Life after Listing | Valuation is a by-product of how well you execute your plans: LatentView CEO Sethuraman

Yes, pleasantly surprised. We knew that there was fairly strong demand for our kind of business given the work we were doing and the type of problems we were solving. But we were overwhelmed by the kind of response we saw from the retail market. It felt fantastic to be the most oversubscribed issue in the history of the Indian stock market.

It lends credibility to the business model and the type of work we do, and how we help our clients. The market validated us. It felt good to know that we were valued not just by our clients, but also a cross-section of the public.

Anuradha SenGupta:

When you look at your offer price, what you listed at, then the lifetime high, and now the current value, how do you make sense of how a market values a company? Is there any logic to it?

Rajan Venkatesan:

The one thing we do is we don't constantly monitor our stock price.

Anuradha SenGupta:

That's what everybody says, but I'm sure you have an eye on it.

Rajan Venkatesan:

We don't.

Anuradha SenGupta:

You can't afford not to have an eye, come on.

Rajan Venkatesan:

If there are wild fluctuations, we do monitor it, but on a day-to-day basis, I don't think it's something we need to bother about. And we've said this in the past as well. The focus is purely on planning and executing well. Valuation is ultimately a by-product of how well you execute your plans. That's something we firmly believe in.

The overwhelming response to the IPO, the listing price, plus the initial valuation spurt that happened — it was almost surreal for us. But thereafter, where we are today, it is a reflection of how the public sees us being able to take this business forward, and also the excitement in the space itself. Data analytics is a huge space today. It reaffirms our belief that there is a significant runway ahead.

Anuradha SenGupta:

You had said that one of the reasons for the IPO was to raise some money for acquisitions. I think about Rs 100 crore was meant for that. When will this acquisition happen? Why hasn't it happened so far?

Rajan Sethuraman:

The space is still quite fragmented with a number of very small players. You'll find many sub-scale firms with revenues of Rs 5-10 million. We want to make sure that we are acquiring the right company for the right purpose, and in the right fashion as well. Thus far, we have been an organically grown company, and any kind of acquisition, big or small, carries with it a certain degree of responsibility, not only to the acquiring company and its shareholders, but also the company you're acquiring. At the end of the day, we are all in the people business.

We have evaluated almost two dozen-plus companies so far, and found some of them quite interesting. But we want to make sure that we are doing things the right way. There are a few opportunities on the table.

Anuradha SenGupta:

This will be outside of India, isn't it?

Rajan Sethuraman:

We are looking at firms aligned with the verticals we focus on: banking & financial services, and retail. From a geography focus, it’s north America and Europe — those are the growing markets. From a capability standpoint, we are looking at supply chain analytics and data engineering work. These are our sweet spots in terms of where we intend to focus from an investment standpoint. If we can find assets aligned with that, they'll be the ideal candidates.

We can share at this point that while the initial 6-8 months post the IPO  were more of an organic process of reaching out to our contacts to find out which are the opportunities in the market, we have since engaged two outside partners to help scout for the right kind of opportunities on a fee-based arrangement.

We are starting to see a larger number of deals come to the table and expect things to fructify soon. The macro-economic environment is even more uncertain for a smaller firm. We are expecting to see more deals on the table at the right valuation.

Anuradha SenGupta:

Does the geopolitical situation in Europe, one of your key markets, have any bearing or impact on your businesses? I believe the Netherlands, Germany, and the UK are your key geographies, where your subsidiaries are, isn't it?

Rajan Sethuraman:

These markets are impacted by the war and all its attendant uncertainties. But in some sense, we are just at the starting point. Our current business in that region is so small that we shouldn't really be worried about whether the market size is changing dramatically. We are a $2 million business (in Europe) at this time, and expect to grow at a fairly rapid clip over the next three-four years, with Europe eventually contributing about 15-20 percent of our revenues.

Even when we get there, it’s not going to be a number that will break the market. Given that backdrop, we believe that if we do the right things from a strategic standpoint and execute well, then we will have opportunities ahead of us. We may not be a very well-known service provider, but we are working with a few Fortune 500 companies in the European market. We're looking at leveraging those relationships, as also the relationships we have in the US.

Anuradha SenGupta:

How is it in the US? You work with very large companies in the US.

Rajan Sethuraman:

We need to be cognisant of the market. We need to understand what is driving the thought process of the (client-side) stakeholders we’re interacting with? What kind of initiatives do they want to enable using data analytics?

We’re more interested in initiatives that can directly impact the P&L (profit & loss statement) in some shape or form, whether it is revenue growth or margin enhancement or cost containment. Such initiatives are being prioritised over marginal operational improvements.

We are also pivoting to a more value proposition-based approach. So rather than showing up and asking the client what his top initiatives are, and then saying how we can help him, now, given the client’s context, we talk about what is happening within the industry, and what are the two-three things we can do to help with their revenue growth and cost containment initiatives.

These conversations are resonating much better with clients. So if we take the right kind of ideas and value propositions to the market, our growth will continue apace.

Anuradha SenGupta:

How is this year looking so far?

