla and CPaaS industry in general. For the past 2 years, I've been asked three questions consistently on the enterprise business. First have been the implications of global giants with large balance sheets entering the Indian market. I've been consistently maintaining that India is a unique market. To succeed in India, one needs to know local knowledge. I mean, one needs deep local knowledge, ability to work with the entire ecosystem, from enterprises to mobile carriers, and deep domain knowledge. This is a secret sauce of our success. Acquiring ValueFirst from Twilio is a validation of this long-standing belief. The second question has been the competitive dynamics due to Airtel competing with CPaaS players in India, largely around pricing. While there is a certain amount of disruption when Airtel made this entry, I think industry has stabilized over the past twelve months. Airtel is both a competitor and partner, and I think the ecosystem has learned the art of coexistence. I think the phase of market disruption is behind us. As we gain the scale with the ValueFirst acquisition, with the overall CPaaS market share of 35%+, we recognize that we have a major role to play to drive responsible industry conduct. We take the responsibility very seriously. The third question has been around international expansion. ValueFirst is a player in Dubai and Saudi, and making inroads into Indonesia. We will leverage this acquisition to significantly scale our international operations, both on platform, on enterprise business. In many ways, this acquisition has addressed the key questions asked to me. Why does this acquisition make sense for us? I see 5 strong reasons. 1. a significant bargaining power in sourcing. ValueFirst will help us with the further bargaining power in sourcing. We were always larger, now we have become larger, largest rather. The second point is complementary customer base. Our India customer footprint is very complementary. We have 50% share in large enterprise segment, now ValueFirst brings in 20% share in SME segments. Customers contributing 40% of the acquired entities' revenues are net new to us. ValueFirst will cross-sell and upsell to our customers and vice versa. Point number three, drive strong operating efficiencies. We looked at their financials in detail as part of the due diligence. I see significant headroom on efficiencies on both direct, indirect costs. We have clarity on where we can add value and improve. The fourth point is cultural fit. We have a strong relationship with both ValueFirst and Twilio, and Twilio believes we are a natural partner to house ValueFirst employees and customers. Last but not least, is talent. It is not easy to build talent with a deep expertise in this space. Vish and his team have a tremendous domain knowledge, and we will leverage this. They have a strong platform called Soblo, which we can use for our customers. In summary, we have an incredible track record on acquisitions. We work at it, and Deepak and his team has helped EBITDA go from ₹ 35 crores to around ₹ 500 crores in the last four years. The same team which delivered the value at Karix will work with ValueFirst team to unlock the value for our shareholders. Now I'll ask Arvind to take you through the deal construct and financial implications. Thanks, Uday. Good evening, everyone. Let me quickly give you an overview of the acquisitions that we announced. We announced two acquisitions, right? The first one, we signed a definitive agreement to acquire 100% of ValueFirst India from Twilio for a consideration of $42 million, which translates at current exchange rate around ₹ 346 crores, subject to upward closing adjustment between $2.5 million and $3.5 million, due to the net cash in the business. We expect to close this transaction by early July 2023. We should see the full consolidation of this entity in our Q2 numbers. We also signed a binding term sheet to acquire 100% of ValueFirst Middle East, from their existing shareholders for a cumulative consideration of ₹ 20 crores, through a combination of primary investment and a secondary purchase from existing shareholders. This entity addresses the markets of UAE, Saudi, and Indonesia. We expect to close this acquisition in September 2023, and we will see the full consolidation of this entity in our Q3 numbers. We are funding this purchase consideration from our internal accruals. We are incentivizing the management team of ValueFirst for both performance and retention, with a ₹ 50 crore RSU grant in ValueFirst, which will vest over a 2-year period. The overall revenues of both of these acquisitions combined is around ₹ 950 crores. As Uday mentioned, ValueFirst is an existing customer of ours, so if I adjust for net intercompany, the net incremental revenue to Tanla Platforms would be around ₹ 650 crores. The combined EBITDA of the acquired entities is around ₹ 50 crores. Today, ValueFirst operates at around 5% EBITDA levels. EBITDA for Tanla in Q4, we executed FY23 at around 20% EBITDA, and if we just consolidate on a like-for-like basis, the dilution due to this acquisition would be around 2%. Our plan is to mitigate this impact by improving the ValueFirst EBITDA from current levels of around 5% to double digits in the next 2 to 3 quarters. We have a solid plan on this. Uday referenced it in terms of the efficiencies that we see, and that's the focus for us from a profitability standpoint. We expect to mitigate the entire impact of the EBITDA margin dilution by the end of the financial year. Overall, this is a very attractive acquisition from a valuation standpoint. We are acquiring an entity at 7x EBITDA multiple for a business which is operating at very, very low EBITDA levels. As we execute our plan on driving synergistic growth both in India and overseas, coupled with our focus on margin expansion, we see significant value creation through this acquisition. I would, you know, ask the operator to open the floor for any questions, and we'll be happy between Uday, Deepak, and myself, to address any of them. