Intellect Design’s ‘Killer’ AI Product? CMD Arun Jain On The Multi-Billion Rupee Opportunity — Transcript

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1. 0:00Mr. Arun Jain, who's the chairman and
2. 0:01managing director of Intellect Design
3. 0:03Arena. Before we get him on board, let's
4. 0:05get in Mahima to set up the conversation
5. 0:07for us. Mahima.
6. 0:08>> Right. So, you know, overall just in
7. 0:10terms of business outlook, right?
8. 0:12Because AI monetization now is moving
9. 0:15beyond the pilots into enterprise
10. 0:16deployment. And for the company itself,
11. 0:20the purple fabric, which is the AI
12. 0:21platform, is being sold as both, you
13. 0:24know, the platform and AI layer. In
14. 0:26terms of banks acceleration investment
15. 0:28in AI and core infrastructure, Islamic
16. 0:30banking, custody, credit unions will
17. 0:32improve repeatability is what the
18. 0:35management also believes. And the
19. 0:37management is targeting faster delivery
20. 0:38using AI and not headcount cuts is what
21. 0:41the commentary is also indicating. A new
22. 0:43AI product launch is also planned within
23. 0:44the next 2 months. It that will be
24. 0:46something, you know, that will be
25. 0:48interesting to watch out for. That's
26. 0:49what they stated in Q1 commentary as
27. 0:50well. Just to give you as a perspective
28. 0:52of how Q1 fared for the company, margins
29. 0:56were down over around 180 basis points.
30. 0:58So, it was a weak quarter. Pipeline
31. 1:00value, however, did rise by around 15
32. 1:02odd percent year-on-year basis to 13,000
33. 1:04odd crore. There were 19 strategic deals
34. 1:06in Q1 and saw repeatable growth as well.
35. 1:08North America um
36. 1:10has been emerging as the key market for
37. 1:12them. So, I think it will be important
38. 1:14to watch out for us to how that could be
39. 1:16the next growth trigger for the company
40. 1:17or not. So, this is the overall view,
41. 1:19you know, of how business outlook stands
42. 1:21for Intellect Design.
43. 1:22>> Okay. Well, thanks a lot for that,
44. 1:25Mahima. Let Let me get in Mr. Arun Jain,
45. 1:27CMD of the company. Mr. Jain, before we
46. 1:29get into business and the other things,
47. 1:31on the 3rd of August,
48. 1:33I believe you
49. 1:34had put out a release saying that the
50. 1:36tech team has cracked a unique offering
51. 1:38on cloud for financial services. Does it
52. 1:40help equity analysts and anchors?
53. 1:42Because if it does, we'd really want to
54. 1:43know that.
55. 1:45>> I must appreciate your research on the
56. 1:47company even
57. 1:49introduction
58. 1:50doesn't require me to speak a lot about
59. 1:52the company, but this innovation, which
60. 1:54is on the top of cloud, is something we
61. 1:57are excited about. We saw a completely
62. 2:00codeless world where coders are not
63. 2:02required. It's a complete enterprise
64. 2:04applications which can be written using
65. 2:08we are
66. 2:09launching in global fintech forum and
67. 2:12you caught me at the right time either
68. 2:14at the TV channel because
69. 2:16other people will get a chance later on
70. 2:18and you hit up on the right third August
71. 2:20mail. Uh
72. 2:22so this I have to
73. 2:24release to you. We are launching MDML
74. 2:27system of connected knowledge. So
75. 2:30the question is in banking banking space
76. 2:32and financial service space is about
77. 2:34deterministic knowledge which makes a
78. 2:36difference.
79. 2:37And banking world is multi-dimensional
80. 2:39and multi-layer layer in concern like
81. 2:41what Vinay was mentioning.
