How Esri India’s CFO is navigating financial strategy and regulatory challenges in the Indian Geospatial Economy

The implementation of the National Geospatial Policy has significantly transformed the geospatial landscape in India, providing easier access to data and fostering greater adoption of GIS technology. Companies like Esri India have benefited from these changes, realizing substantial cost savings and operational efficiencies.

CFO India recently spoke to Anil Narang, CFO of Esri India, to find out how he is navigating the complexities of the geospatial industry and positioning his organization for sustained growth in a rapidly evolving market.

Q. How has the recent National Geospatial Policy impacted your financial planning and strategic priorities, particularly regarding data democratization and public-private partnerships?

Anil: To begin with, we must understand the era preceding the National Geospatial Policy (NGP) 2022. Before NGP, data access, discovery, and surveys were significantly restricted due to the cumbersome methods of data extraction from government sources or private companies. This scarcity not only extended project timelines but also inflated costs, leading to frequent budget overruns.

With the introduction of NGP 2022, the landscape transformed dramatically. Data is now readily accessible and can be downloaded from government websites, enabling broader adoption of Geographic Information Systems (GIS) across both public and private sectors. This shift has yielded through increase in revenue for Esri India and hence increase in Operating margins by approximately 150 basis points. Prior to NGP 2022, we incurred substantial expenses in data collection, whether through vendors, internal efforts, or partnerships. The newfound ease of data availability has simplified numerous processes and encouraged GIS adoption, proving its efficacy as an economic driver.

Q. How does your company’s financial performance track against the projected growth of the Indian geospatial economy, given its rapid evolution? What key financial metrics are you using to measure this alignment?

Anil: For Esri India, and indeed any geospatial company operating within this domain, the projected growth rate of 12-13% CAGR by NASSCOM has been consistent. This alignment is evident in various financial metrics we monitor. Firstly, the cost of goods sold has decreased significantly due to reduced expenses in data acquisition. Additionally, the attrition rate within the industry has dropped, positively impacting manpower planning and associated costs. Overall, the industry is well-positioned to maintain a CAGR of approximately 13%.

Q. What are some of the significant regulatory challenges you are facing in the financial sector, and how are these being addressed?

Anil: The financial sector, particularly BFSI (Banking, Financial Services, and Insurance), presents several challenges, including high levels of NPAs (Non-Performing Assets) that impede profitability and future growth. Our role as a GIS company involves assisting clients in identifying geographic areas with high NPA concentrations, thereby enabling targeted interventions. For example, we help major financial clients and microfinance institutions address these issues by providing precise location data of problematic areas. Similarly, in the insurance industry, GIS aids in assessing the viability of insuring certain areas, especially in disaster-prone zones, by predicting potential losses.

Q. Since your company’s revenue base is heavily dependent on government projects, what contingency plans do you have in place to mitigate the financial impact of potential delays or cancellations of government contracts? How are you diversifying revenue streams to reduce dependency on any particular sector?

Anil: While government projects constitute a significant portion of our revenue, we have taken strategic steps to diversify. Approximately 20% of our revenue now comes from providing GIS services to US clients through our partners. We are also expanding into the commercial sector, with major clients including telecom companies, utilities, and real estate firms. This diversification helps mitigate risks associated with over-reliance on government contracts and ensures a balanced revenue stream.

Q. Given that you also serve US clients, how does your company manage financial risks associated with operating in diverse regulatory environments?

Anil: We primarily collaborate with partners and associate organizations to navigate regulatory complexities. Our operations in the US are facilitated by compliance with local regulations, including GDPR guidelines for data privacy. Additionally, we implement robust transfer pricing policies to ensure all transactions are conducted at arm’s length. By maintaining strong partnerships and adhering to stringent regulatory standards, we effectively manage financial risks across diverse environments.