IRIS RegTech Solutions Limited — Q2 FY26 earnings call

Call held 14 Nov 2025

Management summary

IRIS Business Services completed the divestment of its TaxTech business, significantly strengthening its balance sheet. While the core SaaS business (IRIS CARBON) showed 14% ARR growth, overall margins compressed due to heavy investments in sales, marketing, and product development. The IDEAL business faced a revenue dip, and the RegTech segment reported a loss in H1 FY26, though management remains optimistic about future growth and margin recovery as investments mature.

Highlights

  • Divestment of TaxTech business consummated, contributing exceptional income.

  • Balance sheet significantly strengthened with cash and investments of INR 170 crores.

  • Net worth increased to INR 189 crores from INR 76 crores as of March 2025.

  • Book value shot up to INR 92 from INR 37.

  • IRIS CARBON's ARR grew 14% in H1 FY26, primarily from Disclosure Management.

  • SupTech segment added 2 new logos (Qatar Central Bank and Qatar Tax Authority) with a promising pipeline.

Concerns

  • Operating margins saw a drastic drop in H1 FY26 due to increased investments in SaaS business.

  • IDEAL business experienced a revenue drop of INR 2 crores due to delayed purchase decisions by prospective banks.

  • RegTech segment incurred a loss in H1 FY26.

  • The South Africa SupTech contract is scheduled to complete this financial year.

Key financials

  1. Cash & Investments ₹170 Cr
  2. Net Worth ₹189 Cr
  3. Book Value ₹92
  4. IRIS CARBON ARR Growth 14%
  5. IDEAL Revenue Drop ₹2 Cr
  6. Employee Expenditure Increase ₹7 Cr
  7. Headcount Increase 8%
  8. Recurring Revenue Share 57%

What they filed

Q1 FY27: revenue up 30.0%, net profit down 521.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue27 33 30 25 29 +6%36 +8%39 +32%33 +30%
EBITDA5 5 6 0 0 −97%5 −12%5 −3%-2 −768%
Net profit4 4 3 0 117 +2904%5 +48%4 +44%-1 −522%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • RegTech
    — H1 Profitability
  • SupTech
    30% Operating Margin

Order book

medium confidence

Total value

₹32.4 Cr

as of 2025-09-30 quantified

14% YoY

Inflow this quarter

₹4 Cr

Pipeline

deal pipeline tcv

The pipeline going forward is looking quite interesting as well.

Cancellations & deferrals

  • completing: South Africa SupTech contract is scheduled to complete this financial year.
Management is optimistic for decent growth in the SupTech business and is constantly building the pipeline. For IRIS CARBON, the net new ARR of INR 4 crores in H1 FY26 is a positive sign.

Source: Prepared remarks

Capital allocation

high confidence
  • M&A TaxTech business Divestment · Closed

    Strategic divestment to focus on core businesses.

    Resulted in exceptional income and strengthened balance sheet.

    As you are aware, during our conference call in July, we had spoken about the impending divestment of our TaxTech business. I am happy to report that the transaction has been consummated, which we have also mentioned at our AGM, and you would have seen the exceptional income in our income statement in the Q2 results.
  • Liquidity Cash ₹170 Cr Sufficient cash and investments to fund organic growth and explore M&A opportunities.
    And investment and cash right now in the books is at around INR 170 crores.

Guidance & targets

Revenue

  • IRIS CARBON ARR Growth Revenue · FY26 · High confidence 35%
    For CARBON, our internal target is to grow ARR at 35% for this financial year.

    — Balachandran Krishnan

  • Recurring Revenue Percentage Revenue · future · Low confidence go up
    So, the assumption is that slowly, but surely the recurring revenue percentage in the overall pie should go up. That's the first point.

    — Balachandran Krishnan

New Logos

  • SupTech New Contracts New Logos · this year · High confidence 4
    In our annual report we mentioned this in the founder's letter that this year we are looking at 4 new logos to come in or 4 new contracts to come, out of which 2 have come in.

