CCAVENUENSEQ4 FY2022May 12, 2022

AvenuesAI Limited

11,141words

78turns

10analyst exchanges

5executives

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Management on call

Rajat Gupta

Go India Advisors LLP

Vishal Mehta

Managing Director

Vishwas Patel

Executive Director

Sunil Bhagat

Chief Financial Officer

Purvesh Parekh

VP & Head, Investor Relations

Key numbers — 40 extracted

70%

significant growth in digital payments the Indian market is hugely underpenetrated with more than 70% unbanked and underserved population. Looking at this huge opportunity we along with our consortium

8 billion

hat our international business is doing extremely well and we are on a run rate of processing AED 8 billion annually from just AED 2.8 billion in FY2021, and we have been able to scale up this business wit

2.8 billion

doing extremely well and we are on a run rate of processing AED 8 billion annually from just AED 2.8 billion in FY2021, and we have been able to scale up this business with an extremely lean workforce. We a

with the growth prospects in UAE which is now meaningfully contributing to our PAT despite being 5% of our India payment size. Further we are launching in Saudi Arabia and USA as well as in this fi

Rs. 3.7 lakh crore

2 was the strongest year in Infibeam Avenues’ history. We are now at an all-inclusive run rate of Rs. 3.7 lakh crore or we can say $49 billion from TPV of Rs. 1.4 lakh crore in FY2021. For Q4 FY2022 consolidated

49 billion

am Avenues’ history. We are now at an all-inclusive run rate of Rs. 3.7 lakh crore or we can say $49 billion from TPV of Rs. 1.4 lakh crore in FY2021. For Q4 FY2022 consolidated gross revenue that we report

Rs. 1.4 lakh crore

are now at an all-inclusive run rate of Rs. 3.7 lakh crore or we can say $49 billion from TPV of Rs. 1.4 lakh crore in FY2021. For Q4 FY2022 consolidated gross revenue that we reported was up by 84% year-on-year,

84%

Rs. 1.4 lakh crore in FY2021. For Q4 FY2022 consolidated gross revenue that we reported was up by 84% year-on-year, down 7% quarter-on- quarter at Rs. 369 crore. Within this gross revenue, Payment bus

Y2021. For Q4 FY2022 consolidated gross revenue that we reported was up by 84% year-on-year, down 7% quarter-on- quarter at Rs. 369 crore. Within this gross revenue, Payment business gross revenue is

Rs. 369 crore

olidated gross revenue that we reported was up by 84% year-on-year, down 7% quarter-on- quarter at Rs. 369 crore. Within this gross revenue, Payment business gross revenue is a function of ‘business and payment

15%

it options reduces the gross take rate and hence gross revenue. However, our net revenues were up 15% year-over-year and 9% quarter-over-quarter and has been growing across all the four quarters of F

gross take rate and hence gross revenue. However, our net revenues were up 15% year-over-year and 9% quarter-over-quarter and has been growing across all the four quarters of FY2022. This is on acco

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Guidance — 20 items

Vishal Mehta

opening

“As our business model has started stabilizing and delivering results we are now confident of sharing outlook and guidance for the coming year.”

Vishal Mehta

opening

“For FY2023 we are targeting to achieve the following; - We expect to process Rs.”

Vishal Mehta

opening

“We will be at a run rate at the end of FY2023 at Rs.”

Vishal Mehta

opening

“- We expect EBITDA in the range of 170 to 190 crore and a profit after tax in the range of Rs.”

Srishti

“Second would be on the broader side of international business given that India has a massive opportunity in itself in terms of digital sales so what is our rationale of going global and entering more geographies given that there might be competition as well and how much growth we can expect coming from those markets in medium to long term?”

Sanjay Awatramani

“You said that you are adding 8000 new merchants daily which are signing up and the transaction charges are like per transaction basis so what will be these per transaction charges?”

Vishal Mehta

“The one place where we are somewhat differentiated is that we work in not just doing an aggregation but we also provide payment infrastructure to banks, so in other words in our prior calls we have talked about working with the likes of say for example Kotak Bank, so for Kotak Allplay if you take a payment gateway it will be through us and same thing where many of the B2B solutions of HDFC Bank, Mashreq Bank and many others.”

Sanjay Awatramani

“As you mentioned that this is the share, I know that we are not a payment bank but all these Google Pay and WhatsApp pay will be into the payment bank right we are just a merchant?”