82. 2:43Because any CIO and takes time to
83. 2:44understand multi-dimensionality of the
84. 2:46financial services and multi-layer of it
85. 2:49and that system of connected knowledge
86. 2:51has to be there with the bank and we
87. 2:53connect the technology where we have
88. 2:55taken file 39 patents in this area of
89. 2:59how the right deterministic knowledge
90. 3:00should be center piece of intelligence.
91. 3:02So intelligence is outcome of but then
92. 3:04you have a data which is DBMS, then you
93. 3:06have a MDML system of connected
94. 3:09knowledge and then you have a
95. 3:10intelligence of cloud and this is where
96. 3:12we are launching it in GFF and so we are
97. 3:15launching which is a complete AI native
98. 3:18engineering platform where coder hand
99. 3:20coding is completely
100. 3:22taken off from the radar. So obviously
101. 3:24you can imagine if hand coding can be
102. 3:26taken off how
103. 3:29valuable [clears throat]
104. 3:30it is for the global world.
105. 3:33>> Well, we'll see you at the GFF Mr. Jain,
106. 3:35but
107. 3:36pardon me for not being so tax tech
108. 3:38savvy to understand everything that you
109. 3:40said, but is the implication that this
110. 3:43promises to be a real big breakthrough
111. 3:47both from a tech perspective as well as
112. 3:49what it could mean for business for
113. 3:51Intellect Design?
114. 3:53>> Both ways, yeah. So, we need to observe
115. 3:56how do we evangelize it. It will take 12
116. 3:58months for evangelizing any such
117. 3:59technology like any cursor got
118. 4:02evangelized. Similarly, something that
119. 4:04evangelize it takes time for people to
120. 4:06accept it. In Intellect, we adopted in
121. 4:08141 different programs which we have
122. 4:11gone on production. So, that's where the
123. 4:14critical value is
124. 4:16coming in over there. And this
125. 4:19financial We are focused on financial
126. 4:20service. Our 40 years of knowledge is
127. 4:22going getting into the system of
128. 4:23connected knowledge. And we are saying
129. 4:25you can do the transformation of banking
130. 4:27technology using spatial graphs. The way
131. 4:30you create a visual graph where business
132. 4:32operation and technology come together.
133. 4:34I think it's a very, very different
134. 4:36view. And I'm very
135. 4:38enthused that we cracked something
136. 4:39because 39 patents are not a small
137. 4:41number of patents we filed from India.
138. 4:43And those patents are in the space of
139. 4:47how does knowledge gets connected, how
140. 4:48the multi-layer of business policies,
141. 4:51rules, uh domain, data, your call
142. 4:55chains, cloud chains, all of them
143. 4:57connected in a single dimension where we
144. 4:59create a knowledge nodes and knowledge
145. 5:02relationships. And that drives the
146. 5:04intelligence out of it. And that gives
147. 5:06you a deterministic intelligence which
148. 5:08financial service industry needs. And
149. 5:11today a fine
150. 5:12All the global financial institutions
151. 5:14invested heavily on the cloud and other,
152. 5:17but it's not driving the last mile
153. 5:19problem. So, we solve the last 10%
154. 5:21problem of cloud and cursor or codex
155. 5:25to get into the right brownfield and
156. 5:28greenfield applications.
157. 5:31>> Mr. Jain, very good morning. Tamanna
158. 5:32here. And honestly, it sounds very, very
159. 5:35cool. I'm going to ask you a basic
160. 5:37question.
161. 5:39How does all of this become monetizable?
162. 5:41And I'm going by the Q1 data and your Q1
163. 5:45numbers that we have in front of us. Are
164. 5:48you is is the monetization of Purple
165. 5:51Lab, for example, a work in progress
166. 5:54right now? Do you expect a bit margins
167. 5:56to come back to the 21-22% range? What
168. 6:00are you expecting top line to look like
169. 6:02with all of these innovations that
170. 6:04you're bringing in?
171. 6:05>> Yeah.
172. 6:06First of all, Tamanna, I would like to
173. 6:07highlight last time also I highlighted
174. 6:09don't look at quarterly results for us.
