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00:00Hello and welcome to NDTV Profit. My name is Rucha Somaiya and today we have with us

00:05Mr. Anuj Khanna Soham, the founder, MD and CEO of AFL India. Thank you for joining us

00:11on the show, sir.

00:12Hi, good morning.

00:13Good morning. Okay, so AFL reported healthy numbers. Revenue was up about 3% while margin

00:21was largely flat on a quarter-on-quarter basis at around 20%. So what is your first take

00:27on the results, Mr. Soham?

00:29Well, AFL has done consistently well over the last five years. If you look at our revenue

00:34has grown 6x, profits have grown 5x and the growth journey has been very consistent over

00:40a long period of time. And Q1 this quarter was very special because not only did we deliver

00:47106 crore of profit before tax EBITDA and PBD, being over 100 crores was for the first

00:54time for us. And the revenue growth has been robust both, you know, in emerging markets

01:01as well as in developed markets. Organic growth was over 20%, consolidated basis close to

01:0728% growth year-on-year basis. So it's a very consistent growth performance. Even on margin

01:14expansion, if you see EBITDA margin has actually expanded year-on-year basis as well as sequentially

01:20it is on a positive trend line. So I'm very, very happy with the way the team has performed

01:25throughout this period.

01:27Right. Mr. Soham, profits were largely down because of a higher effective tax rate in

01:33the current quarter. So do you expect the current tax rates to continue or do you expect

01:38that to go down?

01:40In the long term, all the, you know, geographies around the world, they are basically working

01:48towards a certain fair baseline taxation. So you would expect all companies, all jurisdictions

01:55around the world to be in that 15 to 20% tax range. So I think where you see today, we

02:01have taken a conservative approach that for our UAE entity, we have actually taken and

02:06provisioned as if there will be tax in that jurisdiction because the laws are, you know,

02:11already there, but it's still not clear. So we've taken a conservative position. But what

02:15we wanted to present from this financial year onwards is that, you know, this is a

02:20fair tax basis on even on a fully sort of taxed basis, we are delivering a sensible

02:28sort of bottom line performance. So if you see it on a pro forma basis and apply the

02:32same tax rate that we had last year, you would see a much higher growth impact, you know,

02:37just on a like-to-like basis.

02:39So what you see now is a fair, fully loaded tax basis. And we think that we are doing

02:44really well, even with that taken on board.

02:48Right. Okay, so let me move on to the CPCU, that is cost per converted user kind of business.

02:55It's a really healthy growth of around 37% and which is like almost 99% of the revenue.

03:02So that 1% of the non-CPCU business, you had mentioned last time that, you know, you would

03:07like to reduce the focus over there. So what kind of revenue proportion do you expect from

03:13the CPCU and non-CPCU business going ahead?

03:17So our endeavor has always been that, you know, we are a consolidated consumer platform,

03:22a single cash generating unit, you know, all our acquired businesses, as well as, you know,

03:28markets, both emerging and developed markets is one cash generating unit for us. And we

03:34are seeing this CPCU business as a dominant factor within the consumer platform business.

03:39So I would expect 100% of the revenue to be a consumer platform business. And within

03:44that decisively, you know, 90%, 95% to be CPCU business.

03:505% to be CPCU business, is it?

03:54I said over 95% to be CPCU business. And it is part of what we define as a consumer platform

04:00business, you know, which is largely derived from giving digital advertisement.

04:05Right. Okay, got that. So one, one other question from my side is, these Apple OEMs, etc. These

04:13guys have come out with a new feature wherein they would allow users to ask them whether

04:19the app can track their activity or not. So do you see some kind of risk from, say, Apple

04:27users, because of this kind of privacy issue, because privacy has now become a very important

04:31concern for users. So how does that affect our business?

04:35So if you look at our track record, over 19 years, Apple has been leading this business

04:41consistently. And in fact, the change in Apple's privacy policy that you're talking about

04:46happened in 2021, in the early part of 2021. And we have shown that in 2021 itself, we

04:53turned it into a competitive advantage by being better prepared, by taking the position

04:59in a strong way, because our IP, which is, you know, anchored on 36 patents now, includes

05:06forward-looking Gen AI preparation as well. But most importantly, it is fundamentally

05:12privacy compliant by design. Since inception, since April 2005, our company has stood for

05:19consumer consent, consumer privacy. In fact, our first patent was filed in April 2005,

05:25and it talked about consumer acceptable advertising. Even in this title, it talks about

05:31consumer acceptance. So we are very much in favor of consumers' consent, being honorable