Priya Harwani

“My first question is on government e-marketplace license which is about to expire soon so do you see any competitors bidding for the same or you expect to hold this position for the next term too?”

Vishal Mehta

“So if you recollect we have taken up this project in 2017 and we have been on this project for the last four-and-a-half years.”

Risks & concerns — 8 flagged

We must remind you that the discussion on today’s call may include certain forward looking statement and must be therefore viewed in conjunction with the risk that the company faces.

— Rajat Gupta

TrustAvenue will also enable merchants to discount bills and get working capital loans, which would have been difficult for them earlier as lenders would have lesser credit history or visibility to underwrite such loans for merchants.

— Vishal Mehta

Separately, during the quarter and FY2022 the company has provided for the impact of changes in the fair value in case of investment in equity instruments.

— Sunil Bhagat

The net impact of changes in fair value gain or loss is disclosed under the other comprehensive income and has no bearing on the existing business and margins.

— Sunil Bhagat

The impact of re-measurement of deferred tax on above his accounted in Q4 2022 and FY2022.

— Sunil Bhagat

So another question on this point only, nobody is asking this time that net take rates are going down, actually they have gone up in case of quarter-on-quarter basis so can we assume that this trend of decline in net take rates is over or do we still see that phase coming back?

— Amresh Kumar

— Sunil Bhagat

This is nothing but the mark-to-market impact of changes in the fair value of investment like Suvidhaa, major part consisting of our investment in Suvidhaa Infoserve where the cost which was booked in the books of accounts is much lower than the realizable value in the books of accounts that is the reason we have provided.

— Sunil Bhagat

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Q&A — 10 exchanges

Hi Sir. Thanks for the opportunity. My first question is how do we see the payment processing companies losing out on the overall revenue by the shift in merchant payments towards low yielding form factors such as UPI and that is coupled with rising competitive intensity across payment modes, which is driving the overall payments fee yields lower across the ecosystem first is that. Second would be on the broader side of international business given that India has a massive opportunity in itself in terms of digital sales so what is our rationale of going global and entering more geographies giv

Vishwas Patel

To answer your first question on the digital mix of the transactions, so UPI accounts for 5% of our overall payment that happened on our system so 95% is through the other payment options. We have 200 plus payment options; there are credit cards, there are debit cards and net banking, there are wallets, etc. There is good MDR to earn from these and that reflects in the overall gross revenue and the net revenue increase that we have reported. Second thing is, on the UPI and on RuPay debit card there is a plough-back from the government also coming in, around Rs. 1300 crore for the year that has

Yes good evening and thank you for giving me this opportunity. Sir for FY2023 you mentioned that EBITDA to be in the range of Rs. 170 to 190 crore and PAT to be Rs. 110 to 120 crore, is this understanding correct?

Vishal Mehta

That is correct. You said that you are adding 8000 new merchants daily which are signing up and the transaction charges are like per transaction basis so what will be these per transaction charges? will this be vendor pay or the customer pay how is this transaction going on exactly if you can help me with this? So basically the MDR is charged by us on the merchants who accept the payments. Say you go to a Shoppers Stop outlet and you are giving your Visa credit card and buying something say Rs.100 shirt or something like that. So what happens is that the next day the settlement goes for a cred

My first question is on government e-marketplace license which is about to expire soon so do you see any competitors bidding for the same or you expect to hold this position for the next term too?

Vishal Mehta

So if you recollect we have taken up this project in 2017 and we have been on this project for the last four-and-a-half years. We have built out this system which is very elaborate, so in other words we know there is significant amount of work that has happened. Last year alone government e-market place they clocked more than Rs. 1 lakh crore in terms of total transaction volume and this year it is expected to even be higher. So, to give you a sense, I think, in terms of technology and infrastructure there is significant amount of complexities that are involved in terms of build-out and we hav

Hi Sir thank you for the opportunity. My first question is let us say for the take rate has shown an improvement on y- o-y basis, I wanted to understand two things one is, is it largely because of the spend mix, and two are we starting to see any reduction in competitive intensity by some of the private equity funded players given what we are seeing in the funding market so that is my first question, second when we look at our market share of 8% and you are hoping it to improve to 10%, I am trying to understand using the larger ecosystem who are the players who are actually being losing market