175. 6:12Last 12
176. 6:13We have grown 23% we grown on all the
177. 6:16indicators of last 12 months period. So,
178. 6:19it's only for a product company like us
179. 6:21because we are the only few players in
180. 6:23product market in India. We are only
181. 6:25matching to the quarterly numbers and
182. 6:28constantly keep on saying that quarterly
183. 6:31investment we are investing 100 crore
184. 6:33which we are writing off in a balance
185. 6:34sheet and that's coming from the core
186. 6:39cash and we should why should we
187. 6:41generate a cash
188. 6:42which is idle cash rather investing back
189. 6:44into the system and this mark this
190. 6:48numbers of a a bit margin a bit of
191. 6:50margin to me
192. 6:52is the outcome of something research
193. 6:54produces and suddenly the numbers will
194. 6:56shoot up from 19% to 25% in one go. You
195. 7:02will not even realize when the number
196. 7:03moves in a research companies. So, I
197. 7:06think we need to look at it from a
198. 7:07research company orientation not from a
199. 7:09sequential services company orientation.
200. 7:12So, that's a guidance I would like to
201. 7:14give it to you.
202. 7:15>> That's fair enough. That's fair enough
203. 7:16and that's exciting and that point is
204. 7:18well taken. We'll pull up those YOY
205. 7:20numbers and put them up as well. But
206. 7:22just this bit about you don't know when
207. 7:25it will shoot your a bit margins will
208. 7:26shoot up to 25%. This sounds very
209. 7:29exciting. Is that something you have
210. 7:31visibility on as
211. 7:33a research driven company as a product
212. 7:36company as you're describing yourself?
213. 7:38>> Obviously, that's what we are working
214. 7:40hard for it. This kind of technologies
215. 7:42of 1200 research people is not working
216. 7:45for 20% margin company. We want to work
217. 7:47on a company which has a 25 30 but
218. 7:49whether it's a 12 months time, 18 months
219. 7:51time, that market will tell us when it
220. 7:53will become and that anxiety of the
221. 7:56shareholder on quarter to quarter number
222. 7:58I think research company doesn't give
223. 8:00you quarter on quarter number.
224. 8:02>> So
225. 8:02>> No no so so so just the 12 months 15
226. 8:05months just the 12 months 15 months
227. 8:08any kind of specificity that you can add
228. 8:11to this narrative uh Mr. Jain and you
229. 8:13must pardon us we we are
230. 8:15you know business journalists. So we
231. 8:17want to see what the visibility is what
232. 8:19it is that we can get out of
233. 8:20conversations like this which is useful
234. 8:22to your shareholders. So in that context
235. 8:25what is the extent of visibility you
236. 8:26have?
237. 8:27>> The point is if my you look at the cost
238. 8:30as a business analyst you are looking at
239. 8:31the cost. My cost is close to 680 crores
240. 8:34on a quarterly basis.
241. 8:37This cost is not going to go up when you
242. 8:39have to plot it because I have a
243. 8:41AI native engineering platform where I
244. 8:43may not need coders. So my cost will
245. 8:44increase very very marginally on the
246. 8:46sales and marketing side. That's the
247. 8:48only way
248. 8:48my cost will go up. Now if top line goes
249. 8:52up to
250. 8:53any number if it goes from 850 crore to
251. 8:55950 crore
252. 8:57the margin automatically shifts.
253. 8:59And that margin shift is substantial
254. 9:01shift not just 1% 2% because it's not a
255. 9:04service margins.
256. 9:06When it comes to 1000 crore again margin
257. 9:09shifts. So every every lens which you
258. 9:11look at it margin shifts happen because
259. 9:14my cost structures are not in line with
260. 9:16the revenue structures.
