Good morning, ladies and gentlemen. Welcome to Infibeam Avenues Limited Q1 FY 2023 earnings conference call 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, Lizanne. Good morning, everyone, and welcome to Infibeam Avenues Limited earnings call to discuss the Q1 FY 2023 results. We have on the call with us today Mr. Vishal Mehta, Managing Director, Mr. Vishwas Patel, Executive Director, Mr. Sunil Bhagat, Chief Financial Officer, Mr. Purvesh Parekh, Head Investor Relations, and Mr. Ravi, Corporate and Financial Advisor. 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. We now request Mr. Vishal Mehta take us through the company's business outlook and financial highlights. Subsequent to which, we'll open the floor for Q&A. Thank you, and over to you, sir.
Thanks, Rajat. Good morning, everyone. Thank you for taking time to attend our earnings call today. I hope you would have seen our presentation, which has been uploaded on the exchanges as well as the company's website. To start with, we had a great start and a strong performance in the first quarter of FY 2023 across all of the parameters that we monitor. Our confidence and strength and scalability of our business model and our strategy to focus on merchants and bank for digital payments and providing them with differentiated business offering has been very rewarding. Over the years, we have always innovated well ahead of the curve and introduced products which have been pioneers in the Fintech space.
Our most recent launch, which is called Tap on Pay, CCAvenue TapPay, which was launched just last month, is a revolutionary product, and it will be a game changer in the payment space. I will request Vishwas Patel to talk about it in detail. I will briefly discuss the performance for the quarter. We delivered strong performance in the standalone business, which is the core India payment business and the platform business. All of our financial parameters, revenue, EBITDA, and PAT were at a record high. On a year-over-year basis, gross revenue has been up 95%, EBITDA was up 51%, and PAT is up 137%. The performance has been driven by higher transaction processing volumes, which we call TPV, an increase in take rates in payments business.
EBITDA, as a percentage of net revenue, has risen to 64% from 60% year-over-year, which we had guided in FY 2021. The total transaction processing volume, which comprises of digital payments transaction processing as well as what we process on Government e-Marketplace is a record high at INR 87,218 crore for the quarter. I would like to inform you that the TPV number that we report excludes the UPI payments, which contributes to a single-digit percentage to the payments transaction processing volume. Another interesting point to note is that this is the fifth consecutive quarter of growth in gross and net take rates in India payments business just through payment processing alone. We have not yet undertaken any major monetization efforts.
Gross take rates in India payments business were 78 basis points, and net take rates came in at 6.9 basis points, which has been steadily improving since the second quarter of 2022 when it was 4.8 basis points. Both the payment and industry mix contributed to this increase in take rate. We have in the last quarter of Q4 FY 2022 disclosed that the share of credit options, which has increased to 45% and that continues. We continue to maintain 0 MDR payment options in single-digit % of the overall transaction processing volume, while other options constitute the rest, which includes net banking, debit cards, prepaid instruments, NEFT, RTGS. As far as Government e-Marketplace is concerned, GeM has already crossed INR 50,000 crore on the first of August, double the speed rate compared to last year, FY 2022.
As far as the industry is concerned, I'd like to highlight that the outlook is quite positive. We believe payments transaction processing volume will continue to grow as there is a significant headroom and large untapped merchant and customer base. There are some legacy systems with banks and efforts by the government and the regulators to build on this sector in India to create financial inclusion. RBI, through its most recent published Payments Vision 2025 report, is aiming to triple the digital payments in India. Digital payments comprising of cards and prepaid instruments grew 35% to INR 20 trillion. Including UPI, P2M, it grew to INR 36 trillion, up 70% year-over-year. Given the first quarter statistics by RBI and extrapolating it for the full year, it is expected to cross INR 50 trillion in FY 2023.
Point of sale and e-commerce are expected to be equal contributors. Credit card trends are particularly encouraging. Credit cards have increased to 7.9 crore in June 2022, from 5.8 crore in March 2020, which is the pre-COVID level. Credit card value itself has shown a very strong averaging over INR 1 trillion in each of the months in first quarter. It averaged around INR 60,000 crore monthly in FY 2020, the pre-COVID period, a growth of 67% in two years. We have been pioneers in our product offerings for online merchants over the last two decades and doing many of the industry firsts in the Fintech space. We want to offer differentiated product offering in our other segments also.
We want to grow our market share in payments by targeting offline merchants and generating higher cash flows and returns for our shareholders. Vishwas Patel will throw a few pointers and provide some insights on this. We are focused on building a frictionless financial technology company in the digital payment space. We should provide a seamless and holistic digital payment solutions to merchants, along with access to capital at a click of a button. Through our comprehensive offerings comprising of software platforms, payments and finance, we want to make the merchants digital, credible and hence bankable. Offer them financial services in the form of lending based on in-depth data analytics that we generate based on millions of merchants and their transactions. I will now hand over the call to Vishwas Patel for his comments. Vishwas Patel, over to you.
Thank you, Vishal. Good morning, everybody. I'll start with our new launch, the CCAvenue mobile app, which is the world's most advanced omni-channel payments platform with TapPay, which is India's first PIN on Glass solution. TapPay. For those who could not attend our event, we have put a video on YouTube of our entire event of the launch, including our corporate AV. CCAvenue TapPay is a breakthrough payment technology with PIN on Glass technology that will allow consumers to do transaction with an OTP even on amounts which are in excess of INR 5,000 limit set by RBI. Not just on the merchant's phone, but on their own phone as well.