    — Balachandran Krishnan

Profitability

  • RegTech Profitability Profitability · next few years · Low confidence good profits and healthy margins
    It is too soon to think about this. What I can say clearly is that we will invest in the existing business lines and grow it to a level where it start generating good profits and healthy margins, especially the RegTech. Then I think this question will be more germane.

    — Balachandran Krishnan

What to watch in Q3 FY26

IRIS CARBON ARR Growth

Next quarter
Current 14% growth in H1 FY26
Target Progress towards 35% ARR growth for FY26

Why it matters

Key indicator of success for the core SaaS business and return on investment in sales & marketing.

For CARBON, our internal target is to grow ARR at 35% for this financial year.

Risks & concerns

  • Margin compression due to investments

    high

    Operating margins saw a drastic drop in H1 FY26 due to increased investments in sales, marketing, and product development for the SaaS business, leading to RegTech segment loss.

    Management acknowledged

  • IDEAL business revenue drop

    medium

    IDEAL business experienced a revenue drop of INR 2 crores due to delays in purchase decisions by prospective banks, though ARR is still growing and recovery is expected.

    Management acknowledged

  • Policy uncertainties impacting ESG mandates

    medium

    Global policy uncertainties have caused a slowdown in ESG mandate rollouts in Europe and the US, but the company's solutions are designed to decouple from mandates.

    Management acknowledged

  • South Africa SupTech contract completion

    medium

    The current South Africa SupTech contract is scheduled to complete this financial year, though discussions for deeper engagement and additional requirements are ongoing.

    Management acknowledged

Q&A highlights

5 direct, 1 evasive
Margin drop and investment ramp-up Partial
No, we have mentioned in the past that our focus is to grow the SaaS business, and we will make investments to grow the SaaS business, which is in sales and marketing primarily. And that we have started doing because we have rolled out the Disclosure Management offering, and we need to make sure that we reach out to the market and there is an initial period before the momentum gets built.

Analyst challenged the significant margin drop, and management explained it as a planned investment for SaaS growth, indicating a lag before benefits.

Asked by Ankit Minocha

Timeline for margin recovery Evasive
It's a tough question to answer. I think we have to cross a threshold in terms of our SaaS business. And threshold, I would say, is maybe some time away.

Analyst pressed for a timeline on margin recovery, but management indicated it's difficult to predict and depends on achieving scale in the SaaS business.

Asked by Ankit Minocha

SupTech pipeline health and growth Direct
But we are constantly looking at building the pipeline, the pipeline building process is on, and we remain optimistic for a decent growth in the SupTech business for sure.

Analyst inquired about the SupTech pipeline, and management expressed optimism and confirmed ongoing pipeline development.

Asked by Ankit Minocha

Disclosure Management revenue timeline Direct
We have mentioned that our ARR for first half has grown by about 14%, and we have given the numbers in our slides as well. If you look at the overall ARR for the company, IRIS CARBON has moved from INR 28.4 crores to around INR 32.4 crores, and this is net new ARR. The bulk of this has come from the IRIS Disclosure Management, which was rolled out in the marketplace.

Analyst asked for an update on Disclosure Management revenues, and management confirmed it's already contributing to ARR growth.

Asked by Rahul Bhansali

Capital allocation strategy for INR 170 crores cash Direct
So, we use this cash to build our business organically. From an inorganic perspective, early days, but we are just speaking to a few people to understand other possibilities where we can look at opportunities in a very prudent manner. But these are very early days.

Analyst questioned the use of the significant cash balance, and management prioritized organic growth while acknowledging early-stage M&A exploration.

Asked by Yash Naik

ESG Sustainability reporting revenue contribution Partial
So, we have rolled it out in conversation with various prospect customers to be able to get our own customers on the ESG side. So, advanced stages of conversations with both customers and partners. We have what we believe is a pretty strong MVP product on the ESG side. We are in the process of building the sales pipe.

