Ladies and gentlemen, good day and welcome to Q2 FY 2023 earnings conference call of Infibeam Avenues Limited, hosted by Go India Advisors. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rajat Gupta from Go India Advisors. Thank you, and over to you, sir.
Yeah. Thank you, Rutuja. Good afternoon, everyone, and welcome to Infibeam Avenues Limited earnings call to discuss the Q2 FY 2023 results. We have on the call with us today Mr. Vishal Mehta, Managing Director, Mr. Vishwas Patel, Executive Director, and Mr. Purvesh Parekh, Head Investor Relations. Also joining us on the call today is Mr. B. Ravi. Mr. Ravi was the CFO of Sadhana Nitro Chem for over nine years and has a wide experience in corporate strategy and finance. He's also advising Infibeam on similar fronts of corporate strategy and finance as an independent consultant. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the company faces. I now request Mr. Vishal Mehta to take us through the company's business outlook and financial highlights.
Subsequent to which, we will open the floor for Q&A. Thank you, and over to you, sir.
Thanks, Rajat, and good afternoon to everyone. Thank you all for taking time to attend our earnings call today. I hope you've seen our earnings document, which has been uploaded on the exchanges as well as the company website. To start with, in the last few years, your company has made investments in building an incredibly strong payment infrastructure which focuses both on merchants as well as banks. We've evolved to offer a very inclusive and scalable solution which simplifies business operations and transaction processing for merchants, government enterprises, as well as banks. The strength and scalability of our business model can be seen from our performance and strong profitability, and we are very excited to talk about the performance of this quarter as well as ongoing forward.
This quarter we've delivered a superior operating and financial performance across the board, and I'll discuss that in detail. Firstly, let me focus on a few strategic developments. The company has received in-principle approvals from RBI to operate as a payment aggregator. We now have two licenses from RBI, one for operating as a payment aggregator and the other one is for bill payments under the Bharat BillPay infrastructure. RBI has issued a framework under which payment aggregators are mandated to obtain a license for acquiring merchants and providing them with the digital payment acceptance solutions to ensure safety of customers as well as for merchants. This development will give us a substantial boost to expand our reach of payment processing in online segment as well as in particularly offline segment.
We've also applied for one more license, which is under the New Umbrella Entity license through our subsidiary in consortium with some of the reputed and experienced enterprises that will allow us to be at the center of all payment flows. Continuing on with our omnichannel strategy, after launching CCAvenue omnichannel mobile app, which is featuring India's first pin-on-glass solution, and we named it CCAvenue TapPay. The company has also made some strategic investment by taking up a 50% stake in a Gujarat-based software startup called Vishko22, which is backed by the erstwhile founders of yepme.com. The company is going to focus on omnichannel enterprise software products along with payments, which will make it a B2B e-commerce inclusive framework.
Since our company has launched CCAvenue TapPay in July 2022, we have so far deployed CCAvenue TapPay across more than 15,000 terminals, and we plan to take it to 1 lakh by end of this financial year, FY 2023. We are targeting to reach a million merchants by the end of FY 2024 on CCAvenue TapPay. I will now briefly talk about our financial and operating highlights for the quarter. We achieved the highest ever quarterly and half yearly gross revenue as well as net revenue on both standalone and consolidated basis. This quarter, our gross revenue and net revenue grew 53% year-over-year and 25% year-over-year to INR 435 crore and INR 70 crore respectively.
Our India payments and platform business on a consolidated level also includes international payments, global payments in some of our other subsidiaries. Each of them have shown substantial growth. We are confident of maintaining this growth momentum for the future as well. On a standalone basis, our profit after tax was INR 47 crore, which includes DRC Systems' stake sale impact. Consolidated profit after tax stood at INR 40 crore, and we are confident in achieving our guidance of INR 110 crore-INR 125 crore in profit after tax in FY 2023. Our transaction processing volume for this quarter crossed an all-time high of INR 1 lakh crore, including the non-NDR-based payment transaction processing volume. Both payments and GeM and the platform business were an all-time high. This was primarily on account of increased contribution from COVID-impacted sectors, which are travel, hospitality, entertainment, et cetera, and a rise in digital transactions.
Strong tailwinds, customer adoption and support from RBI environment will help Indian digital payments industry grow at 30% or more for the next five years. Our gross take rates in Indian payments business were close to 90 basis points, and net take rate came in at 7.2 basis points, which have been steadily improving since the last four-five quarters. You can refer to the slide six, which will give you some indication on how our net take rates have been improving in the past few quarters. Higher contribution from credit cards, about 47% versus less than 40% year-over-year, has led to a higher gross take rate.
As the sectors which we talked about, which is travel, hospitality and entertainment grow, the credit card usage in these sectors is higher and hence our gross take rate comes out to be higher. As you can see from our slide six of the presentation, both our India and payments net take rates has been continuously increasing. We are committed to take this to a double digit in the next few years through several business initiative offerings. One of them being offline expansion, where we have launched CCAvenue TapPay. Our payment infrastructure services to banks as well as our international expansion. We continue to build our merchant base as we continue to add more than 8,500 merchants on a daily basis. The number of merchants increased 77% to 7.3 million during Q2 2023.