To this, we are also introducing soon CCAvenue TapPay, as a payment option inside some of India's major merchants, checkout pages. Consumers can select it as a payment option and tap their card on the phone for an instant checkout without having to enter the card details or remembering CVV. Payment issuance in our country is sorted, but RBI's Payments Vision 2025 can be achieved only by improving payment acceptance infrastructure and providing holistic solutions to merchants. What we are aiming to do is just that. We are building a frictionless, Fintech company, a comprehensive payment technology that will offer not only payment acquiring, but payment issuance and all the related infrastructure.
This will make us a core part of the entire payment ecosystem, allowing us to build a long-term, sustainable, profitable business and create for value for all in the system. We're going to build this infrastructure in a two-fold manner. One, we have and are continuously engaging with the top banks to build top-notch infrastructure for them that is not only scalable and robust. Two, by offering CCAvenue mobile app with TapPay feature for merchants as an app for free to penetrate payments too deep across India. Despite tremendous success of UPI, NPCI has mentioned that its reach is about 250 million customers. The target is fourfold. It's to reach around 1 billion people in India. They say acceptance and infrastructure has to be improved for deeper reach.
This is where the CCAvenue omni-channel app aims to address the challenge of unified payment acceptance infrastructure and eliminate barriers to seamless digital adoption. For small businesses or large, due to the ease of its deployment and its profitability to make it the best choice for many use cases, apart from it being zero and low cost. The future of digital payment is growth oriented and a massive unbanked, underbanked population waiting to be covered. The value of digital payment is expected to reach threefold from 3 trillion today to $10 trillion by 2026. There is a huge opportunity for us to scale and capture that opportunity. There is also a huge opportunity for credit as our country's credit starts with household debt at only 11% of the GDP.
When you compare it with the mature market at USA, which is at 84%. 40% of the MSME need credit in our country is still via informal channels. That is where our lending platform, TrustAvenue, comes in, which will allow the banks to lend and our merchants to get the loans through our next generation merchant data analytics. Today, cash still accounts for 72% of the total consumer spending. There is more than INR 29 lakh crores of cash in the market. Our aim is to make our country a less cash society. BCG analysis expects two out of every three payment transactions will be digitized by 2026. The digital payment market for person-to-merchant payments will be INR 2.5 trillion from the INR 0.4 trillion in 2021.
B2B would become INR 2 trillion in 2026 from the INR 1 trillion in 2021. This all is very encouraging, and we will strive and continue to grow as fast and as we make new technology to capture this. Vishal, with this, would you like to add anything before we open up for Q&A?
We've been growing at about 8,000 merchants per day. With a rich blend of offerings which will allow us to boost our earnings across millions of merchants. All of our Fintech solutions are also fueling our expansion to our goal of achieving a transaction processing value run rate of INR 7.5 lakh crore by end of FY 2024. We are on the trajectory and confident of delivering this kind of performance going forward. Thank you. Moderator, we can now open the floor for Q&A.
Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. Anyone wishing to ask a question may please press star and one on your 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 with the line of Anuj Narula from JM Financial. Please go ahead.
Thank you for taking my question. My first question is.
Sorry to interrupt. Anuj, we're not able to hear you.
Am I audible now?
Sir, you're sounding very soft.
Huh?
Yeah.
Hello.
This is better. Please go ahead.
Thank you. Thank you for taking my question. My first question is, like, in terms of the recent expansion to Australia, how much would be the investments, and what are our growth aspects here? What sort of competition do we face in other international markets of UAE? Shall I ask the second question now?
Sure.
My second question is with respect to Tap Pay and, like, how much market share do we expect to capture with the launch of Tap Pay as we plan to eliminate the POS machines. How much CapEx would it incur? Any update on the e-commerce tariffs would also be helpful on this. Thank you.
Sure. Thanks, Anuj. I will take the first question and also give you some background on the second one as well. As far as Australia is concerned, as you're right, we've just announced an opening of our offices and a fully-owned subsidiary in Australia. We think it's a very large market. You know, as far as the investment amounts are concerned, historically we've been forward investing in the international markets. We see the ROI coming up in less than one or two years. Fortunately, we've got payment solutions which are globally scalable. You see, in payments, all the card networks as well as all the technology infrastructure that we've built out, they've all been built out on a global scale. We currently operate mainly within UAE.
We are number two players in UAE, and we've also opened up Saudi Arabia and US. We believe that, since technology is scalable globally, we have built out a model which is called Country-in-a-Box, and that model allows us to create a team who can actually work on a country to be able to build up volumes and generate traction there. The thing that we are very excited about as far as Australia is concerned is that it's a very digital-savvy society. With our new solution, which is the point that you brought out in the second question, which is TapPay, these applications can be provided to even small merchants as well as larger merchants in that region.
you know, as far as the investments are concerned, we believe that it will be, you know, some $1 million in the first year. It will be about INR 7-8 crores of investments which we will make in that geography this year. We expect that we should be able to launch and generate good amount of traction, given that a lot of technology that we have built out is built out for global scale and not just for India alone. I hope that answers the first question that you have.
