Ladies and gentlemen, good day and welcome to the Q3 FY 2022 earnings conference call of Infibeam Avenues Limited, hosted by K.R. Choksey Research. As a reminder, all participants' 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 the star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Parvati. Thank you and over to you, ma'am.
Thank you. Good evening, everyone. On behalf of K.R. Choksey Research, we welcome you all for the Q3 FY 2022 earnings conference call of Infibeam Avenues Limited. I take this opportunity to welcome the management of Infibeam Avenues, represented by Mr. Vishal Mehta, Managing Director, Mr. Vishwas Patel, Executive Director, Founder, and CEO of Payments Business, Mr. R. Srikanth, President, and Mr. Hiren Padhya, Chief Financial Officer. We begin this call with a brief overview of the company by the management, followed by the Q&A. I now hand over the call to Mr. Vishal Mehta for his opening remarks. Thank you and over to you, sir.
Thank you, Parvati. Good evening and welcome everyone to our earnings call. I wanna wish everyone a very happy, safe and prosperous 2022. India presents a very, very great opportunity, as we are in a very nascent startup ecosystem with about only four to five s in this space versus 20-25 years by most other countries like the U.S., U.K., China, Japan, Korea and others. We believe this decade will be the year of tech-led organizations for India that will solve many business challenges and make us more efficient in the way we do business, consume resources, and will make governments also very efficient to handle economic affairs with use of technology. Government's vision is to make India a less cash economy, and Infibeam will play its part in adding to the nation's purpose.
We aim to do that by enabling the merchants from top of the pyramid right up to the bottom with two of the most basic business requirements in the digital space, marketplace software and platforms to do business digitally and payments to accept money digitally. We offer a full stack solutions under both these options, and we've been doing it for more than 2 decades now. Many global tech platform companies have over the last two- years also doubled up as a payments company. We envisioned this combination as a successful business strategy back in 2016. Together, we have built a very comprehensive suite and solution for our merchants for a very long-term value creation and sustainable growth.
We have presented this on slide number 16 of our presentation deck, which is called Growth-Oriented Business Model as a header under the Company Overview section in the earnings presentation. In the slide, you will also see, as we began our journey with digital payments, we built a deep portfolio and a profitable business model for long-term sustainability. Our payments business under the brand CCAvenue, which was launched in 2001, and we will complete more than 2 decades of incorporation in the next few days. We have been PAT profitable, profit after tax profitable in this business for 20 years straight. A reputed Singapore-based research firm in their fintech blog mentioned, "Can payments be profitable?" They say, "Lessons from Infibeam Avenues." Our payments business has a very strong customer acquisition engine with almost minimal customer acquisition cost.
We worked in retail payments for more than 11 years and had the benefit of first mover advantage to target all the premium businesses in India whom we can continue to serve even today. We have built an innovative products through our journey and expanded both horizontally into different payment acquiring businesses and we've expanded internationally as well. We cover merchants of all different sizes and scale. To have a huge competitive advantage and a great value proposition on top of our payments business, we have the platform business to significantly scale up the customer acquisition and also a retention, engagement and cross-sell opportunity. The combination of payments and platforms, enterprise platforms that make the customer even more sticky and allows us to generate additional revenue, scale our businesses and start incrementally contributing to our margins.
Among the platforms, the GeM platform, which is called the Government e Marketplace, is one of the strongest offerings with millions of merchants registered to sell to the government. We earn on a per transaction basis with revenue linked to order value of each transaction. In FY 2022, the order value is estimated to be INR 1 lakh crore, which is projected to double by FY 2023 as per comments from GeM. Thus, the scaling opportunity is immense, and unlike payments, there is no passthrough as this is a business of software, so most of the earnings flow to EBITDA and PAT.
This is why our platform business is high operating margins, and it helps us to generate consistent cash flows quarter- over- quarter. Also, the merchant base on such platforms have been increasing at a very fast pace. Currently, GeM alone has 3.5 million merchants.
Add to this one the merchants of our payments business, acquiring business, the entire offering of CCAvenue and from other platform businesses, that is BillAvenue as well as ResAvenue, as well as other large enterprise clients to whom we cater the platform business to presents a very long-term opportunity to build out our new products. To let you know, we added almost 8,000 merchants across our Fintech platform portfolio every single day in Q3, totaling to over 800,000 merchants in the three months ending December 2021, which has been our highest ever. We've added 5 million merchants with many marquee brands. Similar to our own payments and platform growth strategy, we also have an investment-led growth strategy. See the bottom of slide 16.
