CCAVENUENSEQ1 FY23August 09, 2022

AvenuesAI Limited

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8analyst exchanges

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Management on call

Vishal Mehta

MANAGING DIRECTOR.

Vishwas Patel

EXECUTIVE DIRECTOR.

Sunil Bhagat

CHIEF FINANCIAL OFFICER.

Purvesh Parekh

VP & HEAD (INVESTOR

Rajat Gupta

GO INDIA ADVISORS LLP

Key numbers — 40 extracted

rs,

with a great start in a strong performance in the first quarter of FY23 across all of our parameters, that we monitor. Our confidence and strength and scalability of our business model and our strateg

95%

evenue, EBITDA and PAT were at a record high. On a year-over-year basis gross revenue has been up 95%, EBITDA was up 51% and PAT is up 137%. The performance has been driven by higher transaction proc

51%

T were at a record high. On a year-over-year basis gross revenue has been up 95%, EBITDA was up 51% and PAT is up 137%. The performance has been driven by higher transaction processing volumes whic

137%

rd high. On a year-over-year basis gross revenue has been up 95%, EBITDA was up 51% and PAT is up 137%. The performance has been driven by higher transaction processing volumes which we call TPV and i

64%

d increase in take rates in payments business. EBITDA as a percentage of net revenue has risen to 64% from 60% year-over-year which we had guided in FY21. The total transaction processing

60%

e in take rates in payments business. EBITDA as a percentage of net revenue has risen to 64% from 60% year-over-year which we had guided in FY21. The total transaction processing volume w

87,218 crore

ansaction processing, as well as what we process on government the marketplace has record high at 87,218 crores for the quarter. I would like to inform you that the TPV number that we report excludes the UPI

78 basis point

t yet undertaken any major monetization efforts. Gross take rates in India payments business were 78 basis points and net take rate came in at 6.9 basis points, which has been steadily improving since the secon

6.9 basis point

ts. Gross take rates in India payments business were 78 basis points and net take rate came in at 6.9 basis points, which has been steadily improving since the second quarter of 2022 when it was 4.8 basis points

4.8 basis point

6.9 basis points, which has been steadily improving since the second quarter of 2022 when it was 4.8 basis points. Both the payment and industry mix contributed to this increase in take rate. We have in the las

45%

e in the last quarter of Q4 FY22 disclosed that the share of credit options which is increased to 45% and that continues. We continue to maintain zero MDR payment options in single digit percentage o

50,000 crore

NEFT, RTGS, et cetera. As far as government e-market place is concerned, GeM has already crossed 50,000 crores on the 1st of August double the speed rate compared to last year FY22. As far as the industry is

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Guidance — 20 items

Vishal Mehta

opening

“Our most recent launch, which is called tap on pay, CCAvenue TapPay, which was launched just last month is a revolutionary product, and it will be a game changer in the payment space.”

Vishal Mehta

opening

“RBI through its most recent published payment vision 2025 report is aiming to triple the digital payments in India.”

Vishwas Patel

opening

“And what we are aiming to do is just that, we are building a frictionless Fintech company, a comprehensive payment technology that will offer not only payment acquiring but payment issuance and all the related infrastructure.”

Vishwas Patel

opening

“The target is to reach around a billion people in India, and they say acceptance and credit structure has to be improved for deeper reach.”

Vishwas Patel

opening

“We see the analysts and expects two out of every three payment transactions will be digitized by 2026.”

Vishal Mehta

opening

“We are on the trajectory and confident of delivering this kind of performance going forward.”

Anuj Narula

“So, my second question is with respect to TapPay, how much market share do we expect to capture with the launch of TapPay, and we plan to eliminate the POS machines and how much CAPEX would it incur any update on the e-commerce tie ups would also be helpful on this.”

Vishal Mehta

“So, as far as the investments are concerned, we believe that it will be sub 1 million in the first year dollars, it will be about seven to eight crores of investments that we will make in that geography this year.”

Vishal Mehta

“And we expect that we should be able to launch and generate good amount of traction, given that a lot of technology that we’ve been built out is built out for global scale and not just for India alone.”

Vishal Mehta

“So, we expect that, we will be approaching, it’s already live across many of the implementations, a few 1000 implementations have gone live already.”

Risks & concerns — 9 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

This is where the CCAvenue omni channel app aims to address the challenge of inadequate payment acceptance of infrastructure and eliminate barriers to seamless digital adoption.

— Vishwas Patel

So, how do you see that challenge of competition from them?

— Gaurav Sharma

So, it’s very difficult to service, very difficult to hear.

— Vishwas Patel

And that’s really great but, why is it not resonating in the gross margins because gross margins are still volatile if they are not in line with the NTRs improving.