Yes. Yes.
As far as the second question around what is the opportunity for Tap Pay in India. See, Tap Pay is for the first time and across India, this is the only application which has got PIN on Glass certification. So what that means is that any transaction which is even above INR 5,000 can be transacted using Tap Pay, which is the only application which has this kind of approval across all the card networks. So we expect that, you know, we will be approaching. It's already live across many of the implementations.
You know, a few thousand implementations have gone live already, and we expect that a large number of channels, OEM brands in the mobile phone space, we believe banks as well as, you know, other financial institutions who want to cater to, you know, small merchants. We will be working very closely with these channels to be able to create a digital footprint for them. Because for all these merchants, if they are digital, then they become credible, and hence they can get loans for their growth. We can give them wings to fly. We believe that, just because, you know, merchant cannot afford a 10-15,000 rupee point of sale machine does not mean that we take away the credibility from them.
Acceptance, like Vishwas mentioned in his speech, acceptance is a very large problem in India. If you allow any merchant to accept any kind of payments, and that too without a piece of hardware, every merchant has a mobile phone or a smartphone, but every merchant may not have a point of sale machine. If we are able to create that kind of an opportunity for a merchant, we believe that it fulfills a large part of our mission that we built out this company for. You know, as far as you know, the opportunity is concerned, we expect that we will be able to. Today, 99% of all transactions that we process are online transaction only.
In the coming 2-3 years, we expect that at least 25%-30% of the transactions that we process will also include offline, which is CCAvenue's uptake.
Okay. Thank you.
Yeah.
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one. The next question is on the line of Rahul Jain from Dolat Capital. Please go ahead.
Yeah. Thanks for the opportunity and congratulations on decent number. I just want to understand a couple of things. Firstly, on this net take rate that we have got in this quarter, it's slightly up now. I just wanted to understand two reasons behind it. One, from a competitive landscape perspective, that how this is going on a directional path, and how much of this is coming from the mix change advantage that we may have in some of the business.
Sure. The take rates have improved. If you recollect in our prior calls, we've mentioned that as the industry mix changes, you know, a lot of, if you look at last year and since Q2 of FY 2022, you will see the take rates improve quite a bit. Since it was, you know, if you look at pre-COVID versus now, most of the industries, including travel, entertainment, everyone else, they have started, you know, coming up to speed. If you recollect, I just mentioned in the prior question that all our transactions, 99% of our transactions processed are online. As offline picked up, online also picked up. Since industry mix changes, that we've seen a much better take rate, you know, than what we had a year ago.
We'd also formally communicated that saying that we expect the take rates to improve quarter-over-quarter as we go forward. The competitiveness in the industry is definitely there. I also mentioned that in our TPV, the transaction processing volume, we don't include the UPI-based payments, which is actually single-digit % of the overall payments, because that is not where we, you know, get our commissions. If you look at the overall perspective, we expect that the take rates will keep on getting better, you know, as we go through and build up. The competitive intensity in the industry is definitely there. It's more so in the UPI part of the ecosystem.
You know, we expect that as we build out more and more feature sets, ones that allow the merchants to improve their own sales and other opportunities and make it part of our offering to merchants, it creates more stickiness, it creates better analytics, and it also allows merchants to become more successful. We believe that as we keep on building that up, it makes it more and more tenable. See, we've also built out for the first time an omni-channel solution, one that offers online and offline both. For the entire 5 million large merchant base that we have, we would be wanting to offer this kind of an experience with a single console at the back end.
This is the only omni-channel solution across the country, where you can process your online transactions, offline transactions, and get reported into a single dashboard at the back end. Large chains, large institutions, large OEMs, we would want to tap into them. Given this kind of a solutioning, it makes it very easy for anyone to even buy online, return offline, and do whatever they want to be able to achieve a better experience. We believe that in the next few quarters, we should see the take rates getting better in spite of competitive intensity.
Just a small follow-up on the same. Also if you could share some thought in terms of volume-led your ability to you know pull a better bid for you. Is that happening? In what kind of you know partners where you are able to see larger quantum-led ability to push for better world pricing.
See, if you look at the competitive intensity, it is significant in this country. In other words, you have a lot of companies offering similar, you know, competitive rates. I think what we want to do is really go after the feature set and the stickiness that we would want to create with our merchant base. In terms of volume, which is impacting pricing, what we realized is that we would want to pass the savings to our customers and our merchants to become more competitive in the industry. Volume does give us some edge. I think, you know, we've already got significant amount of volumes passing through us. You know, if you look at, you know, our projection by FY 2024, we expected to do a transaction processing volume of $100 billion.
I think that as far as the volumes are concerned, definitely we are there, and any volume-related savings that we expect to achieve, we will pass on to the merchants.
Got it. Thank you. That's it from my side.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Gaurav Sharma from HSBC Securities and Capital Markets (India) Private Limited. Please go ahead.
Yeah. Hello. Good morning. Am I audible?
Yes, sir. You're audible. Please go ahead.
Yeah. Thank you for providing the opportunity. Sir, a couple of questions from my end. Since you will be entering into the working capital and invoice discounting business also, just wanted to know the timeline when it will be initiating the same and what will be the average ticket size on the same. Second is, like since some of the players, you will be providing the capital as well as the platform for these services. On the other side, some platform-based competitors which are leveraging on the large bank customer database, they are tying up with the banks and they're getting the benefit of huge customer base. How do you see that challenge of competition from them?