We aim to present across the entire ecosystems of payments comprising of payment acquiring through Infibeam Avenues, payment issuance through our majority-owned subsidiaries, which is Go Payments, a payment network through our majority-held subsidiary, So Hum Bharat, in consortium with other large MNCs and international MNCs as well, where we are awaiting RBI approval, as well as cross-border payments through Fable Fintech, incubated right in our offices. The entire portfolio of ours leads to our next phase of growth to monetize on the rich and growing merchant database. We aim to do so by enabling leading lending to our merchants.
We know the credit gap in the country is almost $300 billion, and takers are many. We have three models under lending, which we discussed in the last call as well. Secured lending through same-day settlements, which we are doing. Aggregating buy now, pay later options.
Third, enabling credit through a credit platform, TrustAvenue, which we launched today. Secured lending is up from $150 million in Q2 to $175 million in Q3, a run rate of $700 million, 3x ahead of our FY 2022 guidance of $200 million. We are targeting $1 billion run rate by end of March 2022. The buy now, pay later option, which is the second option, are available, and under our payment gateway, we will offer more and more of these options to merchants where we can earn upfront MDR, which is merchant discount rate, without any collection worry or NPAs.
The credit platform, TrustAvenue, will be a future revenue and margin driver for us, one that we will give to all of our platform implementations as well as to our clients using our payment gateway. India's digital story picked up from the time of demonetization, accelerated by COVID, and also digital has been one of the core go-to-market strategies for most businesses. Overall, digital payments in India is just about four-five years old, versus nearly two decades in some of the countries, including U.S. and China. There are only about 250 million digital payment users in India, with a population of 1.4 billion. Hence, we believe the headroom for growth in India is significant, and we are at an advantageous place due to our unique business model.
Between December 2020 to December 2021, our market share in India's digital payments industry, as per RBI report, has significantly improved. It is important here to note that while we are achieving growth, we are also having a profitable business model, and we continue to grow our profits in India's hyper-competitive market with predatory pricing and where there are regulatory guidelines of zero MDR on UPI and RuPay debit cards. Hence, we continue to maintain single-digit contribution from zero MDR payment options. Hence, the impact on our net take rate is low.
We continue gaining market share without compromising on profits. Our next few years, we will invest and work towards improving our market share further in India, increase revenue contribution from our new businesses, and our investment-led business scale, as well as our international expansion scales. It will also scale with our lending business.
It will improve further our operating profits. We are also planning, and we'll be announcing, and we've already talked about this in our disclosures, and Vishwas will cover it in slightly more detail. All our payments today are digitally online payments, and we are now also getting into an offline payment opportunity, one that will be hybrid, one that takes over a merchant's payment requirements, both as online as well as offline. Thank you, and I will now ask Vishwas to give you updates on the payment business and more.
Thanks, Vishal. This quarter, we have taken payments to a new high. Our payments transaction processing value has grown 60% year-on-year. We have added a thick pipeline of merchants which is consistently growing for the last 5, 6 quarters. We are very proud that we have doubled the number of merchants than one of our largest peer. Our 21-year-old brand speaks for us when it comes to portfolio services, security, success rate, tech support, customer service and even on timely payouts to the merchants. We are a preferred choice of our customers and partners. This quarter, we have seen a good uptake in the sectors that were badly affected by the COVID pandemic, be it airlines, travel, and all those have experienced pre-COVID levels of volume.
This is a very good sign, and we hope the trend to continue, which will have a positive bearing on our overall performances. We continue to expand our portfolio in the Indian market. In the past, we have launched payments for corporates, payment services for banks, expanded possibilities within our online payment gateway business. Today, we are taking a very big step further to become a full-fledged payments player by entering into the offline payments. For this, we have acquired 100% in the Bengaluru-based Uvik Technologies, whose payment platforms can allow smartphones to be converted into business and payment terminals. Apart from contactless technology allowing to pay by tapping on the phone, we can also offer QR codes for payments, payment links. We can offer bill payment services embedded within the app.
