DHANINSEQ4 FY22June 3, 2022

Dhani Services Limited

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146turns

14analyst exchanges

2executives

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Management on call

Nikhil Chari

HEAD, FINANCE AND INVESTOR RELATIONS, DHANI SERVICES LIMITED

Pinank Shah

GROUP CFO, DHANI SERVICES

Key numbers — 39 extracted

rs,

able to build a substantial customer base for our digital businesses, including the wallet customers, we’ve been able to cater to more than 5.2 crore customers since we launched our digital businesses

5.2 crore

for our digital businesses, including the wallet customers, we’ve been able to cater to more than 5.2 crore customers since we launched our digital businesses. The total number of paid individual custome

78 lakh

omers we were able to sell last year, including our credit product and e-commerce businesses were 78 lakhs, and our active paid customer base as of March 31st, 2022, stood at 61 lakhs. Given the evolving

61 lakh

ce businesses were 78 lakhs, and our active paid customer base as of March 31st, 2022, stood at 61 lakhs. Given the evolving regulatory landscape, we are making changes and strengthening our business m

Rs.50,000

nual membership fee to access our credit facility which can be used for shopping for a maximum of Rs.50,000. We have also retained many of the features that are customer value, such as payment entry easy i

retained many of the features that are customer value, such as payment entry easy installments at 0% interest paid on time, and 2% cash back on all orders in terms of Dhani cash, which can be used f

that are customer value, such as payment entry easy installments at 0% interest paid on time, and 2% cash back on all orders in terms of Dhani cash, which can be used for future orders, and free del

10 lakh

ty suppliers. This way we have significantly expanded our product offering to our customers. Over 10 lakh products in over 100 categories virtually covering all consumer needs for our customer base. The

Rs.1465 crore

capital efficient way. Now coming to the financial update for fully FY22. We recorded revenues of Rs.1465 crores for the full year FY22 compared to Rs.1363 crore in the prior year on an overall growth of 8%

Rs.1363 crore

update for fully FY22. We recorded revenues of Rs.1465 crores for the full year FY22 compared to Rs.1363 crore in the prior year on an overall growth of 8% year-over-year. Profit after tax for the year was ne

crores for the full year FY22 compared to Rs.1363 crore in the prior year on an overall growth of 8% year-over-year. Profit after tax for the year was negative Rs.860 crores compared to negative R

Rs.860 crore

prior year on an overall growth of 8% year-over-year. Profit after tax for the year was negative Rs.860 crores compared to negative Rs.230 crores in the prior year as we ramped up our digital businesses. Our

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Guidance — 20 items

Nikhil Chari

opening

“Going forward, we have put in place a more robust business model both on our credit and e- commerce businesses and will enable us to grow in a capital efficient manner.”

Nikhil Chari

“So, as we mentioned in our presentation, given the evolving regulatory landscape, so we are fading out this monthly subscription model, and which is replaced by a model in which we will be charging a onetime annual membership fees for our customers to access our credit facility, and which can be used on an Dhani store for a maximum credit limit of Rs.50,000.”

Nikhil Chari

“So, given the guidance’s by the regulator this subscription model going forward will not be applicable.”

Nikhil Agarwal

“So we will not have the monthly subscription all going forward, right.”

Pinank Shah

“But this of course, includes, customer acquisition cost, et cetera going forward we will be significantly lower, because we’ve had a large push, which has happened for increase in our customer franchise through the course of last 12 to 18 months.”

Nikhil Chari

“So, as Pinank mentioned, going forward what we are focusing more on the +5 crore, members that we’ve already, customers already acquired.”

Nikhil Chari

“So given that, over the past year we’ve gathered a sizable customer base, our approach is how can we optimize in terms of conversion from this customer base going forward.”

Nikhil Agarwal

“Alright sir, sir one last question about the legacy loan book, by when do we expect it to run off and the interest income, hike that we see so we are still getting a lot of interest income is it because of the legacy loan book, or how are we seeing the legacy loan because as far as we see the new model, since the last say one year, we are relying on subscription fee for income as well.”