This is on backbone of our business and forms the base of all our future cross-sell opportunities. We are confident of growing this merchant base to over 10 million in the next two years. Under our enterprise marketplace platform business, GeM continues to achieve record GMV quarter over quarter. In the first half, GeM GMV has crossed INR 75,000 crore, and we are hopeful that it will double by the end of this financial year. Additionally, our interest in Vishko22 startup to develop omnichannel enterprise software products and services will also go a long way. This will allow us to scale our platform business. Our balance sheet continues to remain strong. We had a cash of INR 316 crore at the end of second quarter, up 50% in six months.
Our capital expenses have reduced from INR 83 crore in 2021 to INR 16 crore in the first half of this year. A lot of CapEx cycle is behind us, and we believe that the current business will continue to evaluate opportunities and look at additional CapEx and expansion. We believe that whatever we have implemented so far, the CapEx cycle is behind us. We want to offer a very differentiated product offering in all of our other segments, and we want to grow our market share in payments by targeting offline merchants and generating higher cash flows and returns for our shareholders. Mind you, all the merchants that we talked about are online payment processors with us, and that entire base of merchants can potentially also use other offline solutions.
We have a significant merchant base with us where we can tap into to open up the offline payment solutions to CCAvenue TapPay. Our strong performance in the first half of this year gives us confidence of delivering higher than our stated revenue and operating guidance, which is mentioned in slide 12. Our confidence in this business can also be seen where we have continued to look at investing in our own company through preferential allotment on a fully convertible basis. We have continued to evolve the business. The funds that we have, we will continue to look at it wisely in terms of where we can get the returns for our shareholders and do significant contributions and investments in those areas going forward. I think that is all for now. I'd like to pass it on to Vishwas for his comments.
Vishwas, over to you. Thanks, Vishal Mehta. Ladies and gentlemen, thank you for joining us today. This is an interesting time for our company, and we are extremely excited with the way our business is progressing. Payments has got to take a center stage across all businesses, and it's a mission-critical subject in every aspect of life. This is where we want to solve the challenges across the economy to ensure smooth flow of funds. I would like to start by talking about TapPay. I'm extremely happy with the way this product has ramped up, and just within three months of our launch, it's now present across 15,000 merchants who have started processing through the solution. The CCAvenue omnichannel mobile app is useful for both small merchants and vendors and to large corporates.
The omnichannel app aims to address the challenges of inadequate payment acceptance infrastructure and eliminate barriers to seamless digital adoptions. We're already testing it with a few large enterprises, and we believe it will immensely help these large enterprises to have a single view of sales and settlements, and a single point of contact for all resolutions. We are confident that by end of this year we'll activate almost 100,000 terminals and eventually reach out to millions of merchants globally. In our international markets, we are seeing increasing business in the UAE. By end of this financial year, we plan to start payment business in Saudi Arabia and Australia, followed by USA, and then proceed to multiple international destinations to offer digital payments and payment infrastructure services.
We are targeting offline payments to contribute around 20%-25% of our overall payments CPE by the end of financial year 2025. We'll be offering these services to merchants and banks globally. The Indian payment license will also help us in gaining trust among the merchants and banks, and we believe will help us to penetrate into the hinterlands, and will also help us to expand in international markets, and it will instill trust in our partners. We are also participating in similar license requirement in the UAE and also Saudi Arabia. Hence, like India, UAE and Saudi Arabia will also be a regulated market.
We are focused on building frictionless financial technology and digital payments, which will provide a seamless and holistic digital payment solution to merchants across, along with access to capital at the click of a button. Therefore, our comprehensive offerings, including platforms, payments and finance, we want to make the merchants digital, credible, and hence bankable. Our principal focus has always been our merchants, and we shall continue to develop differentiated sets of solutions for our audience. Now with this, I'll open the floor for questions. Thank you, everybody.
Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Gaurav Sharma from HSBC Securities and Capital Markets India Pvt Ltd . Please go ahead.
Hello. Yeah. Am I audible?
Yes, you are. Please go ahead.
Sir, my first question is regarding that you mentioned that your payment net take rate is constantly improving both in India as well as the total payments. You mentioned that 47% is contributed by the credit card usage. What are the take rates on credit card usage? Also, what are the payment models for the balance 53%, if you can mention. That is one. Sir, I also saw that the gap between the Indian payments and total payments is getting closer. Do you expect that Indian payment NTR will cross over or it will match the total payments NTR? If yes, then what will be the timeframe you would like to give? These are my questions, sir.
First question I understood, so I'll answer that first. I think the take rate is improving. You have seen this quarter, right? Across credit and debit, both, across all options. 95% of the transactions we process are credit and debit, and only 4% or 5% accounts for UPI. So that take rate, as we said that, as more are kind of customers that the travel hospitality go online, the take rates are improving. This quarter, we have seen the take rate improving to 7.2% from 4.8%, which was year-on-year quarter. That is increasing year on year.
As more merchants as we go into the holiday season, we hope to keep bettering that take rate. The second part of the question, can you repeat it? Because I think it's briefly lost your voice on the second question.
Yeah. Sure, sir. If you look at the slide number six, as you mentioned, we can see that the Indian payments NTR and the gap between the total payments NTR is coming closer. It is bridging the gap. Just wanted to know, do you see going forward that Indian payments NTR crossing up the total payments NTR? And if yes, then what is the timeframe? Also, a small question on OpEx side, since we see that the OpEx has frequently increased significantly. If you can just mention the factors that one may be the, like, technological expenses, and if you can also mention some other factors, it will be great?