I'm sorry. Can you repeat the question? You were slightly not audible. I'm sorry.
Oh, okay. Yeah. My first question was like, since you will be entering into working capital and invoice discounting, wanted to know the timeline for the same. What time you will be initiating the same, and what will be the average ticket size you'll focus? That was one. Second is, since some of the players which are just growing the platform in fintech, they are leveraging on the customer database of large banks that are having some tie-ups, and they're providing the loan. How you see the competition from them since you will be using your own finance to provide the funds?
This is answered. I'll tell you that we don't expect to put our own finance to, in our own balance sheet, you know, to be able to fund, you know, any, whether it is invoice discounting, bill discounting or any loans. What we will do is we will act as a platform in every case where we would be able to connect the merchant with the necessary financial institution, whether it's a bank or an NBFC, and we will be able to earn, you know, a small piece of that transaction. The classic example is what you would see as a DSA, where you would earn a small fraction on every transaction, is what we would want to, you know, cater to.
As far as the strategy for us is concerned, our strategy is that we will work with very large platform implementations, to be able to, you know, give that kind of an opportunity where merchants can avail loans, from financial institutions. You know, the two largest frameworks that we are essentially catering to in India, one of them of course being governmental marketplace. We also have more than, you know, a few million merchants of our own that can potentially leverage, the opportunity to get, you know, attractive loans and offerings. We are going to continue building up that portfolio. As you can tell, we already have crossed more than $500 million in terms of, our settlement loans that we give to our merchants.
That's one more, you know, part of financing that we offer, which has already been very successful, and we have zero NPAs so far in that, literally. I think that we have a scientific approach to approaching this. You know, we expect that, you know, for all the settlement that we do, we expect that maybe we will be able to cross more than $1 billion of financing there. Then we will work with, you know, that some of the implementations that we have, they already, in terms of platform implementations, have a few billion dollars of GMV or TPV that they process. To your second point, which is, you know, some frameworks can leverage our setups to be able to do this. That is anyways work in progress through our TrustAvenue framework.
We expect that, you know, in any of these implementations, we will be able to help them process more than $1 billion of loans in this coming year.
Thank you so much, sir. That was my question. Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Amrish Kumar from GSFC Capital. Please go ahead.
Hello.
Sir, just one question from my side. You said that you will be not using your own capital to build this lending business. Can we assume that you are not going for any kind of NBFC license in the future?
It's reasonable to assume that in near future we will not be going for such licenses.
Okay. Sir, second question is, this OnTap technology. Just trying to understand what is the pain point that you are trying to solve here for your customers? Do you think that it is the cost of the POS machines for your merchants which is the big problem for them or something else?
I'll tell you, which basically the objective is that merchants, they had failed both in the online world as well as in the offline channel of their own. The one pain point that merchants face is that not all merchants have access to a point-of-sale machine. Because you see QR code-based payments are different than card-based payments. You know, while some merchants may have QR codes, but not everyone has a POS reader. There are more than 700 million RuPay cards which are out there. If you look at the number of consumers in the UPI framework, there may be 150-200 million. I think that there is an opportunity for merchants to be able to accept payments in any shape and form.
If you are able to create an opportunity for merchants to accept payments across any channel, whether it is QR code-based, link-based, whether it means card-based, credit card, net banking, whatever you talk about, then it allows them to be able to cater to more consumers. Now, what we are trying to solve is acceptance for the merchants, which is merchants can and consumers can be issued a card. Issuance is not as much of a problem. If there are 700 million RuPay cards, there may be more than a billion more cards. So I don't think that issuance is as much of an issue. We expect that acceptance is going to be a bigger issue in India, which is what we are catering to and which we would like to solve.
Now, the second part in this is that if you are able to digitize most of the transactions for the merchants, and you provide an interface for them to be able to conduct their business online as well as offline. Because right now there is no omni-channel solution. This is the second problem that we want to solve, which is that a merchant will have a different provider for online and a different provider for offline point-of-sale machine. For a point-of-sale machine, they will of course have a cost of point of sale. They would want to go and make sure that there's paper roll, there is maintenance, there is internet connectivity for the POS machine. There are so many other issues that continue plaguing this industry.
What we would like to do is to be able to offer an opportunity whereby whether it is pre-bundled onto their phone or it comes across as an application that can potentially just get downloaded and be able to use it. You can imagine that there will be millions of kiranas that can potentially benefit out of such an implementation. Even a QR code can be accepted onto the app, and it is their own. They don't have to be limited by one POS machine. There is no queuing. We expect that there will be many, many more opportunities that potentially and use cases that can be solved using this. At a macro level, what we would like to solve is two things. Acceptance on a very, very large merchant base that don't have access to point-of-sale machines.
Acceptance for all the merchants who have a point-of-sale machine but don't want to go through the maintenance and the hassles of being able to conduct their business. An omni-channel solution whereby there is better credit rating for the merchant that can potentially be offered a much larger opportunity to be able to take loans to grow their business. Because once you have both the online as well as the offline digital payment solution in for merchants, it gives you a much better analytical position to be able to offer larger opportunities and loans to such merchants, which is what we'd like to solve.