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press S and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press S and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press S and one at this time. The first question is from the line of Anil Nahata, from an Individual Investor. Please go ahead. Yeah, hi. Hey, Anil, go on. Of the international, in terms of the geographies that they are having, because the slide gives a breakup of around ₹ 153 crores, whereas the revenue is around, ₹300 crores, if I understand right? Yeah. Anil, let me clarify that, right? That is the NLD business in those respective geographies, okay- Of course. Which includes the Tanla numbers. That is more to give you a sense of what is the domestic business that they do with local enterprises, okay? Okay. They also do global business and ILD business out of these entities. We are breaking it down. We will give you further details post the acquisition in terms of the kind of business that they do. We wanted to specifically call. See, there is a difference between serving a market and, you know, the entity being used to book revenues, right? Mm-hmm. You could book a global to global revenue in a Dubai entity or a Saudi entity. We were. Absolutely. Carving out what is the local business that we do, and that local business for the combined group would be about ₹ 153 crores, where about ₹ 100 crores comes from ValueFirst, and about ₹ 50 crores comes from Tanla. Tanla was only present in UAE, ValueFirst is present in all three geographies. Great, Arvind. Thank you for that. Can you also give some sort of, the, range around which the margins for the domestic business in the overseas, countries is there, and the Indian margin for ValueFirst? If you ask me, the margins on the overseas business today is a little lower, Anil, right? It's probably breakeven or slightly 1%, 2%, you know. India is little higher at about 7%, 6.5%, 7%. You're giving at EBITDA level? Yes, I'm giving at the EBITDA level. Okay, fair enough. My third question around these lines is, of course, it may be a bit early to ask this question, but I would still leave it with you. Now that Uday has said that, one of the large concerns that has been raised by the shareholders community is about the international expansions. ValueFirst can be a good step beyond what Tanla was already doing in UAE, in terms of getting into, deeper into the KSA and Indonesia. I mean, what kind of a plan we can see from Tanla over the next 1 or 2 years? Can we look at international revenue base of 10%, 20% of the overall revenue? I mean, some sort of thought process would be, I'm not even asking guidance. I'm saying some, what kind of a thought process can be there? you know, Anil, I, as you said, right, you know, it we've not even integrated the entities, right? Correct. Absolutely. We see a huge opportunity. Okay? We see clearly a huge opportunity. In fact, we've been talking about Saudi quite a bit, right? We've been talking about Far East Asia quite a bit, right? The market sizes there are very, very large. Okay? The idea, obviously, and I think Uday kind of mentioned this, is not just look at these geographies only from an enterprise side, but even from a platform side. The, the expectations and internal workings are quite aggressive, Anil, but, you know, it can be substantial, but maybe I will wait to kind of, have a much more detailed out plan in terms of what we are doing before I kind of comment what kind of percentages it can become. Okay. I know it's ahead of time, and I mean, Arvind, if you are okay, can I ask more question or should I come back in the queue? I would suggest we come back because I think there is a queue here, right? You know. Fair enough. everybody is done, if you have time. Absolutely. Fair enough. Thank you. Thanks, Anil. The next question is from the line of Deepak Chokhani from Reed Capital Partners. Please go ahead. Hi, Uday and Tanla team. Congrats on this acquisition. Great move, which will surely solidify Tanla's pole position in India. I have two questions. First is, I understand ValueFirst is largely into enterprise business. Just want to understand, given Tanla's foray into IP platforms and other business, what could be the cross-sell opportunity to ValueFirst customers? More on the platform business side, number one. Number two, you mentioned that the international businesses can grow 2 to two and a half times in few months. Is that, like, few months? I mean, can you throw some light on this? The third is, ₹ 50 crore EBITDA is