— Unnati Bhavekar

So, that is the second question and third, is express settlement that you’ve been talking about is that really doubling up, tripling up, wherein you don’t have any kind of credit risk.

— Unnati Bhavekar

Short of any uncertain event that happens around pandemic, we expect that they should continue on building up for the remainder quarters this year.

— Vishal Mehta

And as I spoken about the, so what I meant to ask again is that, while the NTR are improving, when do we see the impact of it reflecting in on a regular basis or on a consistent basis, because right now although the NTR has improved to 6.9 basis points, the GPM have kind of come down to 17.6% kind of levels from 0.6% in Q4.

— Unnati Bhavekar

We think it’s a shot of uncertain event like a pandemic.

— Vishal Mehta

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Q&A — 8 exchanges

So, my first question is in terms of the recent expansion to Australia, how much would be the investments and what are our growth aspects here and what sort of competition do we face in other international markets of UAE. Shall I ask the second question now.

Vishal Mehta

Sure. So, my second question is with respect to TapPay, how much market share do we expect to capture with the launch of TapPay, and we plan to eliminate the POS machines and how much CAPEX would it incur any update on the e-commerce tie ups would also be helpful on this. Thank you. Sure, thanks a lot. So, I will take the first question and also give you some background of the second one as well. As far as Australia is concerned, you’re right we have just announced an opening of our offices, and a fully owned subsidiary in Australia, we think it’s a very large market. And, as far as the invest

I just want to understand a couple of things. Firstly, on this net take rate that we have got in this quarter. It’s slightly up now, so I just wanted to understand two reasons behind it one from a competitive landscape perspective that how this is going on a directional path, and how much of this is coming from the mix change advantage that we may have in some of the business?

Vishal Mehta

Sure, so the take rates have improved, if you recollect in our prior calls we mentioned that as the industry mix changes, a lot of if you look at last year, and since Q2 of FY22, you will see the take rates improved quite a bit. So, since it was if you look at pre COVID versus now, most of the industries including travel, entertainment, everyone else, they’ve started coming up to speed. And if you recollect, I just mentioned in the prior question that all our transactions, 99% of our transaction processed are online. So, as offline picked up, online also picked up and since industry mix change

Sir, a couple of questions from my end, since you will be entering into the working capital and invoice discounting so just wanted to know the timeline when it is initiating soon, and what will be the average ticket size on the same. And second is sir, like since some of the players, I hope that you will be providing the capital as well as the platform for the services. But on the other side, some platform based competitors, which are leveraging on the large bank customer database, they’re tying up with the banks and providing, they’re getting the benefit of huge customer base. So, how do you

Vishal Mehta

Sorry, can you repeat the question you were slightly not audible I am sorry. Okay, so my first question was, since you are entering into working capital and invoice discounting, so just wanted to know the timeline for the same, when you will be initiating the same and what will be the average ticket size we will focus that was one. And second is sir, some of the players, which are just throwing the platform for this services, they’re leveraging on the customer database, of large banks having some tie ups and providing the loan. So, how you see the competition from them, since you will be using

Just one question from my side, you said that you will be not using your own capital to build this lending business. So, can I assume that you’re not going for any kind of NBFC license in the future?

Vishal Mehta

It’s reasonable to assume that in the near future, we would not be going for such licenses. Okay. And the second question is on this on tap technology. So, just trying to understand what is the pain point that you’re trying to solve here for your customers. And are you trying to take away, do you think that it is the cost of the POS machines for your merchants which is the big problem for them or something else? I’ll tell you, basically the objective is that merchants they have faced both in the online world as well as an offline channel of their own. And the one pain point that merchants face

So, even these NDTRs is whatever started later on. So, I have a couple of questions on the financial side, and then also want to get some understanding around what is the share of all these new businesses to the total revenue. So, we’ve been talking about the TPV is going very strong, and they have been very strong, approximately 100%, kind of year-on-year growth is visible in the last four quarters. But then do you believe that in the first quarter of 23, this last quarter, the quarter-on-quarter growth has kind of slowed down and what could be the reason for it. And secondly, on the NTR side

Vishal Mehta

Sure. So, I will take a few questions and then Vishwas can add in. As far as the overall quarter- over-quarter growth is concerned. We have been somewhat slightly marginally better in terms of the digital payments space and as far as the government e-marketplace is also something that we cater to. So, that should also answer some of the margin questions as well that you have as much. So, usually, Q4 is a very large quarter for gem and others, and you will see that Q1 also there is significant traction, but not as much as Q4, Q4 may there’s usually a 40%, 50% increase over the other quarters, b