Very helpful here, this explanation. Do you have a tie-up with a bank at the back end for rolling out this world's best, as you said, the payment mechanism? Or what are we trying to do here? Vishal, do you want to take this?
Yes. Yes, we do have every acquiring piece needs a bank who has the tie-up with the network. This we have launched in partnership with RBL Bank. We have our own acquiring BIN through which the bank has sponsored in the card networks. We've launched it with RBL Bank. The whole idea here is that, look, today the point-of-sale terminals is less than 5.7 million terminals for around 150 million SMEs in our country, right? Point-of-sale terminals is not a very expensive INR 10,000-INR 12,000 battery, as Vishal pointed out, giving them paper slips, training the merchants. Imagine in a tier three or four city or a town in Arunachal Pradesh or Assam or Tamil Nadu or Odisha.
It's very difficult to service, very difficult to hear. Where what we have given a solution is that, merchants, most of the kiranas have a phone. We are turning that phone into a POS terminal, right? It's very simple, and it is giving them an all encompassing 200+ payment options. It's not just tapping a credit card or debit card, but it has also a static QR code, just like what you see printed on a kirana today, where any potential customer can just scan that QR and do the transaction. As well as, you know, it has an inbuilt sound box also. After the transaction, a kirana can hear that a transaction is successful in multiple languages.
Which is comparable with whichever locals. What we are trying to solve here is that, not only growth acceptance based on the current 5.4 million POS terminal to 150, it is a huge opportunity. We want every street cart vendor. The use cases are enormous because it has a user management. If a restaurant has around 10 or 12 delivery boys, all the 10 or 12 delivery boys on their phone can download the app, and it is multiple users. The parent app can show all the transactions where the money is collected and notifications appropriately. Use cases are huge. If you see acceptance today, there are like I was sitting with the team, there are more than 1 million schools in 4 states only which are not accepting fees online.
Payment acceptance is such, you know. Like what is commerce? Any product service is sold and payment made. This kind of an app can make help that enablement. A student paying to his tuition teacher, right? That has to be digitized. The tuition teacher paying to a kirana store for buying his biscuits or whatever, that has to be digital, not go to an ATM, withdraw cash and then pay the money through this thing to the kirana. Kirana paying to his distributor has to be done. Distributor paying to the manufacturer has to be digital. Manufacturer paying his taxes to the government should be digital. All those, every leg of a commerce cycle is there.
If you make such an easy acceptance where your own mobile phone becomes a point of sale acceptance terminal, that is a breakthrough transformative technology, right? It is much cheaper and better and more options than a physical POS. It's more advanced than a simple QR code pasted on a kirana. It's a very transformative technology. I think we are quite gung-ho. We are India's first certified with PIN on Glass on this thing. You will see in the coming quarters the take rate and other things, the acceptance of this service.
My last follow-up on this is very interesting. This app is. One of the large competitors who has spent so much money in rolling out so many physical POS all across India, he would also be looking very closely at your application. Do you think that, you know, how much time it will take for them to copy this innovation?
Sure thing. Yes, anything we build, a couple of months down the line they will also follow, copy and see if that's the case, what we have always been leading for the last 22 years. Like we introduced that SMS invoicing 20 years back, right? Till then, you also have to understand that we have the whole ecosystem ready. We have like 6.4 million merchants where we'll be rolling it out. Like if you say in hospitality, we have Taj, Oberoi, ITC, Lemon Tree, all those, and another 2,000 hotels. So these hotels where these merchants are already onboarded onto us, KYC done, these are the first low-hanging fruits that whom we'll be going and offering our.
We are where we are offering all our solutions now and doing deep integrations with their existing systems, since we know these merchants and their track record with us. Having an ecosystem. Similarly, yes, when they come, they might go to their merchants, but we will. Since we are first, there's a much more advantage, right? There is this thing. Let's see how it pans out.
I will also add to that, you know, we are somewhat built as a payment infrastructure company, not a payment provider alone. What we do as a payment infrastructure company is give it to merchants that we have, and we also give the framework to banks. We know that some of the banks, including Kotak Bank, 1Pay, as well as, you know, HDFC solutions, comes to us. We are built out more as, in U.S. there is a company called Stripe, which is more of a payment infrastructure, not just a payment solution provider. We are really going to give our offering and our framework to many of these merchants that are already on our platform, the millions of merchants that Vishwas talked about, but also to the ecosystem that we cater to.
Okay, got it. Thank you so much for this elaborate explanation, sir. Thank you.
Thank you. The next question is from the line of Unnati Bhavsar from K R Choksey. Please go ahead.
Hello. Good morning.
Good morning.
Yeah. TPVs and the TRs is what I'm going to start, and later on I have some questions for you.
Sorry to interrupt. Ma'am, your voice is breaking up.
Hello. Can you hear me now?
Yeah, much better. Thank you.
Yeah. I have a couple of questions on the financial side, and then also want to get some understanding around what is the share of all these new businesses to the total revenue. We've been talking about the TPVs growing very strong, and they have been very strong, approximately 100% kind of year-on-year growth is visible in the last four quarters. Do you believe that in the first quarter of 2023, this last quarter, the quarter-on-quarter growth has kind of slowed down? What could be the reason for it? Secondly, on the NTR side. The NTRs have been moving up for the past three, four quarters, and that's really great. Why is it not resonating in the gross margins? Because gross margins are still volatile if they are not in line with the NTRs improving.