Vishal Mehta

In terms of competitive intensity and what you raised in terms of the take rates so we do not expect the competitive intensity to reduce at all, in fact the way we plan for things is to assume and be slightly paranoid about intensity actually increasing with the funded players, so if you look at our past history also there has been a lot of companies being funded. This is not a new phenomenon for us. We have lived this world for the last five years where there is humongous amounts of capital which is coming in. Many of these companies in there give lot of promotions and do activities in market

Hello Sir. Sir congratulations on a great set of numbers. My question was that according to me the business model of Infibeam has been appreciated and most people have historically not understood it well. I believe this has been like a reason for the lack of stock price appreciation as well as lack of major investor interest in the company. So what could be done and is the management planning on introducing any names which could mitigate this information gap and create value for this company and in the last earnings call you had stated that the company was planning on aggressively marketing to

Vishal Mehta

I will take the second one first. We are committed to achieving TPV of $100 billion. We are already at $49 billion run rate and we expect that we will continue building up. So far all of our transactions have been online transactions, which means that you have either a web application or a mobile app application and we have a take rate on each of these transactions. We are not in the offline point of sale world at all. We have always focused on online. While online has huge growth potential, we will continue focusing on that, but in the offline world with this acquisition of Uvik that we have

Sir I want to ask a very basic question. When I go to websites to pay my utility bills or some other bills I see your CCAvenue and I see other options like BillDesk and Razorpay, etc., so these merchants for these websites how easy is it for them to integrate say other payment mechanisms like UPI, etc., along with yours?

Vishwas Patel

So basically it is up to the utility to integrate how many PGs they want which we cannot control. Ours is an offering based on certain functionality that we can offer so you see CCAvenue, then there is an alternative bill payment that is BillAvenue that we have that works on the same concept where you do not need to go to the biller website, we are getting the entire feed in one thing of all utilities that we have onboarded or all utilities onboarded and can give it into any interface like you go to a bank interface or you go to say an outlet in any small shop across the station in any part of

Thanks for the opportunity. This offline tap through app system which you just spoke about this will be offered exclusively to the current merchants and new merchants or will you be looking to monetize the same by offering it to other players, that is the first question and secondly can you run us through the unit economics of this and how similar will it be to the current POS ecosystem?

Vishwas Patel

So basically as I said if you were a merchant in any village or town or in a city or anywhere right you just go to the android app store and just download CCAvenue TAPPay, that is the app that is there. What that enables is that then as a merchant just two to three minutes online onboarding with the eKYC and e-signing everything and then you become a merchant, and go live. Now it is very easy, simple to use, what we say that we have made it very easier to kind of solution that even the villager at a ground level should be very easy to understand. So if you are putting in an amount say Rs.500 i

Yes thanks a lot. My first question is that I am seeing in Q4 as well as in the projections that revenues are not being able to keep pace with the increase in the TPV and with a positive take rate basically so is this something that is going southwards on the platform businesses other than the payment business?

Vishal Mehta

So as far as the payment business is concerned the take rates have improved in Q4 compared to what Q3 was and in terms of the platform business as well there is actually given segmental results so if you look at the segment wise comparison in our results for Q4 you would see that in FY2022 on March 31, 2022 which is the last quarter so out of Rs.369 crore, Rs. 327 crore came from our payment business in the last quarter and if you look at the processing charge you will be able to come up with the take rate on that and there is a difference between what we would earn out of a GeM transaction. G

My question is to Mr. Sunil, the CFO of the company. In the consolidated financial statement, it is mentioned that net change is a fair value of investment in equity instrument, can you just explain the nature of that entry, what is the meaning of that net change, is a fair value of investment in equity instrument because it is loss of Rs. 72 Crores so what is that?

Sunil Bhagat

The Company has invested in certain companies whether it is listed companies as well as the private companies and these are the companies in which as of March 31, 2022 we are supposed to provide the impact of mark-to-market. This is nothing but the mark-to-market impact of changes in the fair value of investment like Suvidhaa, major part consisting of our investment in Suvidhaa Infoserve where the cost which was booked in the books of accounts is much lower than the realizable value in the books of accounts that is the reason we have provided. This is nothing but the changes in the fair value

Thank you everyone for joining our Q4 and full year FY2022 conference call and we on behalf of management appreciate your participation and look forward to keeping in touch with you as we build out the business. Thank you all.

