Edited Transcript of IFIB.NS earnings conference call or presentation 5-Jun-20 10:30am GMT

We are one of India’s top digital payment solutions software platform provider. We have deep understanding of India’s e-commerce and digital payment sector, which has allowed us to be consistently profitable. Many marquee clients in India and international markets use our fintech solutions and platforms. We have been awarded an exclusive mandate, competing with some of the well-known global tech giants to order our e-commerce platform to the Government of India for the procurements, projected to be as high as USD 100 billion in terms of value.

Going ahead, we plan to replicate our successful business model in India in various international markets, and also expand the digital product range for Indian and international customers. Our journey was led by a very strong industry experience, and we’ve gained a lot of experience over the last 2 decades, backed by a very, very highly motivated team that continues to work with us since inception and the strong cultural values that have been imbibed in us. To give you a snapshot of our business, please turn to Slide 6.

In a short span of about 3 years, we have grown to over 1 million merchants across our fintech platforms from a factor of magnitude lower at the end of fiscal 2017, almost representing a 10x jump. This will only grow with time. We process transactions, almost worth INR 900 billion across our platforms in fiscal 2020 from less than INR 10 billion in fiscal 2017, a 10x growth. Also we’ve processed government procurements, which are worth INR 500 billion over the past few years on the GeM Portal since we signed the contract. We are amongst the top 3 digital payment solution providers in India with respect to processing volume as well as market share. But we rank second in terms of profitability among the top 5 digital payment solutions providers. And we are the only home bootstrapped and profitable payment company with international operations.

If you turn to Slide 7, during the year, we have undertaken various initiatives towards building a very strong and sustainable business, from strategic tie-ups to strategic investments, new business, into new geographies and strengthening of our leadership team. I’m particularly excited to share some of the key business developments. First, to capitalize on the growth in digital transactions, globally and leverage on our strong business portfolio, we have launched our payments business in Saudi Arabia, in addition to our operations in UAE. This would allow us to address nearly 2/3 of the GCC region. We are also launching payments business in the United States of America, one of the most developed and competitive digital commerce market globally. U.S.A. is world’s second largest digital payments market by revenue. And Infibeam Avenues will leverage upon its comprehensive fintech portfolio, existing relationships, along with collaborations with some of the top banks in the region.

As part of strengthening our payments portfolio and to offer a complete payment solution to merchants, we are entering into the card issuance side of payments business, in addition to the acquiring business that we are currently into. To give you a small brief, we acquire payments from merchants, as in we collect payments from customers and give it to merchants. And in the acquiring side, we have been very, very successful. We process upwards of INR 65,000 crores of transactions on an annualized basis. We believe issuance is a very interesting space to also evaluate and get into. Issuance business means that you are able to issue a card or a payment instrument to customers, who are able to send payments to merchants. Issuance business will allow us to earn significantly higher rates compared to the acquiring business and also allow us to provide great merchant experience by associating with us. That said, we will offer following services under payments issuance business. First, we have launched a secured lending as express settlements for existing merchants. We have signed up with multiple clients and processing multi-crore worth of transactions daily. Second, we have launched a prepaid corporate card for employees. There are thousands of enterprises in the country with frequent expenditure for food, travel, entertainment, et cetera. The corporate gets the card for free, while we charge a TDR to merchant outlets when the employee spends. The corporate preloads money for its employees every month, which makes it a secured business. And third, more importantly, we have fully acquired card pay technologies to offer corporate credit cards to capitalize on the huge market for credit for SMEs in India, which are not adequately served by other financial institutions. And I will give the details in a later slide.

If you turn to Slide 8. I would like to showcase some of the awards and accolades that we have received in the past few quarters, a testimony to our very strong business. We received many prestigious awards by repeated institutions, endorsing our technology and leadership positions in our business. We have been amongst the very few recognized as a Superbrand in 2019, both industry and consumer verified, by Superbrands India. We’ve also been recognized and awarded the most innovative payment service provider and fastest-growing online payment service provider in the UAE at the International Finance Awards 2019.

With this, I would like to hand over the call to Vishwas Patel to take you through the business that we’ve built during our journey and evolution so far. Vishwas, over to you.

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Vishwas Ambalal Patel, Infibeam Avenues Limited – Executive Director [4]

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Thank you, Vishal. If you all could please turn to Slide #10. So in 2 decades of experience building payments and platform solutions, we have built a diversified fintech portfolio to simplify business and payment for merchants and enterprises. We aim to offer solutions to the merchants under one roof, which makes transacting integrations, reporting analytics easy so that they can focus on business growth. Our fintech offerings can be segmented into 4 broad buckets, comprising payments and platform solutions.