I have two questions. And my first question is regarding the capital raising plant as a company. So, my understanding is that we have around 208 crores as cash balance currently, and we incurred around 62 crores of amortization expenses as of March 22, which is actually a non-cash expense. Now in the press release issued yesterday, it will stated that because Infibeam’s major CAPEX cycle is behind them, the company is now focusing on our focused growth strategy for the next three, five years. So, to understand why we would need to raise funds at all if we are in your words, consistently conver

Vishal Mehta

Sure Ayushi. So, in the past, we have mentioned that, we have a significant opportunity to work on the express settlement piece, which may require certain amount of working capital. Express settlement is zero NPA and in that what we are doing is to be able to offer merchants and opportunity to get the cash faster, when they process through us. When we open up the offline space, as well as online space, that becomes one place that we think could be a potential. Second is that as far as our platform business, we think startups is a huge opportunity in India. And selectively we will evaluate maki

I have a couple of questions, one is to understand slightly better, if you look at the net take rate and the transaction process volume at a net revenue level it reaches to somewhere around 59, 60 crores so there is a delta of 14 crore to net debt revenue there. Similarly, it used to be in the earlier quarters slightly higher than this, I just need to understand what is this business, the delta 14 crores, which used to be slightly higher and where are we heading in margin terms on this business?

Vishal Mehta

We are a payment infrastructure company, and not just payment solution provider. So, whenever we provide infrastructure to some of the companies and banks and many others, I mentioned that we want to provide opportunities for them so that you can reach out to the larger ecosystem. So, there are certain things like, Kotak Allpay that goes through Kotak Bank. Banks cannot offer all different payment options to their users. And so what we do is that, we allow them to build upon our solution and provide it to merchants. And, let me be one of the reasons why you would see, whatever that small delta

Thank you all for your participation. And we look forward to getting comments and suggestions from you every now and then, we’ll keep you updated on the progress. Thanks so much.

Management

Speaking time

Vishal Mehta

Moderator

Amresh Kumar

Unnati Bhavekar

Anil Nahata

Vishwas Patel

Ayushi Shah

Anuj Narula

Rahul Jain

Gaurav Sharma

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Opening remarks

Rajat Gupta

Thank you Lizann. Good morning everyone and welcome to Infibeam Avenues Limited Earning Call to discuss the Q1 FY23 Results. We have on the call with us today. Mr. Vishal Mehta – Managing Director, Mr. Vishwas Patel – Executive Director, Mr. Sunil Bhagat – Chief Financial Officer, Mr. Purvesh Parekh – Head (Investor Relations), and Mr. Ravi – Corporate and Financial Advisors. 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. We 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

Thanks, Rajat. Good morning everyone. Thank you for taking time to attend our earnings call today. I hope you would have seen our presentation which has been uploaded on the exchanges as well as the company’s website. We started with a great start in a strong performance in the first quarter of FY23 across all of our parameters, that we monitor. Our confidence and strength and scalability of our business model and our strategy to focus on merchants and bank for digital payments and providing them with differentiated business offering has been very rewarding. Over the years, we’ve always innovated well ahead of the curve, and introduced products which have been pioneers in the Fintech space. Our most recent launch, which is called tap on pay, CCAvenue TapPay, which was launched just last month is a revolutionary product, and it will be a game changer in the payment space. I will request Vishwas Patel to talk about it in detail. I will briefly discuss the performance for the quarter: We

Vishwas Patel

Thank you, Vishal. Good morning, everybody. So, I will start with our new launch in the CCAvenue mobile app, which is the world’s most advanced omni channel payments platform with TapPay, which is India’s first pin on glass solution. TapPay for those who didn’t attend our event. We have put a video on YouTube of our entire event of the launch including our corporate AV. CCAvenue TapPay is a breakthrough payment technology with pin on glass technology that will allow consumers to do transaction with an OTP even on amounts which are in excess of Rs.5000 limit set by RBI not just on the merchants phone but on their own phone as well. To this we are also introducing soon TapPay, CCAvenue TapPay as a payment option inside some of India’s major merchants checkout page app. Consumers can select it as a payment option and tap their card on the phone for an instant checkout without having to enter the card details or remembering CVV. Payment insurance in our country is sorted but RBI is payment

Vishal Mehta

We’ve been growing at about 8000 merchants per day. And with a rich blend of offerings which will allow us to boost our earnings across millions of merchants all over Fintech solutions are also fueling our expansion to our goal of achieving a transaction processing value run rate of 7.5 lakh crore by end of FY24. We are on the trajectory and confident of delivering this kind of performance going forward. Thank you moderator we can now open the floor for Q&A.

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