We can also offer them agency services through Go Payments, which can be an additional income to them. We can enable lending, we can offer credit cards, we can offer BNPL options for our customers, reports, analytics, and many other things which really helps in the merchants day-to-day business. We'll also be able to give seamless payment technology with a larger basket of services for those merchants having both offline and online presence. The company has issued equity shares on preferential basis to Season Two Ventures, not exceeding INR 27.5 crores as part of the deal. Additionally, we also keep building the tech stack. We realized the opportunity is right for lending to the merchants to help them with working capital and grow their businesses. Vishal already mentioned the above three models that we have under lending.
Today, we have announced the launch of trustavenue.com, a marketplace lending platform for businesses to get unsecured loans, MSME loans up to INR 5 crores and loans under the government's MUDRA scheme. An in-principle approval for loan comes in less than an hour. We have 5 million merchants, and we are rolling this out for everyone. We have multiple layers of revenue. We do not take any credit exposure as we are a tech platform offering a marketplace with high intelligence and analytics for our merchants for the lending institutions to carefully underwrite the loans.
Continuing our expansion in the Middle East, especially GCC, we have received an expression of interest from the royal family of Qatar, Al Thani Group, to form a JV in Qatar. They will also be doing a primary investment in the JV by the royal family.
Infibeam Avenues directly or through its subsidiary holds majority stake in the JV. This year, Qatar is hosting the FIFA World Cup in November 2022. As the nation gears up for this event, we believe there will be a lot of opportunities through the year to expand quickly in Qatar. Qatar, like its peers in GCC, is focusing on increasing the digital business. With Qatar's entry, we'll cover three-fourths of the GCC in the payments business, namely Oman, UAE, Saudi, and now Qatar. The four biggest e-commerce markets in the GCC region. We await RBI's approval on the new umbrella entity for the payments network license like an NPCI. A payment network is the most important digital part of the digital payment ecosystem.
If we get the license, it will be a big opportunity where we can build innovative products through our experience. With the help of our consortium partners, we'll be able to reach the bottom of the pyramid and to serve customers across India. Now, let me hand over the call to Srikanth to give you a Q3 business update. Thank you, sir. Thank you. Srikanth, over to you.
Thanks, Vishal, and thanks, Vishwas. During the quarter, we saw 90% increase in our total TPV, led by sharp growth in payments business and increase in order value on the government marketplace. We are now at the run rate of processing over INR 3 lakh crore, more than double of what we did in the whole of FY 2021. We are inching closer towards achieving a total TPV of INR 1,000 crore on an average per day, which we plan to achieve by the end of March 2022, and then double it as we exit actually in FY 2023.
The growth in payment business in terms of our TPV comes mainly from the large enterprises that we have added in the last few quarters, festival buying during the quarter, increasing contributions from travel and hospitality sectors due to Diwali and Christmas vacations and other festival vacations.
An average increase in discretionary spends led by festival quarter. This quarter, we have added a lot of SMEs, grocery still, and it will be interesting to see how this industry plays out over the short and medium term. Growth in GeM order value comes from continuous support of the government to make the digital purchases for transparency and savings, encouraging government departments to buy from the platform, and large number of sellers from various sectors registering on the platform, increasing the number of products and services available on the platform. In the last 30 days, starting from the last week of November to last week of December, the order value on Government e-Marketplace platform was in the range of INR 10,000 crores on an average, INR 363 crore actually per day, which is very remarkable number.
We are strengthening our payments play by entering into offline, as Vishal and Vishwas just mentioned few minutes ago. We will be targeting offline as well as it opens the plenty of opportunity for us. CCAvenue, our business brand for payments, app-based zero cost point of sale and the basket services the company offers all under one roof, will help the company in acquiring offline customers to scale our payment business. We have received, as Vishal and Vishwas mentioned, expressions of interest from royal family of Qatar, including primary investments from them to set up payment business in Qatar through a joint venture structure. Qatar's entry will further deepen our penetrations in the fast-growing GCC e-commerce market, which is expected to double to $50 billion by 2025 from $24 billion in 2020, as per Kearney report.
We already have a presence, as you all know, in UAE, Saudi and we are market leader in our credit card payment business in Oman. Our AI-based platform, branded TrustAvenue, is actually launched today. Partnership with lenders and their integration is now in full swing. Our comprehensive payments and platform stacks on an engaging tool for the merchants, which we plan to monetize through the lending and adjacent services that we will build upon as we go forward. Lending will be the revenue and margin growth driver in the next two to three years' time as we scale. I will now hand over the call to our CFO, Hiren Padhya. Over to you, Hiren.