Sure. This is Vishal here. Basically, if you look at the first question, which is the net take rate. Yeah, it has been improving. India has shown a lot of improvement. The improvement is primarily because a lot of factors that were hit by COVID, they've started coming up. You know, as a result, I think that we are also seeing some traction. Second is the expansion of our merchant base. As we expand into the merchant base and go into smaller merchants, our take rates are also improving through that. Earlier I had mentioned that we are adding about 8,500 odd merchants every day. As a result, when you go deeper into the ecosystem, I think it helps us. The third is the offline payment mode, which is expected to help us.
That's why we think that I'd mentioned that we will go into a two-digit take rate in India. The reason is because offline payments, you know, the net take rates are better, because the risk is lower because the card is present compared to card not present. As a result, I think, you know, these combination of factors will help us keep on improving the net take rates we believe in the coming quarters, which will help us get to a double-digit, hopefully in the next, two years, maybe earlier. We are confident that we are going in the right direction there. As far as the second question, also, [inaudible], you had mentioned that the take rates international and overall and in India, it's also coming up.
I think when we deploy such solutions, internationally also our take rate should also improve there. We think that the solutions that we build out, while we will test them and scale them in India, we'll also deploy them internationally, in international regions. That will help us in terms of expanding our overall rates both in domestic as well as in international markets. To answer your question, I don't think that you know they would be map to map, but we'll keep on with some minimal latency, we'll open up. For example, if we have a TapPay, we are opening it up in international regions, in UAE as well simultaneously as we are doing it in India. We will keep on deploying in all the platform and the frameworks for payment infrastructure that we build out.
We are doing it at a global level, not just India level. That's how we have been architected. To your second point, in terms of operating expense, you know, we are continuously evolving. We will invest ahead of time in anticipation, and I think that we are careful in terms of how we want to plan and project and we monitor how we are performing at a regular basis. I think it's just ahead of our business expansion. We want to continuously evolve our frameworks and build out a very strong ecosystem. When we talk about ecosystem, it's platform, payments and finance. That ecosystem will enable our merchants to be able to perform better, have more stickiness and you know, get into very deep product-based approach.
Things like analytics, you know, which potentially allow merchants to do a lot more than what they are doing today. Merchants across sectors will be able to utilize those kinds of services, which will enable them to create more demand, generate more volume, and through that we will also get an improvement in terms of what we are working on.
Okay. Understood, sir. Thank you and congratulations for a great set of numbers, sir. Thanks a lot.
Thank you. The next question is from the line of Anuj Narula from JM Financial. Please go ahead.
Thank you. Thank you, sir, for taking my question. I have just one question.
I'm sorry to interrupt you, Mr. Narula. May we request you to speak little louder?
Am I audible now?
Yes, please go ahead.
Yeah, sure. Thank you for taking my question. My question is, how many payment aggregator licenses are already given, and how many do you think RBI will give? As per some media reports, close to 200 applications have gone to RBI. Even if RBI gives license to 50%, will the competitive intensity remain high and the industry can never expect to be profitable?
I'll take that. Vishwas here.
Yeah.
From what we, the RBI has not officially put out the number of licenses given or the applications received. From our industry sources and what we hear from the press, 150-odd licenses were applied for and there were many rejects. What we know and what certain persons have got in principle approvals, the count last that we could get who have confirmed whether they received this license, there is something around eight-10 parties only who have confirmed to have got the licenses.
Mm-hmm.
Out of the 150-odd who must have applied. That is our sources. That will be the thing. I think formal announcement by RBI will clear the things that is there. In any sense, what we are looking at here is that we are not aiming at a small market. We are aiming at a $2 trillion digital payments market. Today, only 27% of the market is digital. There's a long way of almost 73% which still has to be tapped. We are looking at millions of merchants. Like, there are like a million schools in just four states which are still not accepting online payments or fees online. There's a huge takeaway.
We are still battling INR 32 lakhs of cash that is there in the market. Going digital and it is only eight-10 people looking at such a broad-based opportunity to encourage digital payments. I think we are well-positioned, well-placed with our platform payments and finance, you know, business model.
Okay. Got it, sir. Thank you, sir. That's helpful.
Okay.
Thank you. The next question is from the line of Rahul from Lucky Investment Managers. Please go ahead.
Thank you for taking my question, sir. Just one first question was on the substantial difference that is existing in the reported PAT in the consolidated and the standalone number. The standalone number is close to INR 47 crore, the consolidated number is about INR 40 crore. I just wanted to know this level of difference didn't exist before, so just wanted to get a sense of what it is.
The expectation should be that it won't be so such a large difference. This particular quarter we had a divestment, and as a result there is a slight differential that you will see. Typically you will not see such a large difference, going forward.
Okay. It's basically a function of the divestment and not much else.
That's right. Correct.
Sir, how much was the profit that we kind of booked in for due to this divestment?
For this quarter it was INR 25 crore.
INR 25 crore. Lastly, the question I had was guidance that we have given. I'm assuming that doesn't include this divestment profit. It's. We are purely talking about operational guidance there in terms of-
That's correct.
Okay. Okay. Yeah, those were my questions. I'll come back for more. Thank you so much.
Thank you. Next question is from the line of Vinod from ICICI Securities. Please go ahead.
Thank you, sir, for taking my question. Sir, my question is, what's the expected contribution, you know, from the offline in the next two, three years? What's the current status since launch in July?