on ₹ 950 crore or ₹ 650 crore? Let me answer the third question first. The ₹ 50 crore EBITDA is on ₹ 950 crores, right? See, the EBITDA doesn't change because of intercompany, only the revenue changes, okay? Both organizations keep their profit. It's just that the consolidated revenue comes down. That is why, you know, you will feel that adjustment happens only at the revenue line, but not at the EBITDA line. That's my first point, right? The second question is in terms of the Yeah, yeah. Platforms. Okay. This is basically like a couple of things. One is, for example, in India alone, only 50% of their traffic comes onto our DLT platform. Remaining 50% goes to our competitors. Going forward, probably from tomorrow or day after tomorrow, days ahead, 100% of traffic comes to our DLT platform. That's that's that was that that's number one, right? Number two is what we noticed is 40% of their their revenues are net new to us. Okay, so we are listing down all these their clients, and we are also working on how how to upsell and cross-sell some of our Karix and Tanla's services to these customers. We are pretty excited, and we see a huge value there. Of course, in Dubai also, like, you know, we have been operating the last two years, we are reasonably big. We also see the clear opportunity over there, like, in the sense, like, we have our own customers and they have their own set of customers in Dubai. There is a clear opportunity for us to upsell and cross-sell there. It's only beginning. There's a long way to go, but particularly we are very, very excited about their the opportunity. Perfect, sir. Thank you. Just my one question which remains the 2, 3x growth in few months in the international expansion, can you throw some light on this, sir? Sure. Okay. When it comes to the NLD business that we specifically talked about, especially where we have geographies like Indonesia, where we have just made an entry, and if you look at that slide deck, right, you have a significant headroom because it's a very, very large market, right? What we are planning, right, is to see how do we accelerate the growth in some of those geographies where we can quickly turn around and get a big opportunity. Obviously, we will assess in more detail, but that's the kind of potential we are seeing, Deepak, right? That is our approach, specifically in these geographies where the base is small, and we feel that if we can put our full might and our investments behind it, the opportunity to scale up that specific segment is very, very high. Okay. All the best. Thank you so much. Thanks, Deepak. Thank you. The next question is from the line of Meet Raj from Anubhuti Advisors. Please go ahead. Yeah, thanks for the opportunity and congrats on the transaction. First question is in terms of margins. In slide number 16 of the presentation, we have mentioned that there's an opportunity to improve 140, 150 basis points on consolidated basis. Just wanted to know, this is on the Q4 exit rate or the FY23 average of 18%? I kind of talked about this, in my, you know, opening remarks. What we are saying, right, and it is both, in a way, you know, it's, it is to say that, our exit margin is around 20%. Got it. We have an ability. I mean, if you take the entire impact of the ValueFirst, the impact is about 200 basis points from here, right? We are saying over the 12-month period as we exit, we will kind of get that dilution back, largely through the improvement in ValueFirst EBITDA, right? Which we have talked about. Right. Okay. Okay, okay. Second question is in terms of the business which we had earlier with ValueFirst. Can you elaborate what was the business we were doing with ValueFirst for the last 10 years? you know, Tanla has always been a very large platform provider, right? Right. We've been a large platform provider, and we have served all of our big CPaaS players, right? Because our platforms are deployed at the telco end, and our customers from Tanla historically has been business CPaaS providers, right, in generally. In fact, interestingly, you know, when we bought Karix was probably one of the our largest customer of Tanla at that time. Tanla has been serving, you know, the CPaaS players, right, from inception. That's the kind of service. It's typically it could be messaging service, where, you know, I mean, they send the messages and we run it through our platforms with the telco. Okay. Okay. Fine, that's just confirmation. Thanks. Thanks. Thank you. The next question is from the line of Amit Chandra from HDFC Securities. Please go ahead. Yeah. Yes, sir, thanks for the opportunity. My question is on the synergy benefit. Sir, you mentioned that there is obviously like a lot of synergy benefit that you're seeing. If you can, now tell me, what are the immediate kind of synergy benefits, you know, we'll see, and what are the, you know, long to medium-term synergy benefits? I know you mentioned about kind of pricing benefit that, you know, we can get as a, as a larger entity. If you can throw some light on that. If I see the gross margins for both the entities, they're mostly the same. The and also the difference is mostly on the EBITDA margins. The margin benefit we are talking about, either through gross margin expansion or through, like, cutting the cost, at the