Nikhil Agarwal

“So where do we see the interest income coming from and by when do we expect the legacy loan book to run out?”

Nikhil Chari

“So, as you would have seen here the legacy loan book has reduced by close just 800 to 1000 crores through the course of last fiscal year, and the revenue loan book today, which is standing at about 2200 crores, we expect the same to runoff in the course of next 18 months or so, you’re right interest income is primarily, catering is being derived from the legacy loan book and which is what we will continue to go on till the loan book is on balance sheet.”

Risks & concerns — 1 flagged

And, do you see any impact of this RBI regulation on the credit card or I’m not sure if it’s really applicable to you on your One Freedom card?

— Arpan

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Q&A — 14 exchanges

Sir my first question is, with regard to this explanation of paid individuals that is 78 lakhs and active paid customer base that is 61 lakhs, sir how exactly do we think we define the active customer base, what is the difference?

Nikhil Chari

So, the active customer base are the ones who have made a paid transaction over the past one year for our e-commerce businesses, or on the credit side who have paid at least one subscription fees. And sir the paid individuals that are 78 lakhs, they have also made at least one transaction in the last year, if I’m not wrong? That is correct. So, active basically means the people who are making it on a daily basis, is that correct? So, active as in those on March 31st, who are still continuing to pay now, there could be certain customers who would have paid a subscription fees earlier in the yea

I have a three part question. First, where are things with the regulatory oversight and the issues you faced are they behind you, are they closed that’s the first one. If you want to go ahead and address that, please.

Pinank Shah

Yes, so we’ve had an engagement with the regulator on this matter. And they’ve taken their observations and our entire product et cetera, we’ve kind of had a lot of new additions, which we’ve done in our product. So, that matter is pretty much something which we’ve already tried and explain and concluded, but any further updates, if any we will keep the investor community posted, for now there’s nothing further from that matter. Secondly, if you were to pitch to an investor today, let’s say a venture capitalist, what would you pitch Dhani as, what’s your strategy are you trying to be, when I l

So, only two question here, the first is on the healthcare segment, where I can see that almost two third of the company workers are from healthcare segment. So how do you see this is going to turn around and by when this will start making positive contribution?

Nikhil Chari

See on the healthcare segment which relied predominantly on the physical warehouse infrastructure, as well as the campaign’s that we had in terms of customer acquisition. So that is something that we have already reduced quite a bit. So going forward you won’t see these kind of numbers on that segment. Understand, but if we see the quarter-on-quarter the overall billing is declining and declining very significantly, is it because now things have become normal, and there’s no COVID and other issues, that’s why these is a impact on the business or do you see growth in this segment? See the prima

I understand that this past few months have not been the easiest for the company and I appreciate the fact that you still conducting your conference call in the midst of settling all the issues, I just have a few questions, some of my questions were already answered. One thing that I wanted to ask was about the employee count at the end of March or even more recently, if you could tell us where you are in terms of employee count?

Nikhil Chari

We have gone through a rationalization process. So as you would have noticed from the previous quarters presentation, the employee count was approximately 23,000, which is currently at around 18,000. And the expenses, which are about 680 crores per annum, do you foresee that coming down? Yes, so we are rationalizing our expenses as well. Large part of customer acquisition costs is actually something which we are going to be significantly lower as we go along. But yes, there is a expense rationalization plan which is currently under play. So, the new model sounds to be more like an Amazon Prime

Firstly, thank you for spending this time with us this evening. Very much appreciated as you know we’re longtime supporters and shareholders. Two quick questions, the first is, when we’re thinking about the model in terms of profit margin expectations. Appreciate that you provided some detail on customer acquisition costs, which we can expect to come down compared to the year that just finished. Now the other big area on the expenses was employee benefits. Now was that particularly large due to the workforce rationalization, so we also should expect that in the year to come, that will be a low

Pinank Shah

Yes, Craig hi, Pinank here. Thank you for your kind words, yes you’re right to interpret that the employee benefit expense, has been higher because of the scale up which the company has been going through, and it will get rationalized through the course of this fiscal year. Yes. And coming to your second question, Craig, you’re right. Going forward, the appropriate metrics would be the number of orders and the revenue per customer and because we are transitioning away from a subscription based model, so those would be the metrics that we would be focusing on going forward.