Sure. Basically we've launched it in July of 2022, and in the last quarter, we have already deployed 15,000 implementations, terminals and merchants. Our expectation is that, you know, we will get to at least 100,000 terminals by end of FY 2023. Our expectation, and this is for the India market. We think that our target for the offline merchant is at least a million by end of 2024. I think, you know, from a current state of 15,000, we would want to reach a million merchants by end of 2024. That's our, you know, guidance, you know, as far as what we'd like to accomplish in India.
The second thing is that, you know, in terms of, you know, the base, we have several million merchants who use us for the online payments. That becomes a very right base to also offer offline solutions and payments to them. Couple that with our RBI-covered licenses of payment aggregation, it becomes, you know, very credible solution for merchants to be able to utilize our solutioning across. That's. If that answers your question, I think, you know, you know, that's our-
Yes.
perspective going forward. Yeah.
Yes. Thank you so much, sir. Congratulations for couple of numbers. Thanks.
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Monaami Manna from KJMC Shares and Securities. Please go ahead.
Yeah. Good afternoon, sir. Thanks for sharing a great set of numbers. I have few questions. Like you said that you are now having around 7.3 million of merchants under your belt, and it is growing at a rapid pace. In Q2, you have witnessed around 8,500 per day. You were also saying that other than domestic market, you are also foraying into the international market, especially UAE, which is a lucrative market. Just wanted to get a sense. I mean, your net take rate, I mean, how will it differ from the domestic market to international market? Whether, I mean, in the international market, the margins, I mean, the basis points are higher.
I mean, I'm not asking for the exact numbers, just to get a sense. Because here there is a I mean delicate play on the volume against the I mean the basis point. As a company, we have to balance it quite well so that our margins also increase and at the same time we also don't compromise on the volume. Is it possible from the international market to have a better margin from the domestic arena?
Yeah. You know, from our perspective, and then Mr. Vishwas Patel can add in. International, typically the margins are better in the international markets compared to the domestic markets. It's a general statement. The competitive intensity, of course, is there, both in international as well as domestic markets. You know, India is far more evolved in digital payments than many of the other markets. The solutioning that we build out for India finds a lot of propensity and applications for the international markets. Talking about UAE is a very interesting market for us, and we've kept on expanding in that market as well. The point is that we are only doing online payments there.
You know, now with the offline solutions that we have with TapPay, we expect to add tens of thousands of merchants in the international market. For example, in UAE, I'm sure you're familiar, but a lot of merchants are offline in UAE. There is a lot of offline selling of products and services in UAE. Online has picked up with Amazon and Noon and many others. You know, the intensity and the diaspora there is a huge opportunity for offline payments in UAE. If we are able to deploy our solutions with the omnichannel approach in that region, you know, we think that there is a significant opportunity to build upon. To answer your question, no one that we know of today offers the omnichannel solution for payments in UAE.
People offer offline and online, and they're two different solutioning. We're experimenting with large merchants. If we are able to tap into that large merchant base, and where the processing volumes are larger, I'm sure that we will find a lot of affinity even in the smaller base. Today, I think even today our processing volume is significantly large in UAE, and we expect that will keep on growing. To give you an example, I think you know the net take rate for UAE business will be in the practically you know just shy of 10 basis points. So even today, it is slightly higher than what India take rate is.
We expect that will keep on updating and changing as we keep on building up in that region. You know, just so that you know, international net take rates are, you know, if you look at some of the other publicly traded companies, you will find that the take rates are better in some ways. We would want to go and get there. We think that we'll keep on scaling up our solutions, getting the cost advantages, you know, in some ways, through scale, and be able to offer the savings to our merchants, to allow them to grow their business.
Okay. Thank you, sir, for sharing your perspective on this. This helps us. That's all from my side. Thank you.
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Gautam Gosar from Perpetuity Ventures. Please go ahead.Associate Investment Analyst
Hi. Thank you for the opportunity. Basically, I have two questions. Firstly, on your international business. You recently ventured into Australia and launched the payment business there. What sort of revenue or margins and growth you are expecting from there? What are the other countries you are planning to enter this fiscal? What are your expectations from the overall international business for FY 2023, if you could?
Internationally, UAE is our largest market at the moment. You're right, we've expanded into Australia. We are also into Saudi Arabia, as well as in the U.S. With this approach of being able to offer payment infrastructure as a service, we are also giving it to Oman. Bank Oman, Bank Dhofar, they are all using our payment infrastructure. You know that CCAvenue is a brand, and then we also have a payment infrastructure that we open up for banks to be able to give to merchants. In smaller geographies like Oman, where we don't see an immediate value for us to go as CCAvenue brand, we will provide the entire payment infrastructure to a bank and allow them to acquire merchants and, you know, gain from that.
The approach that we have taken is that for certain countries where we don't find merit in going immediately there as a brand and set up offices and set up the infrastructure under CCAvenue brand, we will offer it as a payment infrastructure to such large banks. Just so that you know, 90% of the volume of Oman goes through our payment infrastructure. Okay? We find certain regions in MENA which are attractive for us to go. You know, UAE and Saudi will account for 60% of the volume. But what I talk about is Middle East and Africa. There are some opportunities because those are, you know, there's a lot of opportunity to evolve there. We think that those will be interesting for us to explore.
You know, in Southeast Asia as well, we would want to explore some of the countries. If you've taken up Australia, we'd also explore some of the other Southeast Asian countries to be able to build up our payment network. I think that's pretty much. We haven't, of course, formally announced where else we would go, but you know, Southeast Asia and Middle East are interesting opportunities for us to explore going forward. In terms of countries, we'll go after larger countries where we see a lot of opportunities to build out our brand and go directly there. In smaller countries, we'll offer it as a payment infrastructure, much like we have done in Oman.