That is the second question. Third is the express settlement that you've been talking about that it's been really doubling up, tripling up, wherein you don't have any kind of a credit risk. What kind of margins do you make on it? What kind of a share do you have of it in the total revenue as of now? If it is a sizable revenue as of now, you can share it. Secondly, also, what is the share of the overseas revenues overall to the total revenue? Do you make better margins over there compared to the domestic revenue?
Sure. I can take a few questions and then Vishwas can add in. See, as far as the overall quarter-over-quarter growth is concerned, usually we have been somewhat slightly marginally better in terms of the digital payments space. As far as you know, that Government e-Marketplace is also something that we cater to. That should also answer some of the margin question as well that you have as much. Usually, Q4 is a very large quarter for you know, GeM and others. You will see that you know, Q1 also there is significant traction, but not as much as Q4. There's usually a 40-50% increase over other quarters. This time around, it continued on in the first quarter as well.
As a result, you'll see that there is a marginal, you know, improvement, both in terms of, you know, overall, you know, Q1 last year versus Q1 this year, because in the first quarter alone, GeM was able to perform INR 50,000 crore worth by August period. Q1 was also very strong. We expect that this trend will continue on in the subsequent quarters as well, both in digital payments as well as, you know, the infrastructure that we provide from the platform perspective. That is one reason why you would see that quarter-on-quarter, you would see little bit of, you know, growth and some bit in certain parameters. I think it has been very strong, you know, compared to the first quarter of last year.
Normally, if you look at it, Q3 is the strongest quarter for digital payments because of the holiday season. So Q1 and Q2, you will see growth. In Q3, there is a phenomenal growth. Q4, so there's some amount of seasonality, but it's somewhat, you know, because of the underlying growth in both the platforms in the payments business that you don't see the impact this year. We expect that will continue on for the remainder of the year. So again, it's reasonable to expect that Q3 will see a significant improvement as well, you know, in the digital payments business compared to the first two quarters of 2023. You know, as far as the take rate is concerned, I'd explained in the earlier question as well.
We think the take rate is actually going to keep on seeing improvement in the digital payments business, you know, because of the fact that the mix has changed. Pandemic is behind us. Short of any uncertain event that happens around pandemic, we expect that they should continue on building up for the remainder quarters this year. International as a part of our business is less than 10% of our overall revenues. International is significantly growing. The take rates in international definitely are better compared to the take rates in India. Many a times in the international geographies, we record only the net take rates and not the gross take rates, you know, because of certain specific rules that apply to specific countries, whereby we are able to position it as a net take rate and not gross.
you know, we expect that international in the next 2-3 years should be at least 30% of our overall business. as we increase our GMV, it's reasonable to assume that international will be at least 30% of the overall business that we cater to with take rates as well as opportunity. Because the vision that we have for digital payments is contactless and borderless. if we take that vision and we work towards achieving that vision of ours, then we would want to make sure that you know, anyone who is in any country, with the regulatory approvals as well as all the compliances, should be able to transact through the banking channels without actually any friction. yeah, international is a significant opportunity for us.
You know, fortunately, our entire payment infrastructure framework is built out in such a way that it is globalized. We don't have to build out for the region. Everything is horizontally scalable as well as globalized. All of our relationships with card networks and everything else are also global in nature. We think that with this kind of a vision of borderless and contactless, we should continue building up. Hopefully that answers, you know, the question that you had asked. If there's something, you can let me know.
Yeah, about the express settlement, as in, where it has reached in terms of its contribution to the overall revenue. Also what kind of gross margins do you make on express settlement?
I will tell you, we don't segment gross settlement out. The express settlement as a separate line item. We have opened it up to a select set of merchants. Actually, to be very precise, it is less than 5% of our merchant base that we've opened the express settlement to. You know, in the last several quarters, we wanted to track and trace it, and we're happy to let you know that we've got zero NPAs so far in terms of express settlements, while we have processed a few $100 million of settlement. Now, in terms of express settlement. The opportunity to expand it is significant because 95% of our merchant base can still be provided with this kind of an opportunity.
In terms of contribution, I can tell you, while I don't have segmental for you, but what I can tell you is that it's reasonable to assume that we make about anywhere from 1-3 basis points.
Okay. As I spoke about the NTR with earlier on, when do we see it?
Sorry to interrupt, ma'am. You're sounding very far away from the mic.
Yeah, sorry. What I meant to ask again is that while the NTRs are improving, when do we see the impact of it kind of, you know, reflecting in the GPMs on a regular basis or on a consistent basis? Because right now, although the NTR has improved to 6.9 basis points, the GPM has kind of, you know, come down to 17.6% kind of levels from 20.6% in Q4. You know, can you just give us an understanding around how do you see this trajectory of GPM will be like going forward?
In terms of, if I repeat your question, in terms of gross margins, is that your question?
Yes.
The gross margins.
Yes.