261. 9:18>> All right. Mr. Mr. Jain sorry just one
262. 9:20follow up there
263. 9:22and
264. 9:22before Alex takes over
265. 9:24I appreciate that you telling us that we
266. 9:26shouldn't look at it quarter on quarter
267. 9:28and a point well taken but this shift
268. 9:30that you're talking about could it to
269. 9:33your mind to your best guess to the best
270. 9:36informed opinion that you can give us,
271. 9:38could it happen in a gradual fashion
272. 9:40albeit in the next 12 months, in the
273. 9:43next 24 months, in the next 36 months?
274. 9:45Some idea for your shareholders to at
275. 9:48least have an estimate when they are
276. 9:50penciling in what the numbers could be
277. 9:52like.
278. 9:53>> I important point is
279. 9:57the way we are
280. 9:58launching M-SOC
281. 10:02which is built on purple fabric for
282. 10:03deterministic knowledge.
283. 10:05I bet any revenue comes from there, it
284. 10:08is going to the margin numbers.
285. 10:10As of now, all the costs are burnt into
286. 10:12the all R&D cost is burnt into the cost
287. 10:15of the company.
288. 10:16Now, if it succeed at what ratio it
289. 10:18succeed, I we believe it's a a killer
290. 10:22product in the market in global markets,
291. 10:23a killer product. It's not for Indian
292. 10:25market. We are cracking the problem
293. 10:27which
294. 10:28Anthropic and other people have not
295. 10:29cracked at enterprise level. They
296. 10:31they're not in financial service
297. 10:32industry. We are in financial service
298. 10:34industry from 40 years. And that 40
299. 10:36years experience of knowledge has been
300. 10:38embedded into this
301. 10:40system of connected knowledge. And
302. 10:41that's where if it succeed, I think
303. 10:44investor will not have any
304. 10:47look back afterwards.
305. 10:48>> Mr. Jain, I'm just trying to understand
306. 10:50that fine. Good morning, this is Alex
307. 10:51here. When you're talking about M-Soft
308. 10:53and and
309. 10:55appreciate that you can't give us
310. 10:56quarterly guidance, so you can't talk
311. 10:57about how quickly margins will go up.
312. 10:59The trajectory is there and we
313. 11:01appreciate that. But if you were to
314. 11:03describe M-Soft to a non-techie
315. 11:07and to help them understand because a
316. 11:10lot of your shareholders may not
317. 11:11understand the absolute details of how
318. 11:14you create the products that you create.
319. 11:16So, if you were to describe it to them,
320. 11:18how would you do that? One, two,
321. 11:20if you were to describe the multi-year
322. 11:23potential
323. 11:24of what you are looking to achieve
324. 11:27through M-Soft, which is your new
325. 11:28product,
326. 11:30and the number of patents that you have
327. 11:31achieved which is quite significant as
328. 11:33well.
329. 11:34How much is that?
330. 11:37>> The M talk is a
331. 11:38M talk is called MPML
332. 11:42system of connected knowledge.
333. 11:44>> Okay.
334. 11:45>> CK. So,
335. 11:46now for the common investor, you need to
336. 11:49look at it that
337. 11:51a HDFC Bank or a ICICI Bank has a
338. 11:54knowledge which is logged in into
339. 11:56technology,
340. 11:57logged in into operations, logged in
341. 11:59into business, logged in into products,
342. 12:01logged in into risk. Now, this knowledge
343. 12:03is fragmented knowledge and a lot of
344. 12:05technology is constantly keep on
345. 12:07connecting this knowledge and creating
346. 12:10intelligence out of it. If this
347. 12:12knowledge itself is a fragmented
348. 12:13knowledge,
349. 12:15how the intelligence will work on it?
350. 12:18Intelligence can only work on it if I
351. 12:20feed in right knowledge along with the
352. 12:23right data. So, data is given by IDMS,
353. 12:25which was in invented in 1977.
354. 12:28M talk is invented
355. 12:30in 2026
356. 12:34by Intellect. Now, this knowledge is a
357. 12:35like a M talk is like a intermittent
358. 12:37layer that they are doing used to be
359. 12:39there. M talk will be the knowledge
360. 12:41layer before intelligence layer will
361. 12:44work.