Payment acquiring. This is a core and current payment business where we offer payment gateway for acquiring on various — through various payment methods, including cards, net banking, wallets, EMI, UPI, et cetera. Bulk payments for corporates, white labeling offer solutions to banks like HDFC banks or the Kotak banks, all payment gateway is a white label of offering of our services. Second, the payment issuance. Issuance is the new business we have ventured into now. We are very strong on the acquiring side. On the issuing side, we are offering now prepaid cards to corporates, corporate credit cards and secured loans. These offerings allowance — allows us to earn higher TDR compared to the acquired solutions and allows us to monetize the PG operations. Additionally, it allows us to be present on both sides of the payment business, acquiring and issuing. Third, remittances. We offer both domestic remittances services throughout India through our subsidiary Go Payments as well as international remittances through our investee company, Avenues Payments. We are also going to add international remittance payment option to our payment gateway to allow Indians staying abroad to purchase goods and services in India directly from — on merchants’ website without using costly options like international cards or remitting to Indian Bank accounts before local purchase. Fourth, software platforms. We realize that businesses will soon be — will become digital sooner or later and requires software platforms for transacting online to cover a large market. And they would require customizations and scale to suit their line of business.

So we have built scalable software platforms for merchants by developing SaaS, software-as-a-service platforms. We offer enterprise level, a level customized e-commerce platform for large businesses, for handling large volume of sales like Vishal just talked about the government e-marketplace, the GeM platform, gem.gov.in. We offer bill payments platform for consumers across India to allow them to make all kinds of bill payments under one roof. And by converting cash to digital payments, we also offer a hospitality platform, a centralized reservation system that allows hotels to pool their room inventory in one place and distribute it across various sales channels with our integrated digital payment platforms to collect payments online.

We’ll keep innovating and adding more solutions to keep simplifying businesses and payments for the merchants and offer them working capital assistance to grow their businesses. We have detailed our fintech solutions in the following slide.

If you move to Slide #11. One, that is CCAvenue. We continue to be among the leading payment solutions in India and the UAE. We are the only homegrown profitable payment company, bootstrapped and not backed by any PE or VC with international operations and expanding into newer international geographies, while offering a host of digital solutions all under one roof.

We successfully processed 147 million transactions, worth INR 62,200 crores in the fiscal of 2020. The payments grew 10x from FY ’16 to FY ’20. In the month of March, before complete lockdown was announced, on account of the outbreak of COVID-19, we were at an annualized run rate of INR 75,000 crores or INR 750 billion. Strong addition of merchants continue through the year and continues under the current situation.

We are a leading solution providers in the UAE and ranked second among the nonbank private players there in terms of total payments process. We processed payments worth AED, the UAE AED, AED 1.7 billion for the fiscal of 2020. In the month of May, we processed payments at an annualized run rate of AED 2.7 billion, a 50% growth. We have recorded month-on-month growth in payments value and volumes since the beginning of the year through to May 2020. We are seeing a huge demand for digital payments from across industries, especially the learning and education sector and utilities. We have marquee clients in our portfolio, both in India and the UAE. We are integrated with 90 of the top 100 merchants in India. We have top clients across industries, including many government undertakings, including eNAM, Port Trust of India and many more. We are among the top global fintech companies. We have seen a strong growth in our core market, India. We have replicated the India success in the UAE and to become a leading player in a very short period of time there. We plan to expand our fintech business in multiple countries over the next few years. This will allow our merchants having international operations work seamlessly with us and also help us in acquiring more multinational clients.

Digital transformation continues to play a fundamental role in shaping the GCC countries’ economies, with Saudi Arabia at the forefront. We have already launched our services in Saudi Arabia. Both Saudi Arabia and UAE contribute to nearly 2/3 of the GCC’s GDP and have many companies operating across the region. We have already signed up with many such companies that operate across the region. We’ll soon be starting operations, soon as the COVID situation eases. We’re also launching our operations in the United States of America very soon. U.S.A. is among world’s top market for fintech services with a market size of over INR 1 trillion. With an aim to be present on both sides of the payments business, acquiring and issuing, we are entering the payment issuance business with a comprehensive issuance solution, secured lending, prepaid corporate cards and normal corporate cards. Let me share next what we offer under issuance and how we strengthen the business.

You can move to Slide #12. We have launched a secured lending product already, which is known as Express settlements and transactions are live with multiple clients. We aim to assist businesses by offering them working capital through various financing options for improved operational efficiency. It will also allow our company to earn higher TDR and monetize the payment gateway offering. We have launched the Express settlement for merchants where they can opt to receive their payment instantly as soon as the transaction is successful, rather than receiving it after T+2 or T+3 days for a small additional fee to the existing MDR that we charge. We have secured multi-crore credit line from banks for this purpose, where the cost to us is around 2.2 bps per day, for which we can offer to the merchants on a higher rate on a case-to-case basis. So converted to the full year, the cost to us is around 10% or less, while we earn about 20% to 30% annualized from the continuous transactions throughout the year. We’ll offer more lending products as economic activities pick up.