To answer your question about our, you know, volumes, I think we think that UAE is, of course, the largest at the moment. We expect that in the next two years, international will contribute to 30% of our revenues.
Okay.
That's from less than five% of revenue today. International should contribute to around 25%-30% of our revenues.
Okay. Got it. Okay.
Yeah.
Thank you for that answer. Secondly, though it might be your highest ever quarterly TPVs, but TPV this quarter again is having seen a great sequential growth given the industry growth happening in the last couple of quarters. Is the competition taking place given the payments growth? What are your expectations in terms of overall GMV growth for FY 2023?
Set the expectation, we've communicated, you know, our guidance for the fiscal year . You know, where we said that, you know, we would accomplish, you know, transaction processing volume of INR 400,000 crore. Gross revenue of, you know, and if you go to slide 12, you will have some indication on that. We've given guidance on gross revenue, EBITDA, PAT, as well as transaction processing volume. I think we are sticking to our guidance. We think that, you know, we will of course have more information to talk about, you know, as we go through the quarters. Typically, you will know that, you know, in the festival quarters, the TPV we'll expect to continue building up. You know, because in Q3 is typically when we have the festival quarter.
A lot of transactions we think happened in Q2 for festival quarter as well. You'll see in effect where you will see Q2- Q3, you know, you won't have a massive growth in Q3 because a lot of festival transactions took place in Q2 as well from our experiences. Yes, the TPV should continue to build up and grow. We think that, you know, going forward, expect that, you know, with the strong economy and the sectors which we talked about where there's significant amount of traction, especially in the entertainment and hotels and many others, we expect that that should continue building up for us. Second is whatever growth from an offline payment perspective, we are going after smaller merchants for acceptance.
We want that if you go to anywhere in the Northeast as well, that you would be able to pay because of our payment solution, which is CCAvenue TapPay not only accepts cards, it can accept any kind of payment instrument, including UPI and others, including QR code through QR code or even LinkPay and many others. I think that there's a lot of. Fundamentally, we want that anyone who wants to make any kind of digital payment to any merchant across the country, they should be able to do it and not be limited by point of sale machine. The thesis comes from the fact that every merchant has a mobile phone, but every merchant does not have a point of sale device.
If you're able to convert the phone into a point of sale device without actually incrementally adding any expense to the merchant whatsoever, it becomes a huge opportunity. You can talk about crore of kiranas being audience for potentially using such solutions. We want to be able to go and deploy it across at least 100,000 implementations by this year and then scale it to a million or more next year.
Got it, sir. Thank you for that elaborate answer. One more question, if I may ask. The EBITDA margins have declined sequentially. If you could like tell us what will be the incremental cost coming from, and what will be the margin range for FY 2023 we should look at?
We're sticking to the guidance of what we had given. We expect EBITDA to come between INR 170-INR 190 and a PAT of INR 110-INR 125 crore.
Okay. Thank you, sir.
Thank you. The next question is from the line of Rahul Jain from Dolat Capital. Please go ahead.
Hi. Thanks for the opportunity and
Your voice is coming muffled. We are unable to hear you clearly.
Any better now?
Yes, please go ahead.
Yeah. Just wanted management's thought on this TapPay opportunity. Of course, you shared lot of input in terms of your target touchpoint audience. Anything you could share in terms of what are the total revenue potential over next two-three years?
Sure. You know, in terms of our expectation, we think that a good 25% odd should come from offline payments. That is typically CCAvenue TapPay in the next two years. As we scale up our business, when we talked about our merchant base that we'd like to reach a million merchants next year, we think that in the next two years of the total processing, 30%, 25% minimum should come out of the CCAvenue TapPay, which is the physical part of the physical payments. Very likely there'll be an overlap of merchants who uses both for online and offline both. There's a massive opportunity in India to be able to go after merchants who don't accept digital payments.
You know, UPI has created one revolution, but you know, unfortunately those rails don't work with cards. If you have a single solution, and with the growth of 5G, which is expected also in the next two, three years, that you know, these kinds of solutions will potentially mean that practically every merchant, I mean, obviously now today majority of the merchants have smartphones. To download the app and starting to use it becomes very interesting. We have a total transaction processing volume guidance of $100 billion by FY 2024. You can imagine that we expect that about 25% of that should come from CCAvenue TapPay. Did that answer your question? Hello?
It's Rahul Jain, if you are muted.
Sorry. I was saying that why you think this TapPay could be far more revolutionary given the fact that UPI has already significant reach both in terms of consumer acceptance, merchant acceptance, and also in terms of, you know, ease of doing thing and lower cost of transaction.
Let me take this as a follow-up. If you know UPI is a debit mechanism. Today, UPI is cannibalizing bank transfer, check payments, NEFT, RTGS and other things. Any kind of a direct debit account, if you have a balance in your account. UPI is a debit mechanism that is there, right? And that is confined to only people who have gone onto the UPI platform. Credit is a big market. The credit card spend, if you have seen, is more than INR 110,000 crore a month, and it's growing very, very fast. The RBI numbers say that, right? It does not do credit. It does not do even a debit card. There are, like, more than 500 million RuPay debit cards in the market.