Analyst asked about current revenue from ESG, and management indicated it's in early stages of sales pipeline building and customer conversations, without quantifying current revenue.

Asked by Yash Naik

RegTech segment performance and H1 loss Direct
First, as I mentioned earlier, IDEAL revenues saw a dip of about INR 2 crores, which is highlighted in the slides which we uploaded. This resulted in a decline in top line and therefore RegTech revenue for the first 6 months has shown a drop. While CARBON has shown a small increase, it is still fairly flat. In addition to that, we have spent on sales and marketing and product development in CARBON, which would be maybe as much as 50% more than what we have done in H1 FY '25. ... SupTech remains profitable, but RegTech has incurred a loss in the first 6 months.

Analyst probed the RegTech segment's H1 loss, and management detailed the reasons including IDEAL's revenue dip and increased S&M spend for CARBON.

Asked by Ankit Minocha

Share buyback consideration Direct
I suppose. It's too soon to say. I think right now, this is definitely not on our minds, because we feel if you want to grow at, say, 35% ARR in the RegTech space, you need to make sure that we have enough ammunition kept dry with us.

Analyst asked about a potential share buyback, and management explicitly stated it's not being considered, prioritizing cash for growth investments.

Asked by Sidharth Shah

2 min read 5 chapters

Detailed narrative

Q2 FY26 Performance Overview and Balance Sheet Strengthening

IRIS Business Services successfully completed the divestment of its TaxTech business, which contributed exceptional income to the Q2 results. This transaction significantly strengthened the company's balance sheet, with cash and investments now standing at approximately INR 170 crores. Consequently, net worth surged to INR 189 crores from INR 76 crores as of March 2025, and book value increased to INR 92 from INR 37, providing a strong financial foundation for future growth.

RegTech Segment: Mixed Performance and Strategic Investments

The RegTech segment, comprising IRIS CARBON and IRIS IDEAL, showed mixed results in H1 FY26. IRIS CARBON's Annual Recurring Revenue (ARR) grew 14% compared to March 2025, with the bulk of this growth coming from Disclosure Management. However, the IDEAL business experienced a revenue drop of INR 2 crores due to delays in purchase decisions by prospective banks. Overall, the RegTech segment incurred a loss in H1 FY26, attributed to increased investments in sales, marketing, and product development, with an internal target to achieve 35% ARR growth for IRIS CARBON in FY26.

SupTech Segment: New Wins and Promising Pipeline

The SupTech segment demonstrated positive momentum in H1 FY26 by securing two new logos: the Qatar Central Bank and the Qatar Tax Authority. The company views its entry into direct tax returns with the Qatar Tax Authority as an opportunity to expand its offerings in similar areas. Management expressed optimism for decent growth in the SupTech business, noting that the pipeline is looking interesting and the pipeline building process is ongoing. The SupTech segment generally maintains an operating margin of approximately 30%.

Investments and Margin Compression

The company's operating margins experienced a 'drastic drop' in H1 FY26, primarily due to significant investments in sales, marketing, and product development for its SaaS business, particularly IRIS CARBON. Employee expenditure increased by approximately INR 7 crores, and headcount grew by about 8%. Management clarified that these are strategic investments aimed at achieving substantial ARR growth and scaling the SaaS business, with the benefits expected to materialize with a lag. They aim to reach a threshold where operating leverage will improve margins, acknowledging that the current phase involves front-loaded expenses.

New Initiatives: Peridot and ESG Sustainability Reporting

IRIS is actively developing and enhancing new product offerings. The Peridot platform for MSMEs is being expanded with a new lending layer, currently in a pilot stage, which will allow MSMEs to access potential lenders. In ESG Sustainability reporting, the company has developed a 'pretty strong MVP product' and is in advanced stages of conversations with prospective customers and partners, actively building a sales pipeline. While global policy uncertainties have caused some ESG mandates to slow down, IRIS's solutions are designed to be less dependent on mandates.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Information Technology earnings calls