If you move to Slide #13, we have launched corporate credit — prepaid cards in partnership with Go Payments. So Go Payments offer corporate prepaid card for employees, which can be used for a variety of business expenses, travel, food, hotel and more. For a corporate, it is usual cost to company business in the form of a prepaid card, with no charges to corporate. The corporates load the prepaid cards every month, give money — giving money in advance. The employees spends it over a period of time. When — the benefit for the employee is that there is a taxation benefit coming in, which or — as part of their salary, which helps them to use these corporate cards. When the employee uses it to purchase any merchant outlet — outlet, online or off-line, the merchant will charge a TDR. The merchant will charge TDR and typically, the net take rate is multiple times higher than the net take rate in the PG business or the acquiring side, allowing to earn higher TDR. According to the research and markets.com, the prepaid card market in value terms in India increased CAGR of 40.2% during 2014 to 2018. During the forecasted date of 2019 to 2023, the market is expected to record a CAGR of 36.5%, increasing from USD 38.6 billion in 2019 to reach USD 133.9 billion by 2023.

We are also — now Slide #14, that was the debit card. This is the credit card. So we also now, with our recent — we’re also launching the corporate credit cards, branded as the GRIT cards, CCAvenue GRIT cards. So we are happy to acquire — announce the 100% acquisition of Cardpay Technologies Private Limited, which will be a wholly-owned subsidiary and through which we will offer credit cards. Cardpay Technologies is founded by Kumar and Malik. Both have deep technology expertise with rich experience in the fintech industry. The technology platform developed by the country — by the company is among the industry’s best with built-in artificial intelligence and machine learning and that verifies and automatically accepts applications and decides credit limits. The platform is highly scalable and conforms to all industry standards. The company is based in Bengaluru. The cost of accretion is payable in 2 parts. The initial cash of USD 4.5 million for 100% acquisition of shares and assumptions of the debt of the target company and up to USD 1 million based on meeting certain performance parameters as per the contracting terms.

India needs a huge capital for growth and has high requirement of credit SME level, which is not easily met by the banks. And for various reasons, including insufficient credit history, high risk, insufficient documentation, et cetera. There are many companies that require strong credit support without the burden of interest payments. So companies can instantly avail credit cards from us with a higher and dynamic limits than the traditional cards, including loyalty and reward points better than the traditional offers. A higher credit card limit allow credit cardholders to smoothly meet all the expenses and easily make the payment within a 15-day cycle without having to pay any interest, which would have — regularly we have to pay to the banks. Instead the TDR is charged to the merchant where the expense is incurred. These cards do not affect the spenders’ credit score maintained by the card agencies. We’ve already signed up with multiple banks and NBFCs for a strong credit line.

Moving on to our platform business. Please turn to Page — Slide #15. Our payments platform is healthy and generates consistent revenue. It’s a high-margin business. Our client government e-Marketplace continued its strong performance in FY ’20 and crossed INR 50,000 crores cumulative procurement. For fiscal 2020, the procurement total was over INR 27,000 crores compared to INR 17,000 crores in the fiscal of 2019. On May 29, the Central Government announced a new version of GeM, the GeM 4.0 to be launched in August 2020. It will have the largest usage of advanced technology in any government platform around the world. The aim is to move towards a unified public procurement system for the country and to bring the functionalities of various government e-procurement onto the GeM platform and to reduce duplicity, and thus enable a unified and streamlined approach to procurement. GeM aims to uplift the marginalized and underprivileged actions of the society and to be part of the growth story with a special focus to onboard MSMEs, self-help groups, artisans, weavers, craftsman and tribe into GeM. GeM will onboard 9.2 million MSMEs, 2.1 million weavers, 1.8 million craftsman and 1,000-plus self-help groups around the country and create special tribe categories of over 5,000 products. This will significantly enhance procurement of the GeM platform and will bring government’s agenda of becoming an end-to-end national public procurement portal for open, efficient and transparent procurement of goods and services.

Moving on to our bill payments platform, BillAvenue. It had a very strong year. NPCI added many more billing categories. And we also added many more billers and agents across the country. We saw a 92% growth in our daily bill payments value. We are proud to mention that we are the only non-bank processor for online booking of LPG cylinders for consumers. And we have seen a significant jump in the volume of online cylinder bookings from across the country. All the top 3 gas cylinder companies in India, IOCL, BPCL, HPCL, have partnered with us on Bharat BillPay as our billers. As per NPCI, the number of billers on Bharat BillPayment system has increased from 182 in March 2020 to 216 in May 2020, while the monthly volume has increased from 15.8 million to 16.5 million, respectively, all this in 3 months itself. The industry presents excellent opportunity for growth, as more and more categories and billers across India come on to the BPS (sic) [BBPS] platform.