Management

Speaking time

Vishal Mehta

Moderator

Vishwas Patel

Sanjay Awatramani

Hitesh Panara

Gunmeen Kohli

Anil Nahata

Sunil Bhagat

Priya Harwani

Ayushi Shah

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Opening remarks

Rajat Gupta

Yes thank you Margreth. Good afternoon everybody and welcome to Infibeam Avenues Limited’s earnings call to discuss the Q4 FY2022 results. We have on the call with us Mr. Vishal Mehta, Managing Director; Mr. Vishwas Patel, Executive Director, Mr. Sunil Bhagat, Chief Financial Officer, Mr. Purvesh Parekh Head Investor Relations and Mr, B Ravi Strategic Advisor. We must remind you that the discussion on today’s call may include certain forward looking statement and must be therefore viewed in conjunction with the risk that the company faces. May I now request Mr. Vishal Mehta to take us through the company’s business outlook and financial highlights subsequent to which we will open the floor for Q&A. Thank you and over to you Sir!

Vishal Mehta

Thank you Rajat. Good evening everybody and welcome to the call to discuss Infibeam Avenues’ Q4 FY2022 as well as the full year performance. We are embarking on this call on a very sad note professionally. We have lost our colleague and our Group President, Mr R. Srikanth and his wife yesterday early Saturday morning Sunday in a very unfortunate event. It has come as a very shocking incident to the entire Infibeam Avenues family. Srikanth was a fantastic professional and he had made significant contributions which had a very deep impact on our organization. He was very instrumental in leading some of our large mega business deals and was always at the forefront of dealing with market participants. Most of you on the call today must have frequently interacted with him. We stand by Srikanth and his wife’s family in this time of immense grief. He will always be missed and fondly remembered. As a mark of respect we will take a 30 second pause … Om Shanti. Coming back to our earnings during

Vishwas Patel

Thank you everyone for being on the call. I will just take you quickly if you can refer to the company overview section in the earnings presentation. Infibeam Avenues Limited has evolved as a payment infrastructure company; it is providing a seamless and a holistic digital payment solution to accelerate its growth. Past investment in developing digital payment infrastructure has started fructifying and delivering growth for Infibeam Avenues Limited after the pandemic triggered digitalization of the economies. For years Infibeam Avenues Limited has built its digital infrastructure and currently the Company is comfortably poised to capitalize on its digital infrastructure be it Payments, Platform and Finance. The deferential factor is our infrastructure, where we had embedded our digital infrastructure through white labelling our digital product and have given it to banks like – HDFC Bank, ICICI Bank, Kotak Bank, Mashreq, JP Morgan and others. Similarly, Jio Mart and GeM (Government e-Ma

Sunil Bhagat

Thank you Vishwas. Good evening everyone. We will quickly take you through the financial performance. FY2022 was the strongest year in Infibeam Avenues’ history. We are now at an all-inclusive run rate of Rs. 3.7 lakh crore or we can say $49 billion from TPV of Rs. 1.4 lakh crore in FY2021. For Q4 FY2022 consolidated gross revenue that we reported was up by 84% year-on-year, down 7% quarter-on- quarter at Rs. 369 crore. Within this gross revenue, Payment business gross revenue is a function of ‘business and payment method mix’ which impacts the gross take rate. Hence, higher contribution from fixed fee or low take rate business mix like utility, education, insurance, etc., and higher contribution from low take rate payment methods like debit options compared to credit options reduces the gross take rate and hence gross revenue. However, our net revenues were up 15% year-over-year and 9% quarter-over-quarter and has been growing across all the four quarters of FY2022. This is on account

Vishal Mehta

Thank you. There is a huge headway to grow in our country in digital payments and there is also a huge opportunity with this kind of innovations that we are building upon. We are going to continue to innovate to grow and to increase our relevance to merchants and banks and continue to create value across digital payments. As our business model has started stabilizing and delivering results we are now confident of sharing outlook and guidance for the coming year. For FY2023 we are targeting to achieve the following; - We expect to process Rs. 4 lakh crore in FY2023. We will be at a run rate at the end of FY2023 at Rs. 5 lakh crore. - We are targeting 9% to 10% market share of digital payments excluding UPI in India from current 8%. - Gross revenue is expected to be in the range of Rs.1600 to Rs.1700 crore. The higher range of gross revenue considers faster than expected growth in new business initiatives like lending. - We expect EBITDA in the range of 170 to 190 crore and a profit afte

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