See, one is reasonable to expect that we will continue to invest in places, you know, which have a potential for us. We are optimizing for the long term. You'll appreciate we don't optimize for a quarter. We expect that, you know, about 4, 5 quarters ago, we had mentioned that, yeah, we should see an improvement in take rate. You know, we have a strong assumption, and we validate our assumptions, and we want to make sure that we can continue delivering on that with the line of sight.
You know, in terms of stabilization and improvement, it's reasonable to expect that we will wisely even invest in certain areas, which includes the CCAvenue TapPay and others, which have a huge potential for us to be able to offer a very differentiated positioning. You know, gross margins will be similar or slightly higher going forward. Certainly, we think it's stable and short of an uncertain event like a pandemic.
Okay. Thank you.
Sumati, just one point I'd like to add here. Subhash here. Gross margin for our India payments business has actually improved on a quarter-on-quarter basis. With the 19% increase that you've seen in the net take rate, the gross margins have also improved in the payments business. Overall, the 90% of our core business, which is our India payments and platforms, which we record in standalone. There also, if you see the gross margins have improved, like the EBITDA margin itself has gone up to 64% of our revenue. There's a significant improvement here with respect to the operating profitability as well and at the net margin levels.
Okay. Okay. Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one. The next question is from the line of Aayushi Shah, an individual analyst. Please go ahead.
Good morning, sir. I have two questions, and my first question is regarding the capital raising plans of the company. My understanding is that we have around INR 208 crores as cash balance currently, and we incurred around INR 62 crores of amortization expenses as of March 2022, which is actually a non-cash expense. Now, in the press release issued yesterday, you stated that because Infibeam major CapEx cycle is behind them, the company is now focusing on a focused growth strategy for the next 3-5 years. I just fail to understand why we would need to raise funds at all if we are, in your words, consistently converting EBITDA into free cash and are almost a debt-free company. If you could throw some light on that.
Sure, Aayushi. In the past, we've mentioned that, you know, we have a significant opportunity to work on the express settlement piece, which, you know, may require certain amount of working capital. Express settlement is zero NPA. In that, what we are doing is to be able to offer merchants an opportunity to get their cash faster when they process through us. When we open up the offline space as well as online space, that becomes one place that we think, you know, could be a potential. Second is that, you know, as far as our platform business, we think startups is a huge opportunity in India. You know, selectively, we will evaluate making investments in such startups that allow us to strategically, you know, open up and expand our own horizons.
There are a lot of things which are slightly experimental in nature. You know, what our internal bias is always to build and not to buy. When we find something which is very interesting, which allows us to expand our opportunity, then we will selectively make investments. These are bold calculated bets, ones that potentially allow us to grow. Historically also, we believe that we've made such, you know, opportunities viable. If you look at Go Payments, which is one of our subsidiaries. If you look at Uvik, which we did last year, which has actually resulted into the CCAvenue TapPay. You know, the transaction size was about INR 75-odd crore, and we were able to, you know, offer a very differentiated play.
Our perspective is that, yes, we are very happy that we are in this position where we have a business model that generates returns and is profitable. We also want to make sure that we continuously innovate, and we want to get the right people with the right framework and bent in technology which can strategically improve the offering that we have. Which is the reason why we would evaluate opportunities from time to time.
Just to get some more clarity on that. Basically, the capital raising funds will be for hiring new employees as well as for new investment opportunities, right?
Yeah, it's reasonable to assume that. Yeah. It will be for investments and growth.
All right. Okay, sir. Sir, my second question was that, so being an investor in the company that I'm highly interested in its growth and that we're progressing by leaps and bounds in almost every segment we enter, be it GeM or payments. That growth hasn't really reflected in the market cap. Now, the shareholders are therefore not benefiting from the company's advancements. What is the reason behind this lag in market cap growth? I'm not saying that like the promoters buy shares of the company or anything, but why don't we get any big reputed investors on board? Or is there like a strategy behind, like behind keeping the market cap at this level?
I would let you know that, you know, we of course, you know, as an investor, we also want that our investors make good returns. You know, I'm also an investor in the company, so, I think I share the sentiment that, yes, we would want to actually, you know, do much better in terms of, the performance. But you see, it's a market, and the markets will of course reward based on execution. As we continue to execute, our focus has always been to execute. As we continue to execute, we hope that, you know, the markets will see through it and be able to, reward the performance of execution. Historically, we have not been focusing too much on optics, but more on execution.
Selectively now we are also looking at trying to talk to people about what we do and not, you know, sell or convince any of the things that we do. Our performance should show up. While there may be latencies both ways in execution and markets, we expect that they should correct itself as we build out going forward. There is no buy-side strategy. We don't participate at all in these discussions. As far as, you know, the opportunity for the growth as well as the opportunity to look at international growth as well, we selectively evaluate opportunities from time to time. For the right reason, I'm sure that the board will take the right decisions.
That does make sense. You mentioned that.
Okay. Ms. Shah, may we request that you return to the question queue so the participant.
Sure. Sure. Thank you.
Thank you. The next question is from the line of Anil Nahata, an individual investor. Please go ahead.
Yeah. Good morning. Congrats on a very good performance this quarter. Very heartening to see the net take rates improving as well as the growth on the payment side. I have a couple of questions. One is to understand slightly better. If you look at the net take rate and the transaction processing volume, at a net revenue level, it reaches to somewhere around INR 59 crore-INR 60 crore. So there is a delta of INR 14 crore of net take revenue there. Similarly, it used to be in the earlier quarter, slightly higher than this. I just need to understand what is this business or a delta INR 14 crore of which used to be slightly higher. Where are we heading in margin terms on this business?