In our hospitality solutions, ResAvenue, we now have over 2,000 hotel properties registered on our platform compared to the over 1,000 we had last year. We are integrated with all the major online travel agents. We have also added Paytm as a new OTAs, online travel agents. On an average daily, more than 3,000 room nights were being booked in Q3 through our solution. The daily average for the entire was 2,700 room nights, affected in the month of March due to COVID-19 pandemic. Recent reports by Hotelivate and FICCI-KPMG joint report, India is the most digitally advanced traveler nation in terms of digital tools, used for planning, booking and experiencing a journey. India is projected to account for 3.7% of the global travel — digital travel sales, making it the 3rd largest market by value in Asia-Pacific region. The number of hotel rooms in India is anticipated to surge to 3.33 million through 2023 from the current 2.72 million in December of 2018. And online sale of travel bookings is expected to increase at a healthy rate of 14.8% annually from 22.3 billion in 2017 to 38.7 billion by 2021. So let me now take you to the competitive positioning, especially in our core market India.

If you go to Slide #16. So among the top peers in the payment gateway and aggregation business, we are far ahead of the competition in terms of the portfolio offering, our international presence as well as the profitability parameters. We’ll continue to offer comprehensive solutions and aim to carry the portfolio globally to be among top fintech companies globally.

I now hand over the call to Hiren Padhya for some financial and operational performance. Hiren?

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Hiren Bachubhai Padhya, Infibeam Avenues Limited – CFO [5]

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Yes. Thank you, Vishal — Vishwas Bhai. Good evening to all of you. We have tried to restate our FY ’19 financials for like-to-like comparison, excluding divestment and demerger. This will allow our stakeholders to compare and comprehend our performance in the light of divestment and demerger announced in FY ’19. The company recorded revenue of INR 6,481 million in FY 2020, that is up by 10% year-over-year. Due to strong engagement across enterprise software platform business, that is platform, and growth in digital payment business, that is payment, in both domestic and international operations.

Platforms business achieved strong double-digit revenue growth compared to previous year. During the year, upgrades and additional requirements by a few subscription-based enterprise clients and increase in volumes on GeM Portal, that is transaction-based client, led to the growth. However, Q4 FY ’20 revenue was impacted due to lower invoicing and collection on account of lockdown in the last few days of March 2020.

The payments business achieved growth during the year FY ’20 compared to previous year despite few adverse effects, some of them affecting the company and the industry, especially in Q4 FY ’20. First impact, government-mandated 0 MDR on UPI and rupee transaction from January 1, 2020, affecting Q4 revenue. Second, lockdown announced in last week of March 2020, which has resulted in customers canceling airline, train and bus travel, hotel reservation and many such transactions that were already done earlier, leading to a huge increase in refunds of transactions and also types of online retail portals were down in most of the month of March. That was mainly due to inability to deliver goods because of lockdown. Third, there was significant increase in low MDR and flat fee transaction related to recharges, utility payments, education, et cetera, which increased volume, but impacted revenue. Fourth, severe pricing pressure from the heavily-funded competition. However, the payment business recorded a strong volume of 147 million. That is up by 28% year-over-year and recorded highest ever quarterly volume of 40 million in Q4 FY ’20, that is up by 39% year-over-year.

Our net take rate remains almost flat compared to FY ’19 despite 0 MDR on UPI and RuPay cards. With newer product launches, especially on issuance card like secured lending, prepaid corporate card, corporate credit card, et cetera, and expanding into international markets, we will be able to improve our net take rate in payment business going forward, which will enhance our operating and profit margins. EBITDA for the year was INR 2,167 million. EBITDA margin was — for the year was 33.4% compared to around 17% in FY ’19. Improvement in EBITDA margin is on account of operating leverage achieved on growing scale. Profit after tax was INR 1,081 million, which includes INR 83 million of exceptional gains. Growth in operating and profit margins was led by a strong growth in revenue from both payments and platforms rising faster than the rise in costs. This is exactly reverse for many technology start-ups and — where costs rise faster than the rise in revenue. Our philosophy remains to earn profitable revenue.

I would like to highlight our operational performance on Slide #19, which has led to our robust revenue growth and strong operating and profit margins. We have seen a consistent growth in payment process backed by a strong growth in volumes. Total payment processed for the year were INR 622 billion. That is a growth of 26%, and number of transaction grew to 147 million. That is up by 28%. Payment value and volumes processed in UAE in FY ’20 increased by 40% and 44%, respectively, compared to same period last year.

In the month of March 2020, before complete lockdown from 1st to March 24, we were at an annualized run rate of processing around INR 750 billion in India alone. The average daily processing value fell by 40% in lockdown period of March from 25th to 31st compared to pre-lockdown period of March and average daily volume fell 30% for the same period.