Rajan Venkatesan:

The year is shaping up quite well. The good work we’ve done in the past several quarters has resulted in a fairly healthy pipeline. Also, we’ve had some larger deals, and the average ticket size of our deals is going up.

Anuradha SenGupta:

I know that India forms a very small part of your revenues. Why is that?

Rajan Sethuraman:

It has just to do with the limited leadership and management bandwidth that was available, given that we saw a very large and profitable opportunity in the north American market.

Anuradha SenGupta:

So it's not a demand issue?

Rajan Sethuraman:

Not at all. We have focused mostly on Fortune 500-companies in the US. If we bring the same approach to India, then the data analytics maturity (of the client) is not very dissimilar. You have companies with the right kind of thought process in terms of how they want to leverage data analytics.

On the other hand, you also have companies who don't have too much of a viewpoint on that. They may have transaction processing and IT systems in play, but are they really utilising the power of all the data to drive decision-making? So you have to pick the kind of companies you want to work with. Till now, our bandwidth has been the constraining factor. But on the back of the IPO, a few things are going well for us. We created a lot of buzz and excitement in the Indian market.

Anuradha SenGupta:

Yes, a lot of visibility for sure.

Rajan Sethuraman:

Yes. Whether it's the client or the talent, a lot more people are aware of our name. Which helps, because we’re a quiet little company doing good work in the background, and not very prominent in the media.

Anuradha SenGupta:

It's also the nature of the business, isn't it? I mean, it's not quite front and centre, is it?

Rajan Sethuraman:

Yes, it's not like we are the face of what is happening in the client organisation. More often than not, we are working with the analytics departments of our client organisations, and we don't want to be seen to be competing with internal teams that have been set up. We want to be seen as collaborators, who can come in and help accelerate the client’s data analytics initiatives.

The buzz created in the Indian market due to the IPO has been pretty helpful. Now when we talk about what we bring to the table at events and conferences, there's a lot more traction.

Anuradha SenGupta:

In November, it will be a year since you would have gone public. Do you feel there are things your retail investor needs to understand better about your business?

Rajan Sethuraman:

One of the things we have been trying to explain to investors and analysts alike is that ours is not a typical IT-type of a business model.

Anuradha SenGupta:

Yes, I have heard you say that and I must confess I don't understand what that means.

Rajan Sethuraman:

A lot of IT work that has been happening in the last two decades is about using the power of technology to automate processes that are well understood. Whether you're talking about financial processes, or supply chain processes, or even simple HR processes. But how do you manage performance using the power of technology? What we are tackling is more about optimisation and decision making. Not just about running processes and collecting data.

Anuradha SenGupta:

So LatentView is higher in the value chain than a traditional IT company?

Rajan Sethuraman:

Higher up the value chain might connote something different. A lot of the IT work that’s been done over the past few decades, starting with the Y2K problem, implementing-client server technology, ERP (enterprise resource planning), and so on, has created a very good stack in terms of the technology that is already in place, a lot of which is about automating existing processes and collecting data.

But how can you optimise and improve your decision-making? That is largely seen as a manual exercise even now. When it comes to critical decision making, people still pull the tons of data available and use their spreadsheets and their grey cells. That is where we come in. Because these are complex, fuzzy problems. We do not aim to replace human decision-making, but to augment it.

Every technological advancement has been accompanied by fears of machines taking away jobs from people. However, we have seen that technology creates more opportunities for people to apply their unique capabilities and skills. So, in a sense, we are helping push into the future.

Anuradha SenGupta:

So the message for the stock market is?

Rajan Venkatesan:

We will continue to put our head down and execute well.

Anuradha SenGupta:

And don't look at us as an IT company?

Rajan Venkatesan:

Yes. We deliver our work using technology. So obviously, there are coders using Python, etc. But don't look at us as a regular IT services company.

Rajan Sethuraman:

Our product is not the dashboard or the model we have built. Rather, it is the decision-making we have enabled. That is really the differentiator.

Anuradha SenGupta:

Pramad Jandhyala (Co-Founder and Director), Venkat Viswanathan (Chairperson), it’s lovely to be here in your headquarters. It seems that when you started in 2006, you did not know that data analytics was going to be the next big thing. How important is harnessing data today?

Pramad Jandhyala:

Every crisis presents an opportunity. See how the technology revolution happened after the dot-com boom and bust. We thought we spotted an opportunity when we saw companies drowning in data, because they had invested so much in technology systems but didn’t know what to do with all the data. Business leaders were always complaining that it took them days to put all the data together. LatentView got its lucky break just after the financial crisis, when we signed up our first customers.

Anuradha SenGupta:

This is after 2008?

Pramad Jandhyala:

Right. That's when we signed up our very first customers in the US.

Anuradha SenGupta:

Venkat?

Venkat Viswanathan:

We were clear right from the beginning that our focus was analytics. It's there in the name of the company. We incorporated that name in 2005. But I confess, we had no idea of the kind of data explosion that was going to happen, because at that time it was more numeric data that we have in rows and columns.