362. 12:45And it can work with Anthropic, it can
363. 12:46work with
364. 12:48Open AI, it can work with Codex. And
365. 12:50that's the beauty of it. So, we don't
366. 12:52want to get entry into the intelligence
367. 12:54space, we want to be mastery in
368. 12:56financial services for
369. 12:58the entire space only the financial
370. 13:01services M talk. And this is where
371. 13:04once the knowledge is valuable, like
372. 13:06what is valuable for any enterprise?
373. 13:08Is knowledge compounding.
374. 13:11Why any bank is better than other bank?
375. 13:12Why Revolut is better than other bank?
376. 13:14Because the knowledge is
377. 13:16connected knowledge available. So,
378. 13:18connected knowledge is a key lever. Once
379. 13:20it is we cracked it, then it can be used
380. 13:24for
381. 13:25right quality of intelligence,
382. 13:27Right, outcome of intelligence, and
383. 13:29where we can connect visualization piece
384. 13:33to the business outcome. So, we can
385. 13:34convert intent to business outcome,
386. 13:37and that's the first time in the world
387. 13:38it is happening.
388. 13:40>> So, okay, point taken. You you've
389. 13:43I think you you've managed to explain to
390. 13:45a certain extent what it's meant to
391. 13:47achieve, right?
392. 13:49We we may have to catch up with you at
393. 13:51GFF maybe and get a clearer
394. 13:52understanding of that. But but having
395. 13:55said that,
396. 13:57how replicable is this, Mr. Jain? Is
397. 13:59there a moat here? One, two, what is the
398. 14:03revenue potential? And you're saying
399. 14:05that you will evangelize the product.
400. 14:06You will spread the message about this
401. 14:08product over the course of the next 12
402. 14:10months. But you must have some idea of
403. 14:13the revenue potential.
404. 14:14>> That's right. The two things You asked
405. 14:17the right question, evangelization. It's
406. 14:19a touch, use, subscribe product. You can
407. 14:21look at it within 2 days I can
408. 14:23demonstrate the piece to that what is
409. 14:25the value of the knowledge which we are
410. 14:26connecting. So, it's a 2-day period.
411. 14:27Only 2-day period I can demonstrate the
412. 14:29value to the customer, and once that
413. 14:31value is created,
414. 14:33then
415. 14:35you can subscribe to it. It's typical to
416. 14:37a
417. 14:39global companies where you just
418. 14:41subscribe, use for first time free for
419. 14:43some 30 days, 60 days free, and then
420. 14:46subscribe to it. So, that's the model
421. 14:47which is going on. On revenue potential,
422. 14:50it could be 50 million, it could be 100
423. 14:52million dollar, it could be 500 crore,
424. 14:53it could be 1,000 crore, it could be
425. 14:552,000 crore. So, that's what I'm not
426. 14:57able to commit to the number, and I
427. 14:59don't know what whether we succeed or
428. 15:01not succeed. Lot of companies in India
429. 15:03have not succeeded in this space. We are
430. 15:06keeping our fingers crossed as we go
431. 15:08forward.
432. 15:10>> Mr. Jain,
433. 15:12you got all three financial anchors to
434. 15:14try and understand a bit of tech. We are
435. 15:16going to ask a tech brain to try and
436. 15:19humor us by talking a little bit about
437. 15:21the numbers where possible. Now,
438. 15:23>> Yeah, sure.
439. 15:23>> Yeah, so one thing that I want to know
440. 15:25because I I think in the past, and
441. 15:27correct me if I'm wrong, but you said
442. 15:28that your your run rate, quarterly run
443. 15:31rate, could move up from let's say from
444. 15:33850 to 900 crores at some point of time.
445. 15:36When do you reckon that will happen? I'm
446. 15:38not asking for a specific
447. 15:40quarter-on-quarter guidance. I'll
448. 15:42compare your numbers year-on-year, but
449. 15:43this is your statement, right? That
450. 15:45you'll move from 850 to 900. When does
451. 15:47that happen, sir?