Just wanted to get a little bit more clarity, though you explained in detail. What exactly is the company’s vision, where we see ourselves in next three years or five years. Secondly, like other group companies are we planning to sell the company also?

Pinank Shah

Coming to, the first part of your question, in terms of the vision, our vision really hasn’t changed in terms of addressing the unmet needs of the middle income segment in our country, both from a credit perspective and everyday consumer product perspective. So our vision remains intact as we had embarked on this journey when we launched our digital businesses. What has morphed or adapted is the business model, moving from a subscription based model to a direct credit model on our store as well as moving from an inventory based model to a marketplace model, but the vision remains the same. So

Sir my first question is, what is the retention rate in the last 12 months?

Nikhil Chari

As we mentioned earlier, since our model is changing from a subscription based model where we talk about retention rates to a model where it’s more about paying upfront fee, and then utilizing credit on our Dhani store itself. So the retention rates would not be applicable over here. And on the marketplace, like we said it’s only a couple of months since this is something that we launched, the relevant metrics we would share with you as this business model progresses. Okay, got it. Sir, second question on your credit cost and your negative carry, so if I see last you would say that around $15

See my question is on governance part, as any credible company institution, you are a shareholder and your people working for you need to know what is going on in our company in the last two months, your stock and went down 80% in value, yet no one from the top management has come to any news channel to speak what exactly is going on in the company. Even you have not given any notification on BSE so that your investor can be aware what is going on in your company. So, I don’t know how governance will play at Dhani and if it does not, I don’t know how will shareholder earn anything out of it?

Pinank Shah

Hi, Ronak thank you for your question. And the feedback which you’re sharing What we would like to update you on this matter is, for any disclosures which we have been making, from time-to-time at a appropriate moment has been a continuous engagement from the company side including the engagement which we are having on this particular earnings call. So, we’ve also transparently explained the kind of business model, which we’re looking to conduct, et cetera. Other than that, share price, et cetera to be honest, we will not be able to comment that’s an independent separate question. Yes, from a

So, I’ve been joining this calls quite regularly for past about four to five instances. And the way in which the company has changed the business model it’s quite agile and free to pass approach. So appreciate for that. However, I would like to understand all this trial and error and the change what you are going through, where do you see the silver lining, that we find the right business model and we continue and then grow on that in the long run, because this whole evolution phases is ticking it has been like last 12 to 18 months, maybe?

Pinank Shah

Yes, Hi Abhijit thanks for your question. And, you’re absolutely right, the evolution of the business model is coming from the learning’s and the idea is that, given our vision of catering to the daily needs of the mass Indian population in a capital efficient manner is something that is something that has evolved over the last couple of years. And so, if you look at the model going forward both on the e-commerce side, as well as on the credit side, it’s a capital light manner, as well as offering maximum services to the customer base that we’ve already been able to gather over the last couple

So, where in you mentioned in the start of the call wherein you changed your business model to an annual subscription from your monthly subscription basis. So how is it going to benefit you from the previous one?