Thank you, Srikanth. Our revenue for the was up by 74% year-over-year. If you notice, Q3 of last year was already the top quarter in FY 2021, and we rose by 74% on that. This is mainly due to our continuous effort of building a strong fintech portfolio with high merchant additions over the last 5 to 6 quarters, which is helping us building a strong growth pipeline. This quarter, we offered promotional rates in the payment business, processing fee of 1.75% due to festivals and vacation or travel season during this quarter. The processing fee was 2% in quarter 2. Despite the drop in the processing fee, we were able to grow our net take rate by 2% in the quarter, which was led by good business portfolios.
As far as EBITDA is concerned, in this quarter it has grown by 10% quarter-on-quarter. This quarter we have made expenses towards building a new business, leading to higher total operating expenses. These expenses are necessary in order to build future growth. We are in an expansion mode. Given the 75%+ headroom available for growth in India in payment, we are chasing growth, but without compromising on profits. Our profit after tax have increased to INR 74 crore in the quarter, growing by 89% year-over-year and 35% quarter-on-quarter. Our cash position remains strong. EBITDA to cash conversion has consistently been above 100% for many years now. Our CapEx cycle is behind us, and we are at base for the company.
As we scale in our new businesses over the next few years in India and internationally, our cash flow will improve further, and the economy will generate higher ROA and ROE. With this, I hand over the floor to the operator for Q&A.
The first question is from the line of Anil Nahata, an investor. Please go ahead.
Hi. I have a couple of questions. The first question is on the Uvik deal. I would just like to know that, how are we going to scale up this business and at what level presently the business is? If you can give me, like, the 6-monthly numbers or 9-monthly numbers. How do our merchants are onboarded onto that platform? Is it a direct onboarding or there is some other way to do it?
Okay. Shash here. I'll just take the question. Okay. The idea here is that look, today we are very well represented on the online space, on the website, for in-app connections and other things. Now, if you see the problem in India is on the offline acquiring, in the sense that you won't find a POS terminal at a kirana store, say, in a village in Assam or Odisha, right? Because the point-of-sale terminal is around INR 10 thousand-INR 12 thousand, and the cost of deploying and training the merchant, plus there are hardware costs of battery and other things that keep recurring. Of course, you have to keep sending them printer rolls for charging those printing those charge slip at the end of the transaction.
That's why the POS terminal was not able to penetrate into that tier two, tier three, tier four, in limited numbers. What is now coming is QR codes into small places, which is very limited with only UPI transactions. It can't do credit card transactions and other things. Uvik has a Tap on Phone, which comes within an app. Within a CCAvenue M.A.R.S. app, right?
Here you can do a digital onboarding of a merchant, right, within two minutes, and then he, the merchant has the ability to accept credit card, debit card, everything within the system. What it means, like suppose if you are a tuition teacher somewhere in a village in Tamil Nadu, and you want to accept 1,100 INR from your student's parents, right? They are giving you a credit card, but you can't, right, accept. All you have to do is go to the Google Play Store and download the CCAvenue app, right? There, like a calculator kind of interface comes in. You just put 1,100.
Then from your phone only, the parents can just tap on the phone to their credit card, debit card, and the transaction will go through without the OTP or anything. That's how easy it is then deploying a POS. We anticipate the point of sale terminals to disappear in the next three years. This is the future technology, Tap on Phone. Any phone can become an acquiring point of sale terminal. Now, today we are growing exponentially. If you see the merchant intake, we onboarded 800,000 merchants this quarter at the rate of 8,000 merchants every day. Now, with this kind of solutions, which is mass-based and anybody across the country can start, just download and start accepting payments, for offline customers or customer-present scenario, then we intend to scale up.
Hence our total processing volume at $44 billion. We have already given guidance of $100 billion in the next three years. This will help expedite our growth rate. This is future technology. Uvik is the only company in India which has certified with Mastercard, Visa and NPCI's RuPay to accept the transaction with glass PIN on Glass, right? They are the only company in entire Asia Pacific which is certified right now, along with one company in Turkey. Hence, the acquisition made all sense. It also helps all our existing bases of almost 5 million merchants. Those who are using POS terminal offline can start downloading the app and collect it through their smartphones.