If a person goes and wants to pay through his RuPay debit card, the payment cannot be accepted. If you want to pay through his Mastercard, Visa, any other credit card, it is there. What this technology brings in is that today, with a clunky $100 point of sale terminal, you know, $150 terminals, it is very difficult to deploy in tier three, tier four cities and in small merchants where, you know, like, say, a food cart in a village outside Guwahati in Assam, right? If you have to give him $150 or INR 10,000 terminal, then there are battery problems, training that merchant, and then you have to keep sending him printer rolls to press the charge slip and other things, right? It becomes
That's why the acceptance base is not there today, right? Even if a person, he can also accept payment through this, then they'll write a check or a draft or all this stuff. What it helps is that if any kind of payment you want to get, this is a very simple one. You just go to the Play Store, download the CCAvenue app, and on your own phone you start accepting payments. You just tap the card at the back of the device thing. Ours is India's first, pin-on-glass certified solution, where even, for higher amounts of more than INR 5,000, the payments can be taken, and it depends on the credit limit of the card.
This kind of a transformation technology which can be, you know, marketed online and go into any merchant anywhere in the country, just download and start accepting payments through credit card, debit card, net banking, wallets, cash card and UPI, plus UPI QR code with payment links and all that stuff. It's a very transformational technology with the kind of expenses versus a $150 terminal versus a zero cost terminal is huge. Every merchant has a phone, a smartphone, of anything above INR 5,000, it works. That's why it's a very transformational technology which will change how payments are accepted in the next three or four years anyway. That's why we are very bullish.
We think that whatever the acceptance base, anybody can just do an online signing and start accepting payments through any kind of payment options. We have 200+ payment options, and not just a UPI card debit to a bank account, but even a credit cards or a lot of other consent keys of the transaction I mentioned, like payment links and dynamic QR and all that stuff.
Right. Thanks for the color on that. Just one more question. When you said that the CapEx intensity of the business is behind us, what I wanted to understand, when you want to roll out so many merchants and of course, although the technology-wise it is very transformative, for us to make people habitual and also in terms of reaching out to a very, very large audience, merchant base, which we want to, don't you think there would be significant investment that would go to make it happen? Or you are seeing that as more of an OpEx than CapEx, and that's why you're saying the acceptance base?
Yeah, you're right. It's more of an OpEx that we believe will be there. In India, we've realized the channels we work. We tap into some large channels. Channels that work with a lot of kiranas. Channels that have, you know, potential to be able to reach out to the masses. We'll have a combination of direct and indirect approach. Direct meaning going direct to the merchant, but indirect meaning going through channels to be able to offer solution. A combination of that will happen. It will involve some amount of CapEx, but not a whole lot. I think majority would have been operating expense.
We have already an existing huge ecosystem of merchants already live on our platforms and payments this time. Those are the early adopters and it's like a 22 years of merchant base that works with us. We already announced that we are onboarding more than 8,000 merchants every day. Those are the most of the merchants will also be going in for this Tap to Send solution from our existing ecosystem.
I mean, yeah, I can understand the early adopters have, you know, still the real challenge comes, you know, to scale beyond a point. Understand your context and those were my questions. Thank you.
Thank you. Participant who wishes to ask a question may press star and one. The next question is from the line of Anil Nahata, an individual investor. Please go ahead.
Yeah, hello. My question to Vishwas is, the first question is that the India payment TPV, I mean, while the NTR has showed a very smart improvement to %7.2, but the growth on the TPV is somewhat subdued at, like, a year-on-year growth of 18%. I believe the debit card plus credit card growth is also subdued, but it is still in the range of 30% year-on-year. What is the reason for this rather subdued growth in the TPV volumes?
Hello. Yes. What we see is that there is already a good growth, 30% year-on-year growth and 50%. 50% is year-on-year growth, right? From what we had last year, same quarter. I think it's growing very fast. As I said that, as we go into the holiday season, it will grow even faster. Yes, I think, we can still work harder and accelerate the pace. Yes, it's growing fantastic. I think we are. If you see the last two years, the TPV, we are doubling year-on-year almost. We've already given guidance of $100 billion by 2024, the processing value. Those things keep growing, and I think that's the normal period that it will keep growing.
Of course, we'll try our best with our new technology and innovations and this TapPay and others to even accelerate it further. I think it's seeing significantly good growth.
Okay. You don't think there is something like that as a market share kind of shift that is happening? I mean, in the end of last year, we were talking about an increase of market share from 8% to around 10% in the payments area. Are we on track to get that increase in the market share?
It has increased. If you see the overall TPV, the numbers released by the team, our market share has gone up. As the other competitors also now looking at profitability with now their mindset also changing from earlier, all those predatory pricing and cashbacks and other things. Now even those guys are completely coming and thinking of profitability. I think the share and everything will increase further.
Okay. That is the first point. The second question is, this TapPay. You mentioned that 15,000 terminals have been done. But I don't think these have been done with the omnichannel app that you are having. When is TapPay going to be available on the omnichannel app?
It is available on the omnichannel app, but we are phase wise because all these merchants, there is a complete new diligence and integration and MID creation required because it's this kind of acquiring is called merchant present scenario, customer present scenario. There's a huge demand from lots of our merchants and existing merchants. We are being strategically going step-by-step right now. We have opened it up only for around 15-20 thousand merchants, and I think we've got a very healthy higher double digit acceptance for whomever we did it. Slowly and steadily, I think by the end of Q4, we should open up for everybody.