We are a payment infrastructure company and not just payment solution provider. Whenever we provide infrastructure to some of the companies and banks and many others, I'd mentioned that we want to provide opportunities for them so that we can reach out to the larger ecosystem. There are certain things like, you know, Kotak AllPay that goes through Kotak Bank. Banks cannot offer all different payment options to their users. What we do is that we allow them to build up on our solution and provide it to merchants. You know, that may be one of the reasons why you would see whatever that small delta is in terms of the processing volumes. I can come back to you on exact specifics, you know, once I do the numbers.
That is one reason why you would see. Because, you know, you can think of us as more of a Stripe. There is a company which is based in the US. They not only provide their own solutioning, but they allow others to build up on top of their own platform frameworks. As we continue evolving, we want to continue building up in that format because while channels will compete with each other, we want to be the backbone provider of such channels. We will expect that should continue being our focus going forward. There are a lot of APIs that have been opened up, and one can build out innovative solutions on top of our APIs. You know, we think that must be, you know, perhaps what you're referring to.
You know, if you have any questions, I can get into specifics.
Yeah. Maybe I will take it offline with your investor relation team and understand it slightly better. That is one point. On the second side, I have a couple of questions. I mean, see, you've given a guidance for the revenue, net profit and all. I believe the way you are setting up, you are going to blow past that revenue targets any which way. One of the questions I have, and that is the most interesting area that you have spoken about in the last two quarters, and I also believe it to be same, is this, TapPay thing that has been launched now. What kind of internal benchmark, if any, you can share? Are you expecting this business to grow to over the next like four quarters?
Any kind of a range that we can think of that this is what is the vision that you are looking at?
Yeah. TapPay is a solution which we've launched recently. You know there are two things that will happen, we believe in the next few quarters. One is that the number of cards that have been issued which are going to be NFC enabled. You know, it should get to maybe 70%-80% in the next 12 months.
Mm-hmm.
Because historically, cards were not NFC-enabled. Not all cards were NFC-enabled. We expect that, you know, in our discussions with card networks and card providers, our expectation is that in the next 6-12 months, India will be a society where any card which has been issued will be NFC-enabled. There is going to be a transition even for cards that are non-NFC-enabled to becoming more and more NFC-enabled, in India. Number one. Number two, that as we build out from merchants, there will be the merchants that don't have point-of-sale machine. Those are very. They are watermelons on the ground, and we can offer such solution into such merchants.
For merchants who are using our platform at the moment, because they are already processing through us, those are the ones which are quick wins for us. In terms of the processing volume, like I said, 99% of all volumes in Q1, in fact 99.5% above, were all, you know, online transactions. You know, offline market is a larger market in many ways compared to what online does today. While online is increasing at a rate which is much faster, so we expect that there's gonna be a crossover. Vishwas mentioned that 72% of the transactions even today are cash-based. If you are able to offer a solution which offers all these different elements, I think it makes it very worthwhile.
This year our target is that in a single-digit %, transactions will be through CCAvenue TapPay. Next year and the year after, we expect that about 30% of the transactions will be, you know, definitely through the offline channels.
30%?
Yes.
Oh, that's huge. That is like.
All the transactions that we process.
Mm-hmm.
It will be through offline channels, through CCAvenue. Because see, what CCAvenue TapPay does is it somewhat morphs the line between offline and online. Fundamentally, it's a point-of-sale machine, which is more like it's a. Think of it as like a POS point-of-sale solution, but it's on the phone with all the security and all the feature sets which have been built out, which have been approved by all card networks through authentications and many other means. We expect that. I'm not sure whether you followed, but there's an event which is online. Perhaps it would help to. My investor relations will reach out to you. But that's where we have a unique solution, and it's patent pending. We filed for a patent whereby a consumer can make a payment while they're on a website shopping for an airline ticket.
They can tap their own phone and make a payment, which is the first in the world. Nobody's done that. If you are in an online website and if you are shopping for a ticket, you will be able to tap your own phone and make the payment, which will go through online. That is something that we've just recently patented, and we would want to. That's where I said that, you know, that offline will become a significant portion. The CCAvenue TapPay, that is a better way to place it. Check out through it.
Yeah, absolutely agree. I mean, see, this is so exciting.
Oh, sorry. This is for Mr. Vishal Mehta.
No, I'm just making a follow-on comment, nothing else. I'm done with this comment. When we see many, many places where there are multiple servers, but they have one or two machines, like restaurants, like, all these petrol pumps, I mean, these are natural targets for TapPay, right? Each of these people have a mobile phone, all of the pump attendants, all the servers in the restaurant, and all of them can be enabled, and they can move away from POS machines to this thing. I mean, I can understand logically also this is an extraordinary opportunity, and all the best for it.
Thank you.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to the management for the closing comments.
Thank you all for your participation, and we look forward to, you know, getting comments and suggestions from you every now and then. We'll keep you updated on the progress. Thanks so much.
Thank you. Ladies and gentlemen, on behalf of Go India Advisors, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.