Yeah, that sounds great. I mean, what kind of, like, transaction processing volumes we are expecting from this in a couple of years' time out of the 100 billion-
Yeah. We've already given guidance of $100 billion, more than double, from what we are at $44 billion run rate. It will go more than double than what we are and even more further. It depends on how far we are able to aggressively market and which we are gonna do market, right, aggressively. It will double from the current TPV that we have and even the merchant intake we expect to double from the current 5 million.
Okay. A couple of other questions. One is on the GeM revenues. These GeM revenues that we get on the per transaction basis, are they accounted in which segment, the payment segment or the e-commerce segment?
They're part of the e-commerce segment.
E-commerce segment. Okay, thank you for that. The last question is on the payment switch. Have we deployed the payment switch, and what is the future outlook for that?
Payment switch standalone cannot work. We have launched a product called CPGS. That's the CCAvenue Payment Gateway Service for big banks and big corporate merchants. That is already deployed and live, where we give the full payment gateway along with the bank end connectivity with various switches, including our switch or third party switch or to the bank switches, whichever. We have launched this around a year and a half back. We have successfully deployed in Oman with the country's largest bank. There is Bank Muscat, which is already live and processing transactions there. The number two bank in Oman, Bank Dhofar, also is live now. In India, we have signed up with Jio JioMart. CCAvenue CPGS as a white label is already used by ICICI for their corporate side.
The retail side is also under discussion. HDFC Bank SmartHub is also live. The Kotak AllPay payment gateway is also powered by CPGS. That's the CCAvenue Payment Gateway Service, the white label. The whole CPGS is already started and live, to answer your question.
Yeah. That answers the question. How do we make revenues on this? I mean, it's on a per transaction basis. What kind of TPVs are there?
Yeah. There are multiple modes of revenues with different banks, it comes under different heads. There is a setup fee, there is for per merchant onboarding, there is a fee. Then there is a per transaction flat fee that is charged for processing those transactions. There is support charges and many others. It comes under different revenue and it depends from bank to bank, how we close the deals.
It is a customer-centric. It's also a customer-centric strategy.
There's no charges to the customer. It's the CP-
No, I'm saying it is a customer-centric. Our customer-centric bank-centric pricing.
Yeah, yeah.
It will vary from banks to banks.
Yeah. It depends from bank to bank.
Okay, thank you so much.
Depends on what scale the banks are.
This also goes into the e-commerce revenue?
No.
No, no. It will come under the payment business.
Okay.
Yeah, it comes with the payment business.
Okay, thank you so much.
Thank you. Ladies and gentlemen, in the interest of time and fairness to all participants, please restrict questions to two per participant. The next question is from the line of Unnati Jadhav with KRChoksey. Please go ahead.
Hello, good evening. You all have mentioned about the drivers of margins growth in your commentary. You believe that as a share of value-added services like CPGS or new banking services where you'll be doing the lending via PL and AI-based credit platform. You think that this is going to have an immediate impact on the gross profit margins in the few quarters ahead because you've been getting a good traction from the audience concerned with respect to these businesses. Do you believe that this is going to have an immediate impact on the GPMs? Gross profit margin first thing, and what could be the share of this particular value-added revenue to the total revenue? It could be as a percentage of total revenue on net revenue.
The second question is, your depreciation expenses have been coming down year on year since Q3 2021. Any particular reason for it, and how do you think it will pan out going forward? Thank you.
I will take this question. Basically, to address the first question is that all our strategy which we mentioned actually and execution we mentioned this call, it is all actually going towards our achieving $100 billion total TPV, and that's basically a unique target for and mantra for the company. We believe that all our business model, 75%-80% of our business model is basically linked to the total TPV in terms of transactions revenue model. Even in this quarter, if you have seen, total TPV has gone up 90% year-on-year and profits have gone up 89% year-on-year. It is in a way directly a linear accelerator total TPV in a way.
For all practical purposes, lending is basically definitely a next generation growth for the company, both for the top line and also for the bottom line. External settlement, we have already experienced actually bottom line growth driver ever since September 2020. We are also getting into the opportunities of offline opportunities. Even though the point of sale terminals are going to really fade away in three-four years time frame from now, but for all practical purposes that we don't want to miss that hybrid opportunity, and therefore that there are several functionality framework of specifications are coming along with that acquisition deal, which we believe that using our brand, we will be able to really acquire more customers on the offline space.