In April, the month of complete lockdown in India, there was a dip in average daily processing value and volume compared to March 2020. And average daily processing value fell 40% and average daily volume fell by over 20%. However, in May, we achieved 32% growth in average daily value and 14% growth in average daily volume compared to April. As there were partial relaxations in May, with further relaxation announced from June, we believe usage will return to the normal and start growing. However, in UAE, we observed a different trend. The average daily value and volume, both have increased in April as well as May, month-on-month. Average daily value increased by 29% in April over March and 10% in May over April, and average number of daily transaction increased by 37% in April and 7% in May.

We are hopeful that overall digital transactions in economy will increase, and we will see growing trend on our platforms too, coupled with launch of new businesses and international expansion. The bill payment value and volume processed through our BillAvenue platform increased by 91% and 93%, respectively, in FY ’20 over FY ’19. We have a strong strategy in place to grow the transaction volume and value, which we discussed in previous quarter. This strategy has helped us to see consistent business growth.

Moving to Slide 20. We have generated positive cash flow year after year due to our CapEx-light model. Our CapEx has reduced year after year, which has helped us to generate strong cash flow. We have consistently converted EBITDA to cash flow, and we have a cash conversion ratio of above 100%. Prudent and optimum use of CapEx helps generate surplus cash, which the company can use for organic and inorganic growth.

Moving to Slide #21. We have an efficient capital allocation strategy to generate high rate of free cash flow conversion and maximize shareholders’ return. We generated free cash flow of — that is before working capital, INR 1,630 million, in FY ’20 compared to only INR 1,975 million in FY ’19. We have negligible debt. Our CapEx requirement for running the business is low, which allows to efficiently use capital, generate strong cash flow and maximize shareholders’ returns.

With that, I would like to hand over the call to Vishal bhai to throw some light on unlocking shareholders’ value before opening the floor for Q&A.

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [6]

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Thank you, Hiren. So I’m on Slide 23, where we talk about the demerger and subsequent listing of our noncore businesses that has a potential to unlock value for our shareholders. Last year, we decided that we are going to focus on 2 specific verticals. One is digital payments, as in fintech, and the other was software platforms. We continue building up on that. The noncore pieces of our business were the ones that we have divested. And we have a potential to unlock significant value for the shareholders with the subsequent listing.

If you go to Slide 24, we’ll sharpen our focus on the core business. And like Hiren mentioned, we want to consistently convert EBITDA into cash flow. We are determined to expand into various international markets. We have built out a unique proposal called country-in-a-box, whereby to open up a new country, it will require a set of individuals, a set of processes and a set of systems that allow us to replicate the success that we’ve had in India, in UAE, into other geographies. We will continue building up on that strategy, as we grow into other territories. We have a very highly experienced management team, and we have a very strong business team that will lead us to the next phase of growth.

To summarize, we are very excited about the potential of combining our acquiring — very strong leadership position in acquiring payments for merchants with issuance, whereby the entire scope, all the way from customer to the merchant, the transaction flows through our framework. And when Vishwas talked about secured lending as well as our acquisition, whereby we will get additional insights into corporate cards and other opportunities, we believe that we become a one-stop solution for global fintech as well as India fintech opportunities.

With that, I would like to open up the floor for question and answers. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of [Deval Shah], an investor.

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Unidentified Participant, [2]

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Hello?

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Operator [3]

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Mr. [Deval Shah], your line is in the talk mode.

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Unidentified Participant, [4]

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Hello?

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Operator [5]

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Mr. [Deval Shah], your line is in the talk mode. There seems to be no response from the current participant. (Operator Instructions) The next question is from the line of Deven Choksey.

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Deven R. Choksey, K.R. Choksey Shares & Securities Private Ltd. – CEO and MD [6]

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Yes. A couple of questions. I think, one, what is the COVID impact as far as I think the business of the company is concerned, because in the last 2 months, I think we have had the situation of most of the businesses not working. And probably, I think, as a result of which our transaction-based business also may have got affected. So what is the impact on the business? That is one question.

And second, if you could throw a little bit more light on the Slide #23 on which I think you said about the monetization of the benefit to the investors, although it is going to be unfolded, if you could throw a little bit more light on this?

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [7]

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Sure. So as far as the impact to COVID is concerned, the month of March was when the lockdown was announced. And prior to the month of March, before the lockdown was announced, we were processing in digital payments at an annualized run rate of INR 750 billion. We were having a very strong addition of merchants and that continued throughout the year as well. Post March 22, we had a fall in terms of digital transactions. On an average basis from the March 22 to the end of March and I used the word average because in certain places, it was explicitly more than what the numbers I’m talking about, but we found average reduction in digital payments volume of 30% per day. In the month of April and May, we had seen that the volumes went further down in the month of May, and we saw a reduction in April of about 40%. But in May, we saw a significant improvement from April levels and the volumes climbed up. We believe that post the lockdown, we have almost reached the pre-COVID level in terms of transaction processing. But the month of March 22 onwards and the month of April, we saw a 30% to 40% reduction in the digital payment volume. It was primarily because most of the activities in e-commerce, most of the activities in hotels, restaurants, we have got a few thousand hotels on us, a lot of airline volume, all of that volume in digital payments dried up. So we were able to see a 30%, 40% impact in the month of March and April. But in May, we saw about a 30% increase from April levels. And in the month of June, we are almost at a point where we believe we are processing volumes to the pre-COVID level. We believe that not every business has still come up online and working regularly. I think there’s a significant opportunity for us to build up on the volumes when the entire ecosystem of our merchants are able to process. But with all the activities that we had done in the past year in terms of allowing a lot of utility companies, a lot of educational institutions and many of the merchants who we signed up with, in terms of addition of merchant base, we were able to get a good traction in the month of June.