Nikhil Chari

It aligns the product to the guidelines that the regulator has. And more importantly Keshav, it is a model in which we believe that there is a much wider customer franchise, which we will be able to cater to. By just the virtue of the fact that there is a overall customer data which has got built out and we would want to maximize reach in terms of reaching to as many customers as possible, allowing customers to pay a annual fee and avail the credit facilities for purchase on the Dhani store, it actually evolves to be beneficial to us from two perspectives. One is of course, it aids into higher

So Nikhil, I’m very not happy with the way stock price have actually gone down. I’m a pretty old investor in Indiabulls and you just mentioned that founder Mr. Sameer Gehlaut did increase the stake, so in Indiabulls every time the founder increase the stake, the stock price has actually gone down. So this always happen in last eight years. And Nikhil you have only your e-commerce marketplace. So Indiabulls as I know social e-commerce and I have come to know that has completely shut down. So any specific reason for that, the social e-commerce has put in our shut down. So, on one side, you have

Pinank Shah

Hi, Vivek. We cannot comment on any other company. But Nikhil sir, Indiabulls is We cannot comment on any other company as well as on the store. - others grew as a e-commerce. No, the entire management is aligned towards building this franchise, and our incentives were also aligned along with yours. And, that’s what we’re working towards, we cannot comment on anything. So, recently PayTM mall valuation has gone down by 99% so, already India is in a loss of e- commerce Flipkart is there, Amazon is there, then how are you going to compete with them, e- commerce is a loss making business, I am no

So in February, the news reports suggest that even though the customers are not booked loans their phone number is being used for booking the loans, so after that note the share prices have crashed sort of percentage price, can you shed some light on that, maybe rectify that, what’s going on, we are not aware of that so far?

Pinank Shah

Hi, Prasada, the news report which you are talking about is pertaining to certain products, processes which has been prevalent across the industry, and has been offered in a construct by many, many other lenders as well. Obviously, the company has taken many, many steps to tighten these parameters significantly, and ensure that these kinds of events do not recur. But yes, we had a media flat to some extent due to these events happening, but that is behind us. And we are not, we’ve kind of tightened our system significantly. Okay, fine. And one more question I just have in the near future, mayb

I had a question regarding the new model the Dhani Plus model. So when you say Rs.500 per annum, so that’s going to be just on the store, is it fair to assume that Dhani stocks would sort of be separated from because it used to be under the One Freedom construct so, would be sort of expect that will be a standalone offering going forward and if at all, would you be keen to spend that off again because, if you look at a Dhani stocks it’s probably far better than most other brokerages out there which are trading at multiple valuations of the Dhani. So would you be willing to do that in the futur

Pinank Shah

So, Rishi Dhani stocks will continue as an independent product, the one product Dhani Plus as we’re talking about is more focused around credit availability for customers to purchase on Dhani Store, Dhani Stocks will continue to operate separately. Okay. And for Dhani Store, is the logistics maintained internally or is it a third party logistics provider? So the deliveries are done by third party logistics providers, but in terms of visibility to the customer it’s like you have an Amazon or a Meesho it’s a one stop shop as far as our customers are concerned. But the logistics are done by a thi

Thank you everyone for joining the call. For any follow up questions, please feel free to reach out to the contact information given at the back of the presentation. Thank you for your time.

Management

Speaking time

Nikhil Chari

Pinank Shah

Nikhil Agarwal

Moderator

Rishi

Vivek Kanda

Raj

Arpan

Keshav Heda

Rahul Jain

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Opening remarks

Nikhil Chari

Thank you. And good evening, everyone. Thank you for joining our 4Q FY22 Update Call. So over the past year, we’ve been able to build a substantial customer base for our digital businesses, including the wallet customers, we’ve been able to cater to more than 5.2 crore customers since we launched our digital businesses. The total number of paid individual customers we were able to sell last year, including our credit product and e-commerce businesses were 78 lakhs, and our active paid customer base as of March 31st, 2022, stood at 61 lakhs. Given the evolving regulatory landscape, we are making changes and strengthening our business model for our credit product. We are moving away from a monthly subscription product to a model where we charge a onetime upfront annual membership fee to access our credit facility which can be used for shopping for a maximum of Rs.50,000. We have also retained many of the features that are customer value, such as payment entry easy installments at 0% inte

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Dhani Services Limited

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