Anuj in conversation with ET NOW, discussing strong business tailwinds and the industry outlook

Well, thanks for having me on your show. For our industry, fortunately, COVID or no COVID, the term slowdown is clearly not associated with our industry. The writing has always been on the wall that digital is the future, and the way COVID impact has led to greater consumer adoption, I think it's a phenomenal acceleration that we have seen in consumer adoption of digital lifestyle services. Consumers are transacting more frequently from their mobile devices, the average value of those transactions are going up across all industry verticals, and this is a systematic step change, a multi-year step change towards accelerated adoption of digital. Therefore, the acceleration is also showing on the advertisers and businesses side because they are now increasingly allocating greater spends of their advertising budgets towards digital and mobile specially. So our business is seeing massive tailwinds, and I think these tailwinds for growth will continue for the next three to five years across emerging markets, certainly in India.

Sure. Acquisitions are a part of our growth strategy. Inorganic and organic growth for our company has been a very, very strong track record over the last five years, and the strategy is anchored on what we defined and lodged as our AFL 2.0 strategy for this decade ahead. Our goal is to achieve reach of over 10 billion connected devices globally by the time we end this decade. As part of that expansion plan, our anchoring focuses on emerging markets, so India where we already have a very strong presence, and we are aiming for market leadership position in most of the emerging markets globally. In keeping with that, we have acquired Jam, which has a very strong presence in Latin American markets as well as very niche and important presence in North American markets. We believe that the synergies will come from our integrated products and propositions to drive conversions for consumers across emerging markets on Android-focused ecosystems, driving not only online conversions for users but also offline conversions for users through our tech stack. We believe that Jam not only has significant revenue, but if you notice from the disclosures we made, they have already reached a near breakeven. So any incremental growth that we deliver from here should be leading to greater profitability. AFL has already demonstrated in the past that when we acquire certain companies, typically they're always at a break-even level, and when we acquire them, within the first year we bring them to a high single-digit profitability level, and by the time it goes into the second year of the acquisition, we bring them almost to higher teens in terms of profitability contributions. So I do believe that over time, you would see that the normalized bottom line performance of the company would see significant growth not only from organic expansion but also from the profitability and the margin expansion that we will do by delivering growth and optimizing these acquired businesses. So I'm very excited, I'm very optimistic that the combination that we have done is a robust combination, and it's been very carefully calibrated. The relationship that I've had with Jam personally goes from 2013 when they started the company in Argentina all the way to 2021 when we have just signed the acquisition. It's been a long courtship period and a very carefully calibrated move on behalf of AFL 2.0 strategy.

Sure. So we've always maintained in the AFL 2.0 strategy that there are two V's in our strategy. The first one is vernacular. When we look at India and going deeper within India from tier three cities all the way to rural India as well, and bringing our advertisers across all the secondary verticalization, across industry verticals, we're helping our advertisers to go hyper-local, hyper-personal in vernacular experiences. And that's where Bubble comes in. Bubble is a vernacular multi-language supporting keyboard, and it's a keyboard app which resides as the default keyboard on the devices of consumers. They are already having shipment agreements with OEMs and a lot of operator partnerships across several emerging markets, not just in India but also Indonesia and other emerging markets. We doubled down on the Bubble investment because we see it as super important in terms of our strategy to reach consumers across every single app that the consumers use on the device, because the keyboard will show up irrespective of which app you're using. You'll be surprised that on an average, people like you and I use our device over 100 times a day, and the usage of keyboard on the device happens over 100 times a day for an average user. So this is extremely strategic and a very important investment.

Well, I would like to change your emphasis. We delivered over 100 crores of positive cash flow from operations in the last financial year, and we are constantly generating cash through our operations. As we keep growing, we will maintain the financial fundamentals of capital-efficient, cash flow positive, profitable growth. When we generate this kind of cash, we are always going to look at investing it to further our growth and increase shareholders' value. When we raised an additional round of funding through the QIB process, over 600 crores as you correctly mentioned, the idea is to really go after expansion. We are a growth-oriented company. Our ambitions are large. We are focused on going deeper within India, expanding and establishing stronger positions across global emerging markets, and also taking niche, verticalized, focused positions in developed markets. Capital is going to be deployed carefully, as has always been done in the history of AFL, and we will lead to strong financial fundamentals-led growth performance which should be very capital efficient, delivering hopefully good returns on capital to all shareholders. I've already mentioned in the past that our industry would be growing at least 25 to 30 percent CAGR across emerging markets globally, and consequently AFL hopes to keep up with that pace of growth, and the capital would support us in that.

Sure. I think history is a good way to look at the trajectory for the future. Let me give you some history on data privacy. In Singapore, the Personal Data Protection Act came into effect sometime around 2012, that is about nine years ago, and became fully operational in 2014, which precedes GDPR that came in 2016 and got implemented over time. What we have seen is that GDPR in Europe, or the Personal Data Protection Act in Singapore, or certain such regulations in the United States as well, have been around for several years. What we have also seen with this is that with these regulations in place, where the consumer has the ability not just to give consent but to revoke its consent anytime in terms of how its data is being used, who's using it, and so on, has been around for a while, and digital advertising in this period of time has grown phenomenally across all of these geographies irrespective of government-enforced data regulation policies. My view is that in the next five years, every single country, every single jurisdiction will have some form of data privacy regulations, and they will be enforced and implemented on all kinds of platforms, whether it's Android or iOS. It is bound to happen. AFL as a company is extremely welcoming of data regulation and privacy because what it does is it forces everybody in the ecosystem to behave responsibly towards consumers. AFL defines its business as a consumer platform business. We are a B2B company. We are working with businesses, we are working with operators and OEMs, we are working with publishers, we are working with advertisers across industry verticals, and we receive data or process data on their behalf in a very trusted and compliant fashion across all these jurisdictions, including Singapore, including Europe, including the United States. Ninety percent of our business focus and activity is happening in emerging markets. Almost all of those emerging market countries are at various stages of bringing data regulation in place. India, as you know, has already tabled its Personal Data Protection Act draft policies into the parliament, and at some point in time in the next three to five years, these policies will come, and there will be some variant of what's already out there in Singapore or in Europe or in the United States. AFL is ready, it is prepared, and we are proactively supportive of these policies coming about. Fundamentally, what you've got to see is the consumers, you and I, are not going to shift our focus from connected devices. In fact, our consumption and our transactions and conversions on connected devices is only going to grow for the next five years. Consequently, the advertisers have no choice but to allocate almost 50% of their budgets progressively towards digital. We've already seen that happen in several developed markets. In emerging markets today, advertisers are spending roughly around 20%. The consumers, the advertisers, VR devices, digital is the future. Therefore, regulation is necessary to set a minimum sort of standards of responsibility and accountability in the ecosystem. Like I said, AFL is ready and we are very welcoming of any regulations or such enforcement on any kinds of platforms.