Basically, at the end of Q4, I should be able to just download the app and basically login, do my KYC kind of thing and be able to go live. Is that it?
Yes. That you are already able to, but we are allowing only a certain app to see all your existing dashboard and your app transactions. You can already do that. The enablement of TapPay, we are doing it strategically because it's a whole new process of MID generation and other things for a customer presence value.
Mm-hmm.
that we are working overnight with the banks and because of the overwhelming response, still in a phase of almost like last 30-40 days, we enabled 15,000 odd merchants and I think around 100,000 we will do it by end of this quarter.
That's absolutely great news. Just one more further question on this TapPay. The solution that we have today, I think by and large it is like, you can take it to any market. Is there a regulatory thing that drives it to take it to the other market or it is just your business plans?
Yes, it's a global certification from the Mastercard, Visa, card companies, and that's what we are launching in UAE also. Each market with a new acquiring bank, we need to do a level three data. It's a slight data certification in that market so that.
Mm-hmm.
Cross-border acquiring is not allowed for merchants. Sitting here, I can't acquire merchants in U.S. I need to do it through my local entity. Slight little certification is there and step-by-step process. Hence, we are very careful in the markets that we are selecting. As you said, UAE is the next market for TapPay launch and then Saudi and then Australia and of course U.S. also will work simultaneously together.
That's wonderful. Thank you so much. Just if I may ask one more question. On this 15,000 kind of terminals that we are having right now, would it be possible for you to give a rough kind of TPV we are doing on a monthly basis or something like that?
I think it's too early to disclose right now because these are.
Okay.
going on in the last 30-35 days. These are all activations going on, other things. Too early to disclose, but I think the coming quarter-
Fair enough.
We'll start giving it out right now.
Thank you and all the best.
Thank you. Thank you.
Thank you. The next question is from the line of Ashish Kacholia from Lucky Investment Managers. Please go ahead.
Yeah, good afternoon to the team and, congratulations on the good set of numbers. My question is basically, can you talk a little bit about the recent announcement that you made regarding some payment gateway? I couldn't understand the importance of that. Could you just talk a little bit about that?
You're talking about the payment aggregator license?
Yeah, that's the one. What is the significance about it?
The significance. Look, there are three permitted license that we need from RBI. One is the Bharat BillPay, second one is aggregator. Aggregator license in the sense that earlier anybody can just start work with a bank and launch a payment system in India. Today it becomes with this license, there are a lot of restrictions, positive network and lot of other things that are put in by RBI to get this license. What happens is that nobody can come in the country, either a new startup or a international guy, and just launch a payment gateway in the country. It's like a moat, but it also gives a lot of confidence to the people and it's given to only experienced guys who have done this business with a positive network and other things.
What it helps is that any kind of a payment infrastructure or a payment gateway business we can do in the country where the money can be settled into our account of all the merchants and then we can do the payment. That means we can handle the money. For doing any kind of payment business, this license is required. Otherwise, other players will have to work with licensed players like us if they want to do payment business. Right now, what we understand is there are only eight or 10 licenses given in
8 or 10, these are the existing major payment gateway operators today who have been given this license?
Yes.
Okay. As of now, there won't be any major shift of market share. I'm assuming that the 100% of the payment gateway market will be-
A lot of smaller ones will be closing down, huh? Because a lot of smaller ones, the payment gateways who are there might have to start, stop or move merchants to this, like, say, MobiKwik license is rejected, right?
Okay.
Many other PGs are rejected.
Okay.
What happens is that those merchants who are already there, like Uber was there on MobiKwik exactly, payment gateway.
Mm-hmm.
Many are there. There will be a relative shift. Going forward also, it gives us a lot of certainty, a seat at the table with RBI and gives us a lot of power to work with different banks. It's a very coveted license to do payment business in the country.
How much, what is the market share of the players whose payment gateway license has been rejected? Do they have-
We don't know because those final, as we said earlier, those licenses and other things are not announced yet, formally by RBI. We don't know how many applied. From the market sources, those who got the license have been coming and, saying it out that we've got it. We've done the whole math. There are only eight or nine guys who have said that they have got the license. If we go by the fact, 150 odd had applied.
8 or 9 guys will control what percentage of the payment gateway market then? The guys who have got the license.
Yeah. Almost they are the ones who will be powering all the payments, right? Because.
Existing market share, I'm saying.
Existing market share, if you are looking at 100%, all will be divided into different parts, right? Depending on how you do it. Different kind of numbers come out, so there is no authentic source because how much they process some of the younger startups, even the payouts that they do, the numbers are counted, right? Even if they are like, they give a payout service, they call that as a processing. You don't call all that stuff. Real payment collection through e-commerce is counted. Those are the things that are there. Overall what we judge is I think we have reached double-digit market share, 10% plus of the overall-
Now effectively like this, you have announced, right? You have said 10% market share in your estimate. Okay? I'm just trying to get some sense.
Yes.
The other seven, eight players also who have announced that we have been given a RBI payment gateway license.
Yes.
these 8, 9 players put together, would you guys be controlling 40, 50, 60% of the market, or you would be controlling 80 or 90% of the market already?
No, we all work with the banks. If you're not counting the banks, then we all control around 100% of the market.
The 8 or 9 players who have been given the licenses?
Yes.
Okay. Now the market share will shift between these players, right?
Could be. Let's see on the formal announcement of RBI comes in, who comes in, who comes not, and who's going away. Lot of things will happen going forward. Let's see how it evolves once the announcements come in.