452. 15:50>> That's what we are
453. 15:51looking for that. If you look at the
454. 15:52patterns of the past, we were 550 crore
455. 15:55we are 550 crore a quarter, move to 650
456. 15:58crore a quarter, move 750 crore a
457. 16:00quarter, move 7 850 crore a quarter. So,
458. 16:02now this is a four milestone we
459. 16:05demonstrated in the last 3 years that
460. 16:07every three every third quarter
461. 16:09second to third quarter, we are able to
462. 16:11jump the 100 crore barrier. Now, in this
463. 16:14period, the margin could have grown by
464. 16:16100 crore if you would not have invested
465. 16:18into the AI Purple Fabric area. So, we
466. 16:21would have been paid much handsomely by
467. 16:23the investor because they are so
468. 16:25finicky about the immediate margin than
469. 16:27the institutional value. That's a
470. 16:30typical issue of Indian investors. So,
471. 16:32that that but that doesn't matter
472. 16:34because company promoters and founders
473. 16:36are not selling the share in the market.
474. 16:39So, that price is not important, but the
475. 16:41issue is that if I'm showing consistent
476. 16:43result every three quarter jumping 100
477. 16:46crore quarter-on-quarter [snorts]
478. 16:48and invest right place rather than
479. 16:50keeping a buyback and other things to be
480. 16:52there where 50,000 crore is
481. 16:55earned and no nothing is invested into
482. 16:57research of the company.
483. 16:58>> There was a little angst in that, Mr.
484. 17:00Jain. There was a little angst
485. 17:03>> [laughter]
486. 17:04>> Mr. Jain, I think the shareholders
487. 17:07will say that they are riding with you
488. 17:09through hail and high water, so that
489. 17:11should be appreciated, if you will.
490. 17:14>> Yeah, that's right, but But, you just
491. 17:15say one quarter margin decrease
492. 17:17[laughter] by 2% 1%
493. 17:21>> No, but that's to be fair that's our
494. 17:23job. That's our job and then also giving
495. 17:25you a platform to explain what you do
496. 17:27what you're doing right now is is what's
497. 17:30important.
498. 17:30>> But but sir I did I did sorry I didn't
499. 17:32get get that answer so I just wanted to
500. 17:33know what do you move to 900 crores or
501. 17:35950 crores at some point of time in the
502. 17:37next couple of quarters do you think?
503. 17:39>> The next two three quarters we'll move.
504. 17:41>> Next two three quarters okay that's very
505. 17:42specific.
506. 17:45Just want to understand one point and
507. 17:48maybe this is what I gleaned from what
508. 17:50we're explaining earlier. One query that
509. 17:53a lot of enterprise users of products of
510. 17:57Cloud etc. like Cloud etc. have and one
511. 17:59concern they have is how some of these
512. 18:02tools
513. 18:04sort of breach their internal processes
514. 18:06and get information about their internal
515. 18:08processes which they don't want to share
516. 18:11with the world where they want to keep
517. 18:12that IP with themselves. Do your
518. 18:15solutions solve this problem?
519. 18:18>> That's right. We want to keep the
520. 18:20knowledge in the bank itself. We don't
521. 18:22want to give M-SOC is a connected
522. 18:24knowledge. You say it's knowledge
523. 18:26repository.
524. 18:27It's a knowledge system.
525. 18:29So today we have a RDBMS system was
526. 18:31designed where database is resolved in
527. 18:33Oracle and that is a bank pays for
528. 18:36securing the data in a database.
529. 18:38Similarly bank will be paying for M-SOC
530. 18:41because they have to
531. 18:43preserve the knowledge not to the Cloud
532. 18:45but within their own system and that's
533. 18:47where the 39 patents is all about.
534. 18:52>> Okay. Okay.
535. 18:54Uh thank you so much Mr. Jain for
536. 18:56speaking with us.