Plus you have the TrustAvenue lending in terms of strong brand, which is actually launched today. Any merchants, not necessarily that they are our merchants, even external merchants can really log in, and we will be able to really do the lending services through partnership with our banks and NBFCs. All put together lead to the growth driver, not only for the bottom line or the top line, but also for the bottom line. Therefore, we are all working actually for the consistent improvements in the margins.
You can see it actually this kind of an improvement in the margins even in the current year, and therefore that uniformly on one side investments and platforms are happening, on the other side growth in the business, all our legacy business and new business are really happening. therefore 2, 3 quarters you can see some amount of tractions in the bottom line, further tractions in the bottom line. The objective is to really have a really scalable, sustainable, profitable growth in the medium to long term. That is what our objective.
Okay.
Second question. What was your second question?
Oh, yeah, the depreciation expenses have been coming down year- on- year.
Yeah. depreciation as you can see it in the footnote to our annual accounts all our enterprise payment platforms or technology platforms or the various assets, intellectual property assets, which got capitalized and have been amortized actually based on certain legacy conventional policy. But as the period actually goes, as the further investments are going into this kind of an IP assets, they have significantly gone up and the remaining usage of those assets have also significantly gone up. We are, as Hiren was mentioning, not a capital asset-centric company.
Therefore that for all practical purposes with the existing assets that we will be able to really gear up our existing the guidance of INR 100 billion total TPV in three-five years timeframe. That's what we guided. Therefore that the useful life and usage of assets have been increased, and that is one of the reasons for our amortization reduction by INR 2-2.5 crores actually during the current quarter.
How do you think it will pan out? Like, because, you have already, you see that the value, valuation of those intangibles is actually more, than, of course, your amortization cost will continue to drop down. Is it or how it will be? It will be stabilizing at these levels?
I think we believe that it could be in the range of INR 35 crore-INR 38 crore on an average actually annual basis.
Mm.
Right now it is about INR 9 crore actually on average per quarter. I think INR 35 crore-INR 38 crore actually based on our existing assets, that could be the number.
Okay. Yeah. Thank you.
Thank you. The next question is from the line of Nandan Vartak from Wealth Managers. Please go ahead.
Yes. Thanks for the opportunity. I wanted to understand, does UPI or Google Pay like system require any services of Infibeam?
Hello?
Hello, am I audible?
Are you saying that does Google Pay or?
UPI-based payment applications, do they require any services of Infibeam ?
Basically, we use them as a payment option to offer it to all our merchants, and we make money out of it. I'm saying that the UPI option
Across all our merchants, anybody who wants to use or pay through Google Pay or PhonePe or through Paytm can pay. We use that as a payment option, and we enable their services through UPI. If they're a Google Pay customer, they can pay our merchants via CCAvenue on that.
Okay. Can you give a update on JioMart affiliation that we have? What would be revenue contribution on that part?
I will take this question. Revenue contributions is a customer-centric confidential information, so therefore we will not be able to share it. For that matter, any large enterprise customer-centric information, unless it is a public data, we will not be able to share. However, our relationship with the large enterprises is pretty good, both on the strategic side and also on the tactical side. You know, our e-commerce marketplace platform is doing wonders and you know with 10X value proposition, and the relationship is ongoing, both on the payment side and also on the platform side.
Okay. Okay. Thank you.
Thank you. Again, if you have a question, please press star and one on your telephone keypad. The next question is from the line of Arvind Datta, an investor. Please go ahead.
Yeah. Hi. Can you hear me?
Yeah. Yeah.
Yeah. My question is on the other expenses on the consolidated results. On a YOY basis, they've grown 92%, and on a QOQ basis, 79%. Can you throw some color on these expenses? And how do you see the trajectory or the run rate going forward in the next three, four quarters on the other expenses?
Sure. Basically, the other expenses is basically provisions, the provisions that we make on a quarterly basis. You know, I think those are one-off charges. They're not recurring charges. That pretty much builds up most of the other expense setup that you talk about.
Okay. It's not gonna be similar trajectory going forward. That's what you're trying to say?
Yeah. That's right.
Okay.
What we do is we've been in a lot of ways appropriately conservative in all of the standards.
Yeah.
In terms of following those standards, we provision every quarter.
Okay. My second question is regarding your slide number 26 on the investor presentation deck, which talks about secured lending performance, $175 million of express settlement. Being a payment gateway or a fintech, can you lend or how is this lending happening? Are you allowed to lend by RBI? And if not, then how is this happening?