05:37and responsible, taking privacy seriously. And our IP for the future is also privacy

05:43ready by design. And we have actually turned the Apple privacy changes since 2021 to a

05:51competitive advantage. In fact, one of the case studies we have shared in our earnings

05:56presentation this time talks about how we are helping advertisers in India to succeed on

06:01the Apple platform. And I mean, this is amazing. So we are ready. And another thing that I

06:08would like to mention is that Google, just in the last month, has announced that it is

06:13no longer going to deprecate the cookies, at least not in the foreseeable future. And

06:17this is something Google had said they will do four years ago. And now in 2024, they have

06:23said they won't do it anymore. So their privacy sandbox project is also delayed. So I'm not

06:29expecting any major, let's say, ecosystem level changes in the next couple of years.

06:34So there's a very clear runway for consistent, predictable, profitable growth for our company.

06:40So just a follow up on that, if this kind of project gets implemented in the next, say,

06:47after five years, in the next six to seven years, will it affect our business? I mean,

06:54not in the near term, as you likely said, because it's not expected. But what after that?

06:59So we have already demonstrated that when Apple did this change in 2021, by the way, Apple is

07:04always ahead in these changes versus Google. And their change in 2021 made most of the industry

07:11players quite nervous. But Apple took it head on and converted into a competitive advantage.

07:16So having dealt with that several times in the 19 years, and most recently with the Apple privacy

07:23changes, what I'm saying to you is that Apple's platform is already privacy compliant. What I'm

07:29also saying to you is that our future proofing with Gen AI related use cases covered in the 36

07:37patents that we have filed and the IP portfolio, we are future ready and privacy compliant by

07:43design. So I'm not worried about data privacy related changes making as much of an impact

07:50because we have already negotiated it and converted it to our competitive advantage in the past.

07:56Right. So privacy compliant is what Apple is about. Got that. Okay. So moving on to the

08:03inventory part of the company. So largely, Apple pays for mobile ad inventory, regardless of

08:11whether a user is generating revenue or not. So can you explain to our viewers,

08:15how does this affect the dynamics, the profitability dynamics of Apple India?

08:21I think we have shown consistency in our bottom line performance as an organization.

08:26And we are absolutely clear that what we are delivering to the advertiser is a bottom line

08:35sensible ROI focused deep funnel conversion based platform capability. So the advertiser only pays

08:42us when they see ROI, when they see conversions, and that's the way we command the budgets.

08:48As far as our own profitability is concerned, if you look at the last five years,

08:55or even longer, pre IPO, post IPO track record of our company, we as a DNA are a bottom line

09:03sensible company. Cashflow positive operations, profitability is super important to us.

09:09We have done acquisitions in the last several years, and those companies were not as efficient

09:15on the bottom line. And we have consistently brought them up, turned them around to give a

09:19consolidated 20% plus a bit of positive performance in the last several quarters.

09:24So I am very, very clear about our focus on margins. As far as the inventory costs are

09:32concerned, most of the places in emerging markets, as well as in developed markets,

09:39there is a significant supply of inventory. As more and more people are using mobile phones,

09:44more and more people are going using mobile apps, even to make payments, everything that you can

09:51imagine is going digital. I mean, the consumption habits are going more and more online. And

09:56therefore, there will be a lot of inventory. What do you think about the fraud links that

10:01are happening across? I mean, how good is your fraud detection technology? And how important

10:07is it for our business? First of all, what we call fraud today, you know, is essentially

10:14what's non-human traffic, right? When on an internet, you see ads being either clicked by,

10:21you know, machines or what's defined as non-human engagement on the internet is today

10:27classified as fraud. Now, we have several patents filed across jurisdictions that are essentially

10:34dealing with, you know, detecting, preventing digital fraud from happening. And also very

10:40importantly for the future as more and more gen AI agents and, you know, using technology

10:47on an authenticated basis will become a base, you know, an important use case. We see this

10:53detection of human versus non-human traffic as a core intellectual property of the company. And

10:59it's super, super important. One of the reasons why our margins are healthy and are strong is

11:04because we are able to deal with this very, very efficiently. And we are able to also ensure that

11:10our acquired companies are now adopting our fraud analytics tool and platform and therefore

11:17improving their margin profile. So it's all work in progress, but we have differentiated IP in this

11:22area and we are doing really well to curb and to control this. Right. Okay. Thank you for that

11:29interesting insight and all the best for your future quarters. We really appreciate your time.

11:35So that was Mr. Soham from Apple India, but do stay tuned for more.

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