Karix level. Sorry, at the, ValueFirst level. Sorry. Sure, Amit. Let me give you, my view and, you know, I'll request from Uday or Deepak to add on, right? What we are saying clearly is... I mean, the first point is, at an integrated level, you know, the gross margin of Tanla is, of course, 25%, right? For the year, it's 27% as we exit, right? It's much lower for ValueFirst, right? There is no dilution in gross margin because, you know, when we do the consolidation, in many ways, the intercompany revenue knocks off, but the gross margin remains. There is a significant gap in terms of the gross margin. Two, three elements there, Amit. One, clearly, is the sourcing cost, because, you know, there is a benefit that we can get as far as that is concerned. Two is, I think Uday mentioned it, you know, you have cross-leverage through platforms that, you know, you have the benefit of, you know, you have multiple of our platforms that are deployed, not all of ValueFirst traffic goes through that, so we will definitely create some downstream benefit there. There will be certain indirect cost synergies that we will identify, and we've already identified, and we will execute on that, right? I don't think, you know, the business is very different for us to operate at very different margin levels. That's the hypothesis that we are starting with. Obviously, with synergies around platform, et cetera, that they do not have, but, you know, we can get the benefit of that. It is easy for us to kind of drive the profitability improvement. Yeah. Okay. You know, in terms of the customer overlaps, obviously, you have given very clearly where the overlaps are. If you can also quantify to what could be the overlap in terms of revenues and, you know, how do you see, you know, these individual customers, you know, which are common, you know, in terms of spending, you know, if there were any both the entities? Deepak, do you want to comment on it? I can give some numbers, right? From a concept perspective, if you want to give your color, right. Sure. I can provide, you know. Yeah. see, it's like this, we have overlapped with some customers, and they are, pretty large customers. We don't see any risk whatsoever. you know, the reason, the primary reason is that, you know, they're two separate platforms. You know, required. Why don't I cover that until Deepak joins back, right? See, one point what we have mentioned is 40% of ValueFirst revenues is customers who are making you good catalog, right? To that extent, that gives you a sense, right? The balance of revenues are obviously having an overlap. Not all overlap necessarily is bad, right? We have a situation where, you know, we can coexist. That is not an issue. We're retaining the brand, so to that extent, it's not that, you know, two of them will combine into one. We don't see an issue, but what will happen is a huge ability to cross-sell, upsell, that Uday also talked about in his opening remarks, right? That we will have with customers, and that's where we see a big opportunity. I know why I was trying to understand this a bit. As you said, that 60% is overlap, so that's a big overlap, right? Any risk you see to that in terms of some, you know, customer, you know, scaling down in one entity or, you know, some any kind of risk that you see in the overlap? That's what I was trying to understand. Deepak is there? Mr. Deepak, your line is in talk mode. Okay, let Deepak come back and answer that. Let me know if we can go with other questions. I'm there. Yeah, Deepak, go ahead. Yeah, sorry. Yeah, Deepak, go ahead. Aravind, would you please clarify about this 60% overlap thing? Yeah. I think the question, Deepak, that Amit wants, is where there is an overlap, do we see a risk of customer pushing out either of the players, right? Is there a risk that we will lose revenues because of whatever overlap we have? I just kind of gave a headline saying we don't see that risk, but maybe you may want to elaborate a little bit on that. No, right. You know, Arvind, it is not a 60% overlap of our business between Karix and ValueFirst, right? No, from the revenue standpoint, it, we did that. It's just 60%. In a sense, 40% is negative. What I mean by that is where we have even 1 message goes, right, we call it overlap, right? You may not feel that it's an overlap, but it is. It's just our presence there. Anyway, so Amit, to answer to your question, in fact, we have done this exercise, okay? How it works is, a customer usually have minimum two or more than two providers, okay? Maybe three or four. Last customer usually have three or four providers. Usually, the last customers, Karix has about 45%-50% share, wallet share. Others have maybe 20, 30, or so on, right? As we see it is that, for the customer, there are 2 separate platforms, hosted in different geographies, different data centers. Our business is services business. It's very people-oriented, so customers are used to of dealing with a certain set of, you know, you know, people in a particular provider. So all... If you look at all of that, I don't see any risk. In fact, we see a huge opportunity where we can actually, you know, enter into ValueFirst customers, okay, where we are not present, and ValueFirst can come as another provider to our customers where they are not