India can contribute 50% to revenue in next 2-3 yrs: RS Software

Provider of customised software solutions for the electronic payment industry, RS Software reported weak set of first quarter earnings. Revenue stood at Rs 24.98 crore against Rs 25 crore in the last quarter. The company had a net loss of Rs 3.90 crore against Rs 2.20 crore sequentially.

In an interview with CNBC-TV18, Raj Jain, CMD of RS Software, said that the company is well secured in terms of cash reserves and is building a digital platform for commerce and  payments.

He further said that there is scope for 50 percent revenue contribution from India in the next 2-3 years and the company expects to start its monetisation payment platform in the next six months.Below is the verbatim transcript of Raj Jain's interview to Reema Tendulkar & Prashant Nair on CNBC-TV18. Prashant: What is happening with the company? The quarterly numbers, which have come, looks poor. Contextualise the numbers for us. A: From our perspective it is a pretty good situation we are in and it is all by plan. It's very rarely that you make a plan and you become your own VC. You have got cash in your balance sheet to transition towards the strategy. Prashant: What happened in the quarter? A: To me RS Software is in the transition for its longer term direction. So our quarterly revenue, what we have done is that the largest risk to the company was one single client concentration and that has been a concern for a while and we want to make sure that when we make a move to get to a diversification strategy, get to a transition to a larger spread like the India opportunity etc, we are well secured in terms of our cash reserves. This was a decision taken in July, last year, and gradually from our quarter three of the last fiscal and we are kind of at the same level stabilise in terms of revenue direction and plus we have also worked very hard on our cost structure and on our cost structure we have been able to align it close to our current revenues but we are making consciously significant investments in three different areas - 1) towards digital payments 2) our continuous investment in sales and marketing because we need to increase our distribution reach as we move from one single client to more clients globally and 3) in the emerging areas of the platform, of the products etc. So as we see moving forward, our strategy is what I call when we look at India where we didn't work until about a year ago and now we have successfully built the digital payment infrastructure for the country -- I have been on your channel when unified payments interface (UPI) was launched and UPI, last week went public, as you probably might know and Bharat Bill Payment System (BBPS), pilot launch happened this morning. If you look at UPI and BBPS, they combined with AADHAR; they formed the foundation of India's future, India's digital initiative future. We see our opportunity in India, what I call a factor of six and that is a very interesting piece. Prashant: What is UPI opportunity for RS Software? Could you give us a number? A: It's a potential opportunity, billions of dollars. It will make any sense for you for a year's time, but the reality is that is where it is where the factor of sticks coming in. Prashant: For RS Software, you build that platform, so what is the opportunity? A: The opportunity for us, the way to leverage this is where RS Software itself is building its own digital platform for commerce and for payments. That is when you start looking at India becoming a foundation for digital payment. Prashant: UPI, what does it mean annually for RS Software? A: Let me tell you what it has been up till now. Up till now it has been a contribution of about Rs 4 crore to our revenue stream and we believe that the applications, platforms, all of which RS Software is looking at monetising as we move into our future - that opportunity is so huge and even if we target a small percentage of that, we are talking about India becoming a major market opportunity for us maybe it will extend about 50 percent of our revenues over the next 24-36 months. Reema: Let's talk a bit about near term, FY16 revenues were about Rs 190 crore. What is your sense about FY17 revenues and what will be the percentage contribution from Visa. Does it continue to decline? We understand it was 25 percent as of March 2016? A: You are absolutely correct and by the way you call it decline and we call it a conscious strategy to move and it is important to understand because your goal is to understand our company, your viewers goal is to understand RS Software, where it is headed. However, we believe that for us to be able to diversify our revenue stream is a single most important thing, when we look at revenues transitioning. Prashant: But diversification can be done in two ways. You make Rs 100 crore from a client; you grow the pie to Rs 200 crore, you diversify it. But if Rs 100 crore becomes Rs 50 crore, right, that is revenues going down. It is diversification but a forced diversification? A: Look at the other way round, if you are now empowered to be able to go to other clients as a part of the deal where your major revenue is coming from, so how do you grow simultaneously whilst staying there. So from our perspective we are on an identified path of our growth strategy. We have added 15 clients during this fiscal already. Prashant: What is FY17 revenue, ballpark going to be? A: It will be very difficult for me to give you a figure. Prashant: Higher or lower? A: It definitely is lower but let me tell you why it is difficult to give a number. There are too many irons in the fire including the alliances we are tying up together right now and these alliances will increase our distribution reach as well. So, the RS story has got to be seen in the context of not will we hit what revenues this year. I think the RS story is where RS going to be the leader in the next 18-24 months. Reema: How soon can you monetise the digital payment. You spoke about the big money coming in once you monetise it. Give us a timeline? A: Starting next six months. Reema: So the benefit should come in FY18? A: Yes. Prashant: Will you make profit this year? A: We are making conscious investments. If it wasn't for investment the profit is yes, but we are making conscious investments. Prashant: So maybe not this year but next year definitely in '18? A: More certainly. Reema: Cash, Rs 190 crore of cash in your balance sheet? A: We are investing organically into our platforms, into the products and plus we are looking at good acquisition candidates at any point of time. We have done that for the last eight months. We will continue to look at towards them actively and they will add to us.