As far as the other opportunities in UAE and other geographies are concerned, specifically in UAE, we saw a good improvement in volume. While we are in the top 3 payment solution provider in the Middle East, in the UAE, we saw that volumes continued to build up. And even during the Ramadan period and the holiday period, we were able to see good volumes. Internationally, Saudi, we have opened up. We are still in the growth phase in Saudi, we’ve added merchants, and we have started processing in Saudi; UAE and Saudi account for 60% of all the volumes in the GCC countries. So this is pretty much the impact. We believe that as this pandemic has wreaked a havoc and slowed down the economic growth, while we continue to evaluate what is the impact to us and there’s uncertainty around it, the thesis is that many of the businesses that have an off-line presence may have to build out an online presence because that’s the best way to engage customers with your products and services. And we think that as more and more businesses want to build out their online presence, we’ve got the tools, the software and the frameworks to be able to enable them to build out their presence. And we also have a phenomenal digital payments horizontal layer that allows them to capture payments as well. Very recently, in the past few weeks, we have seen that there is a significant opportunity also to take a look at the issuance space and specific in the card issuance space for corporates. And that’s one of the reasons why we have acquired Cardpay.

So as a result, we think that as we build out the issuance business, there is an opportunity we have opened up secured lending, which is what Vishwas highlighted, which allows us to monetize even further on top of the volumes on acquiring that we have build out, by allowing merchants to do early processing earlier, they can get their money faster compared to a T+2 settlement.

So with these kinds of initiatives, we think that with COVID and life post-COVID as well, there will be changes in terms of how business will interact. And we think that we’ve got the tools and the frameworks to be able to offer to merchants, who would want to build up, specifically around the online framework. So that’s as far as the impact of COVID is concerned.

Mine — I think there is also in January, government announced RuPay cards and UPI-based transactions at 0 MDR. And while there was some impact in single-digit percentage for us, but fortunately we were able to continue building up our revenue base as well as our transaction volume in that quarter. So this is as far as the COVID impact, we believe, is concerned.

Your second question was — can you please repeat?

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Deven R. Choksey, K.R. Choksey Shares & Securities Private Ltd. – CEO and MD [8]

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Yes. It is basically to unlocking of the valuation for the shareholders.

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [9]

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So there were certain noncore businesses. And as a reminder, there was a marketplace business that we used to operate. And there were business, whereby a lot of SMEs were able to build out their online presence as well. And we also had partially-owned subsidiary company called DRC Systems, which provided software services. And so we said that the focus of the company will continue to be enterprise platforms, which are highly scalable, highly customizable, multi-tenancy, deep integrations, and many others, along with digital payments and build out a fintech framework and a fintech opportunity for us. And that became the focus of the company. The noncore businesses — we have filed for divesting of those noncore businesses, which have opportunity to get listed. And as they get listed, the shareholders of Infibeam will get an opportunity to own shares of additional listed companies as part of this demerger.

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Deven R. Choksey, K.R. Choksey Shares & Securities Private Ltd. – CEO and MD [10]

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Will the shareholders themselves will get it? Or the company will get the shares, Infibeam will get the shares?

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [11]

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The shareholders of Infibeam will get the shares. In other words…

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Deven R. Choksey, K.R. Choksey Shares & Securities Private Ltd. – CEO and MD [12]

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Individually?

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [13]

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Yes. That’s correct. All right. So the individual shareholders of Infibeam will get shares.

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Deven R. Choksey, K.R. Choksey Shares & Securities Private Ltd. – CEO and MD [14]

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When this is expected to happen?

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [15]

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It’s a regulatory process. They do have status updates. I think we believe that while we can’t comment specifically on the time lines, but we had filed in the month of October in 2019, and we believe with the due process that we’ll be able to get additional insights on that.

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Deven R. Choksey, K.R. Choksey Shares & Securities Private Ltd. – CEO and MD [16]

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Is there a possibility to work out, I think what kind of valuations the companies could command, I think on a ballpark basis, from a comparative basis, is it possible?