Okay, got it. All right, boss. Thank you so much. Thank you very much.
As I said, this is the second of the three licenses. We applied for three licenses. BBP, Bharat BillPay and this, payment aggregator license is in place. Last is the NUE part. NUE we are keenly awaiting from RBI.
NUE, what has been our booking? We have submitted our application. What is the contents of the license application that we have made out there? Can you share a little bit on that?
Okay. That's a network license, like NPCI kind of a work that we can do. We can have our own brand of Mastercard, Visa, this thing. Let's see. It's too premature, but it's a network license like a Mastercard, Visa, which can go global. We can have our own kind of a thing called UPI that we can launch in our brand. Our own kind of a card scheme like a Mastercard, Visa, we said. This is a consortium of four players that we have announced earlier, that we have applied for.
Got it. Okay. All right, boss. Thank you and I wish you all the best then.
Thanks.
Thank you. The next question is from the line of Ayushi Shah, an individual investor. Please go ahead.
Hi, good afternoon, sir. Congratulations on the promising set of numbers. Sir, I have two questions. One continuing from the question that Mr. Anil Nahata like asked right before me. One is on TapPay and the second is on ONDC. I'd like to take my first question on TapPay. Sir, the press release states that we have deployed around 15,000 TapPay terminals. But considering that we only have like 1,000 downloads of the TapPay app on the Google Play store, does this mean we are, like, tied up with a big retail merchant or is it divided across certain merchants?
Continuing with that, like, you know, are these terminals the same as the CCAvenue NFC card readers? Are there any updates about the patents that we had filed for consumers to tag their own phone with their card to make online payments?
Okay. Now, the TapPay certain cases, we have given our SDK, not necessarily through our new app. The SDK, like, one example I can give you quickly is the Chalo app that is there in India. If you're going for a BEST bus, it can do everything. An SDK has been given that is integrated into the Chalo app, where, like, when you're buying the ticket, when you enter the BEST bus in Mumbai, you just tap there. That is our solution with the BEST. All our this kind of SDK implementation, certainly I can't say because of confidential integrations that are going on with time machines. These are the kinds of integrations we have done.
All right. Like, with respect to TapPay, like, what kinds of income profit are we expecting? Like, what kind of margin numbers do you think that, you know, we'll probably achieve once that gets activated?
We have already given guidance on the entire thing, the processing volume of around $100 billion. The gross and the revenue has already been given.
So like-
level of the discount, like 5% discount. It can be. Go with the forward-looking guidance.
Right. All right. No guidance about the take rates from the same?
Right now, no. I think it's too early. I think next quarters we'll get those decent digital numbers at least.
All right. Sir, my second question was on ONDC. It's very interesting that we forayed into this space right now. Sir, I wanted to understand, like, what is the business model is like about, like, for ONDC and, like, will payments in this segment be a percentage-based thing or a fee-based model? Like, what kind of revenue do we expect from this segment going down the line? Sir, like, what percentage of our already strong 7.3 million merchant base do you think that, you know, we'll be able to employ for this ONDC venture? Are we looking at other avenues as well?
See, basically, I'll take this. ONDC is a framework and it is evolving. As a pilot happened in Bangalore. There's a lot of encouragement for merchants to be able to start selling products and for buyers to be able to start offering these products on their own portal. ONDC is basically you'll have a buyer app and a seller app.
Okay.
You know, you essentially enable sellers to be able to control their inventory products and orders using that app. Think of ONDC as you know, basically a framework that enables catalog and products to be pushed in and orders to be pushed out. You know, standalone, we can also join in as a payment gateway to be able to offer to merchants. We can also offer software frameworks and applications for existing merchants to be able to push their inventory into ONDC with a set of APIs. There is a backend protocol which has been set up, and that backend protocol will enable you to integrate with ONDC, which is public information.
The whole idea is that, you know, given that we have a very large merchant base and the potential, we would like to offer them an opportunity with a single click to be able to join ONDC, which is the understanding that we've communicated within the call today. If you look at the number of seller apps, there are five or eight or 10 seller apps that have, you know, been integrated with ONDC. In terms of buyer apps, there are not many today. The expectation is that the number of seller apps and buyer apps will grow tremendously once the framework is established and scaled up.
That is where we will offer all our merchants to be able to enable them at a single click to join ONDC. You know, the evolution happens. I think it's happening on a daily basis, by the way. We see an opportunity for us to offer the same solution to merchants where payments will be integrated as part of it.
Right. Sir, just that was a very comprehensive answer. I didn't receive an answer for my question about the update about the patent we had filed. Like, what's the situation with that?
Sorry, I didn't catch that. What is the update on the?
The patent. You had mentioned in our last earnings call that we had filed for the patent where basically consumers could tag their own phone and with their card to make online payments.
Ashish, you want to talk about the patent on the TapPay solution?
Yes. I think what we are doing is a unique one in a sense that this tap on glass with PIN on glass where you can do any kind of amounts and there are certain new functionalities that we have worked, which is not there anywhere in the world. We applied for patent. I think the patent application was filed. I don't have the current status right now. I think the patent application is filed, and let's see once we get it. It's something unique that we have done within the ecosystem of tap and pay on phone.
All right. Okay, sir. Thank you so much.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Thank you all for joining the call, and we look forward to, you know, interacting with you during the next earnings call. Thanks, you know, for being part of this call.
Thank you. On behalf of Go India Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.