Today, data is entirely different. This video is data. We didn't think it would become such a mainstream thing for businesses to harness. But we did see the potential and the opportunity. In many ways, we stumbled upon a good place and things got better and better.

Anuradha SenGupta:

Between 2006 and 2022, so far as business is concerned, how would you say the understanding and utilisation of data has changed?

Venkat Viswanathan:

I think the consumer businesses probably had a better handle on what data is and how to use it. Online retail, which had emerged in the first wave of innovation when the internet came to town, clearly demonstrated the potential of data, and everybody woke up to it.

What has changed in the recent past is that large industrial houses and traditional B2B companies are also saying, hey, we can also collect data, and maybe rethink our business.

Anuradha SenGupta:

Would you be able to illustrate that with an example?

Venkat Viswanathan:

Today, when you buy a car, it comes with tyres. You use it for a certain number of years. When you need to replace them, you go and purchase a new set.

Today, the tyre company is thinking about offering tyres as a service. The tyre manufacturer is contemplating putting sensors in the tyres, so that they can talk to the onboard computer in the car, which talks to the app on your phone. And so they get streaming data, which tells them how you're using this tyre.

They can study the data and see if the rubber seems to run out faster in certain segments of people. Are they driving differently? Is the terrain different? Is it the weather? There are many different factors. Earlier, they used to get some of this data only when they tested the product. But they didn't know what was happening once they sold the tyre. They don't see you for five, six years because you're not in the market to buy a car for a certain period of time.

But today, their relationship with you can be dramatically different. They can know every day what you're doing with the tyre. That gives them insights into their product, the customer segment, how to sell to them, etc. This is just an illustration, but it is happening across businesses.

Anuradha SenGupta:

And across industries.

Venkat Viswanathan:

Across industries. Every business wants to know how to leverage data, which is where we come in.

Anuradha SenGupta:

There's a lot of user data out there which is being harvested by firms for free. What are some of the ethical issues that you're seeing businesses grapple with on this front?

Pramad Jandhyala:

The good news is that companies are grappling with striking a balance and not going overboard. It's good that consumers themselves are asking these questions. One of the things we do when we analyse data is that we don't look at the personally identifiable information (PII).

What you're really trying to understand is human behavior. And using that understanding, you try to make your products and services more relevant. In which case consumers may be willing to part with some of this data for a better product or service.

Anuradha SenGupta:

For the sake of convenience.

Pramad Jandhyala:

For convenience. The ecosystem is slowly maturing. Smartphone manufacturers are themselves saying that they want to put some guardrails to ensure the protection of data and privacy. We are in a good space as everybody's trying to find a balance.

Anuradha SenGupta:

Pramad, in 2014 you all decided to get professional management into the picture. Why did you make that decision?

Pramad Jandhyala:

Even as we were building LatentView we were clear that the firm should go beyond its founders. If you want to build a professional organisation, you have to get a fantastic set of people to come together and join the mission. I have seen the role professionals play in taking the company forward. We were clear that if LatentView was to have a life of its own, it was not to be determined by just a few individuals who were there right from the beginning. This helps set the tone for the larger group of employees who feel this is a company where they can aspire to the top roles.

Anuradha SenGupta:

There was an Offer for Sale component in your public issue, you were selling. O​n selling the shares, you at once shot into the list of richest Indians. How does that feel, and what do you make of wealth? How do you see it philosophically, what value do you put to it?

Venkat Viswanathan:

That is not a list that I ever aspire to be on, so we don't pay attention to such lists. I think we've been very fortunate that we grew up in a generation where we didn't have a lot of cash at home. We were five siblings, My parents are very humble. Whatever little money we had was conserved very carefully and spent on the right things.

That set the tone in terms of our relationship with wealth and aspirations, and how to manage life. We were told to do what felt important to us as an individual, and not worry too much about what others think. That stayed with us all our lives.

By my mid-30s I had reached a point where I had enough money for anything I wanted to do, and that was even before I had started this company. In that sense, this, all the new wealth that has been talked about, is not really material for us. Yes, it's good to know this is possible. But we're not in the market to buy a plane or anything. We're going to employ this wealth. Aside from that, it's just a number on a paper somewhere and if somebody wants to look at it, let them.

Anuradha SenGupta:

Pramad, let me rephrase that question. What is your biggest indulgence and what excites you most outside of LatentView?

Pramad Jandhyala:

Relationships for one, and travel. I love to visit new places. I have discovered a wealth of places in India, mostly national parks of late. There's so much you can learn from visiting these places.

Venkat Viswanathan:

My indulgence is gadgets. I buy all kinds. I buy things which can measure the state of my mind, things that can measure my posture, the speed at which I am running. But these don't cost a lot of money. Most people can afford it and I've been doing it even before I had any money. It’s just what you're passionate about. For me, it's numbers and what can I do with these numbers.

Anuradha SenGupta:

Numbers, and what you can do with numbers. Well, I guess LatentView is testimony to that. Thank you Venkat. Thank you Pramad. Good talking to you. Wish you a lot of good luck.

Venkat Viswanathan:

Thank you. Nice meeting you, Anuradha.

Pramad Jandhyala:

Thanks so much.​