present, right? I am looking at, you know, at a, you know, opportunity where we can look for incremental business rather. Okay. Last question is on the retention program that you have. Can you please throw some more light on how it is structured? Is it only for top management, or it is across all employees for the ValueFirst, and how the payouts is? We've doing an RSU plan. We'll probably cover top 20-25 employees there, right? With a focused view on how to retain. We have an RSU plan for about 60,000 ValueFirst, right? That will rest over a two-year period for driving both retention as well as performance, right? That is really how the incentive plan is structured, Amit. Okay, sir. Thank you and all the best, sir. Thank you. Thank you. Thank you. Thank you. Sure, of course. Participants, to ask a question, you may press S and one. The next question is from the line of Mohit Motwani from Nuvama. Please go ahead. Hi, thank you for the opportunity and congratulations on the transaction. I have a question on around, you know, can you give some sense, you know, on what led to, you know, Twilio selling ValueFirst? You know, I understand that, you know, Twilio works with you as well, but I believe that, you know, they wanted to enter India, which is a fast-growing market, and that's the reason they had gone the acquisition way, and they ended up acquiring ValueFirst. What has led to, you know, them selling the business and that also at a relatively lower valuations? It's good from Tanla's perspective that, you know, you are getting and, you know, you can turn around and, you know, scale and gain more market share. Just wanted to get some color on that, if you can. Thank you so much. Mohit, Uday here. We cannot really comment on behalf of Twilio, but we are very, very excited. We understand this market well. We understand this very, very well. We have been working with ValueFirst for one decade, so we are pretty excited. I know why they left and why they sold it at loss, we cannot really answer those questions. It is completely up to Twilio. Sure. Thank you so much. Yeah. Thanks. Thanks, Mohit. Thank you. Thanks. The next question is from the line of Sharad Kohli, an individual investor. Please go ahead. Hi, I have basically three questions, actually two questions and 1 suggestion. The first question I have is in terms of this industry consolidation. Karix was number one, ValueFirst was number four, so they've become part of Tanla over the last two, three years. You basically have three sizable players left now, right? Besides, Tanla now, which is Root, Gupshup and ACL, which is Sinch. My question is, in terms of negotiating your share of the cuts from the telcos, does this make the CPaaS players in a better position to get a higher percentage of the revenue share from telcos? That's my first question. The second question I have is more on the stats that you gave on the TAM on the Asian markets. The first clarification I have is the Indonesian market led by CPaaS players like Tanla, or is it kind of like the Airtel model, where the CPaaS divisions of the telcos control the market for the most case? I'm trying to get an understanding of how easy or difficult it might be for a standalone CPaaS player to kind of make inroads, if in fact, the telcos are the ones that control the CPaaS market. My last one, just given that we are absorbing so much data on the different markets, mid-market versus large markets. One suggestion I would like to offer is when you guys present your numbers for Q1, is there a slide you can show where we look at each of Tanla's five businesses, whether it's Engage or Communicate, everything. If you can just do a matrix, maybe a 3-by-4 matrix or a 4-by-4 matrix, where you say, "Here are our divisions, here's the, here's which markets we cater to, here's where our share in that market or revenue share of the market is, and here are the drivers of those markets, whether it comes from startups or BFSI, whatever it is." It just makes it easier to understand which segments each of Tanla's five divisions play in terms of just modeling out potential revenues, and if you can also disclose TAM numbers for each of those revenues. That's it from my side. Yeah, right. In terms of second question, what I can say is that, you know, if you look at any market, including Indonesia, it is completely driven by the aggregators or the CPaaS players, not necessarily by the mobile carrier. It's a custom in every market, including India and other markets, right? It's not different from any other market. That's number one. What is the first thing? It's on, in terms of- Yeah, definitely, it would help us. Even now, we have better access to the telcos, and with this acquisition, that definitely does. We have more power to negotiate farther with the telcos. In terms of the metrics, yes, definitely, we'll consider that. Okay. Thank you. Thanks, Sharad. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Ritu Mehta for closing comments. Thank you, everyone. That was the last question for today. In case we could not take your questions due to time constraint, please feel free to reach out to our investor relations team. Thank you. Thank you. Ladies and gentlemen, on behalf of Tanla Platforms Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.