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [17]

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Yes. That will be part of the filing. So in other words, if you recollect, we had divested our entity in 2019, which is NSI into Suvidhaa. And there will be — there was a relative valuation. It was a cash and share transaction. And as we demerge portions of our SME business into that enterprise that it will allow shareholders of Infibeam to own shares of a listed company. So the same thing with DRC as well as Suvidhaa. There is a swap ratio as well that is defined in terms of number of shares, and try to get a valuation out of the same.

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Deven R. Choksey, K.R. Choksey Shares & Securities Private Ltd. – CEO and MD [18]

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Vishwas bhai, I think, one question for you. I think you mentioned about the GeM was launched the new version in the platform. Can you (technical difficulty) it could mean for us and what would be the impact on transaction volume, understanding the volume to possibly increase? And what is the current state of volume at (technical difficulty)?

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Vishwas Ambalal Patel, Infibeam Avenues Limited – Executive Director [19]

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Can you repeat the question? Vishwas here.

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Deven R. Choksey, K.R. Choksey Shares & Securities Private Ltd. – CEO and MD [20]

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Yes, Vishwas, Deven here. Yes, the point was I think you’ve mentioned about the new version of GeM, which got launched. And probably you’ve entered it, I think it is getting into a higher amount of volume in the business. I was just trying to understand, I think what it could mean for us now? And what was it, I think, last year versus what is the run rate now which is currently operating?

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Vishwas Ambalal Patel, Infibeam Avenues Limited – Executive Director [21]

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Okay. Vishal, you can answer?

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [22]

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Sure. So most of the stats, of course, we don’t talk about specific clients, but the stats of GeM will be available online on gem.gov.in. The new version, which is GeM 4.0, has been announced. And in that, the experience of the buyers and the experience of the sellers, will have a tremendous upgrade in terms of the interactions that we will. So if you will perhaps appreciate that in any given marketplace, as you keep on improving with the amount of transparency, compliance and governance, the experience of both the buying behavior and the buyers, in this case, being specific institutions and certain areas of the government as well as for the sellers, that it provides a much smoother interaction. And as more and more products and services keep on getting listed that the potential of more transactions become very high.

So to give you an example, not just products, even services have started getting listed. And that’s a completely different space that was not perhaps part of any marketplace before. So in terms of commenting on the volumes, of course, we would not be able to comment specifically on client-specific numbers. But we believe that as interactions keep on growing and improvement in terms of experience between buyers and sellers, that you would see an improvement in terms of numbers. As far as the total amount of volume of transactions processed, I think that number is out there on GeM, it’s upwards of — it’s closer to INR 50,000 crores. So Srikanth may want to add, if Srikanth is on the call as well.

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R. Srikanth, Infibeam Avenues Limited – President of Finance & IR [23]

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Yes. Actually, the GeM project was started — commercial project was started in 2018, as you all may be knowing. And we are in the project phase, and we are in the development phase, but at the same time we were in the commercial phase. And the 2018, it was actually kickstarted. And 2019 was fairly full year. And — but for COVID, the volume will be, we believe that it could be significantly higher. But having said that, it is a public record of INR 50,000 crores is basically the procurement transaction value as we speak. And I think for all practical purpose, government is very bullish actually on this e-procurement business. And slowly, steadily, they are adding all the institutions, most of the institutions under one umbrella in order to have a transparency, in order to have the procurement actually in a very professional manner. This system is actually a world-class system, so no doubt about it. And in fact, it’s been appreciated actually by the department several times in several meetings, in several takeaway meetings and so on.

So I think in any project of this kind of a nature, the first 3 years is always a slow growth in terms of procurement because India is such a large country, it has to get an acceptance actually from all the users and so on and so forth, that trend is actually getting over. Now — but for COVID, we would really expect some significant numbers. And we believe that the traction is on and, in any case, the good news is that our revenue numbers are based on transaction based. And therefore, as the transaction volume goes up, our revenue numbers will also go up.

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Deven R. Choksey, K.R. Choksey Shares & Securities Private Ltd. – CEO and MD [24]

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Nitin Gadkari has been saying that he wants to involve the MSMEs to come on a particular platform (technical difficulty). So is this already started happening? Or it is to happen?

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [25]

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Can you repeat the question, actually? Not able to understand.

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Deven R. Choksey, K.R. Choksey Shares & Securities Private Ltd. – CEO and MD [26]

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Yes. Nitin Gadkari has been saying that all MSMEs wants to be on this platform. And he wants the growth of the MSME for this platform itself because I think they want to open a domestic as well as for the overseas requirement of the customer. So is there any progress in this direction?

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R. Srikanth, Infibeam Avenues Limited – President of Finance & IR [27]

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Yes. It’s actually a great initiative actually by Government of India. And it is actually good news is it is coming directly under the radar of PM office. And so I think for all practical purpose, the government is extremely committed, and it is actually happening in pockets. And we believe that it will take some time, actually to have a shape, but I’m sure it will happen.

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Operator [28]

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We’ll move on to the next question, that is from the line of [Deval Shah], an investor.

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Unidentified Participant, [29]

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Hello? Hello?

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [30]

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Yes, yes, we’re hearing you [Deval Shah].

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Unidentified Participant, [31]

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Yes, here is, [Deval Shah]. In previous quarter, there has been mention that company is at a very advanced stage with very large enterprise. But in this quarter’s presentation, the company has not mentioned it. So what is the status of that particular matter, what is that, and we would like to know about in detail?

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [32]

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Yes. I think what we said in the previous quarter about this large contract is actually true. And by virtue of a large company, a large contract, it is taking actually time. And the consummation is taking a little bit of time from the contract version point of view. And the main reason is actually the last 70 days of COVID is definitely one of the main reasons. I think the traction is on. And as and when the contract gets consummated, we will be able to come back to you.

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Unidentified Participant, [33]

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So it is still going on, right?

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [34]

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It’s — the traction is on.

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Operator [35]

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(Operator Instructions) The next question is from the line of Deven Choksey.

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Deven R. Choksey, K.R. Choksey Shares & Securities Private Ltd. – CEO and MD [36]

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I’m inclined to ask one more question, Vishal bhai. The amount of cash, I think, that you are now having in the balance sheet, which Hiren bhai mentioned, I think what is the plan? What exactly you want to do with that cash?

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [37]

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So 2 things. One is we want to continuously generate, maybe convert EBITDA to cash flow. So that’s been the philosophy of the company. The cash, which is there, one other things that we are looking at doing, is what Vishwas talked about, which is along the lines of secured lending. So when I talk about secured lending, for the merchant, for customers who pay the merchant, there is typically a T+2 or T+3 settlement cycle. And in the COVID era, everyone, all merchants they would be focused more on cash flow. So in other words, they would perhaps be okay giving additional bps a day to get the money faster. And in order to do that, the reason we call it secured is because it is already there in the bank escrow account. It just takes — it’s a batchy process. And to give you maybe an average example, when the customer swipes a payment instrument, it takes at least T+1 day for the amounts to show up into our escrow account. And it takes T+2 days for us to remit it into the merchant account. Now if you are able to provide and charge additional bps by settling with the merchant faster, think of it as almost similar to settlement funding, then you could start earning additional bps in additional amounts on every transaction. That’s one thing that we think is interesting.

The second thing is international expansion is a very important opportunity for us. We have experience on how to build out UAE and make it profitable. We know we can build out Saudi and make it profitable. U.S.A. is a humungous geography, U.S. is the second largest digital payments setup in terms of the market segment share in the world. So we think that some amount of forward investing into those geographies to build out a highly profitable and cash flow positive business will be also very valuable. I think that we want to track how COVID plays out. Fortunately, digital payments would be the first one to see a jump when this lockdown opens up. We think that we want to be appropriately conservative in terms of how we deploy cash and where we spend our efforts. And our focus is razor-sharp on digital payments and frameworks and platforms. So I think with that said, I think international expansion in one place and second is the issuance or the secured lending opportunities will be the second opportunity to take care of — take a look at.

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Operator [38]

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The next question is from the line of [Tarun Gupta from Infibeam Avenues Limited.]

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Unidentified Analyst, [39]

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I was just wondering about like I have been holding the shares for the last 2 years now. And probably we saw that downfall from 250 and coming down to in the range of 50 and all and the share price has been hovering in that range itself. So do we — I mean are we planning to get in touch with some institutional investor, who is willing to buy a stake in the company? So that even the investors can — so, I mean, there is an appreciation in the value of the shares?

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [40]

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Srikanth, do you want to take that?

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R. Srikanth, Infibeam Avenues Limited – President of Finance & IR [41]

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Yes. I think, as Vishal bhai was mentioning, cash is king, and cash is always required actually as a growth capital to seed our expansion actually, both domestically and also internationally. Company is very actively looking for, irrespective of the valuation, valuation is not the criteria, but irrespect — independent to that of valuation, company is actually looking at raising growth capital actually from the prospective investors. And we are actually in talks actually with some of the prospective investors — some of the very large groups and so on in the U.S. And in fact, with one of the investors, we even signed a nonbinding term sheet actually to raise capital. So at the right point of time, we will get into the very active conversation actually. And should there be a deal, and we will definitely be able to consummate the deal, and we should be able to really communicate to the market.

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Operator [42]

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Thank you. Ladies and gentlemen, due to the time constraint, that was the last question. I now hand the conference over to the management for the closing comments.

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Vishal Ajit Mehta, Infibeam Avenues Limited – MD & Director [43]

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Thank you all for joining us and we hope that you’ll be able to join us again. Keep safe and we will keep you updated. Thank you all.

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Operator [44]

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Thank you. Ladies and gentlemen, that concludes today’s conference. Thank you for joining us, and you may now disconnect your lines. Thank you.