I will take this question. It's a tactical question. Basically, we cannot take any credit exposure, and therefore we are not taking any credit exposure, both on the secured lending through express settlement and unsecured lending actually through relationship with banks and NBFCs. We are not taking any credit exposure. That's number one. Number two is that the loan book of $175 million, which is equivalent to almost INR 700 million, and we're heading towards $1 billion, started from zero in September 2020. It is basically after the purchase of the transaction. Instead of making the settlements actually on T+5, T+7, T+3, we are making the settlement on the T day. That reflects actually additional charge to the company.
Our cost of funds is hardly anything, and therefore that is a profit driver for the company. This activity is going to be a tremendous activity. The engine is working very well, and we are not taking any credit exposure. This is allowed by our regulator.
Okay. Thank you so much. That's my question.
Thank you. The next question is from the line of Anil Nahata with an investor. Please go ahead.
Yeah. Thank you. On the TrustAvenue which we have launched, how are we going to attract the customers? Since it's a marketplace, how are we going to attract the customers to that?
There are multiple ways. The first thing is, like, Srikanth had mentioned, that we will open up the platform for customers who are already using our CCAvenue payment gateway. We've got more than a few million merchants who transact payments through us. You know, that opens up an opportunity to offer them lending products. You see, there are multiple products in lending as well. You know, Srikanth just mentioned one, which is express settlement where we don't take credit exposure. Similarly, there'll be other opportunities as well. The big one, of course, are SME-based lending. The ticket size being anything to do with to move forward from INR 50,000 to close to INR 5 lakh or INR 10 lakh rupees. Those are the ones that typically banks don't cater to.
Those are the ones that who process through us that we can potentially open up that opportunity to. That's one area. The second area is the
Larger enterprise clients who are using our platforms. We open up that opportunity whereby we can reach out to many, many more audiences, and that becomes an opportunity to reach out to those clients as well. These are primarily the two areas that we will focus initially, as far as TrustAvenue is concerned. There will be other products and features that get built on top of TrustAvenue as a roadmap, which we'll talk to as and when we launch. Initially, our appetite is to go with merchants who are using our platform and enterprise clients who would wish to avail the feature sets and the framework that we've developed to be able to reach out to those merchants.
This is essentially a cross-sell opportunity using our other data. Do we also be able to use the GeM merchant base for this thing?
Like I said, we will have to work with each of our enterprise clients and reach out to as many of their merchants as possible. To answer it in a short way, absolutely, we'd like to showcase the TrustAvenue framework to many of our enterprise clients, and we'd like to see how we can actually participate. You see, anytime a merchant gets more capital and cash flow, they can deliver better on a marketplace. To give you an example, there are two different kinds of factoring that happen. You know, RBI has opened up factoring in a very large way where earlier only a handful of NBFCs were able to do factoring, now many, many customers. What you talk about is maybe invoice-level discounting and order-level discounting.
When a seller receives an order, you can discount that order or when a seller invoices, you can discount an invoice. Those are the ones that are opportunities that we'd also want to explore. Absolutely.
Great. Another question. Is the MDR has stabilized over the last quarter, over this quarter rather, from 6%-6.2%. How do you see it going for the next 3, 4 quarters?
We are looking at a more upward trajectory because we were little bit because of the COVID pandemic, our main performing merchants where the MDR is in percentage base, be it the hospitality sector, be it the airlines, be it all the others, were severely affected because of the pandemic. Now in the last quarter, they having come up and we see a more aggressive quarter. The thing, they are coming back to their normal businesses, specifically with international flights also starting. You should be aware that your company processes for many more than a dozen international airlines like Emirates, Gulf Air, Delta, Air France. All those flights when also it starts in a normal way, so we see a more upward trajectory on that intake on that on the gross margins.
From 6 to 6.2, we hope it will go up even more further.
Thank you so much, and all the best.
Thank you.
Thank you. Again, if you have a question, please press star then one on your telephone keypad. The next question is from Ajit Ghate with UBS. Please go ahead.
Yeah. Very good afternoon, everyone. I just had to ask about the future outlook of the company. What are the parameters we are using to get into the developed market like U.S. or any of the other countries wherein we are looking out for the expansion of the business? Or do we continue with the same kind of vision wherein we are targeting the overall business model which is there in the country?
I will take this question. I think, thank you for asking this question. This is a growth driver which we are talking about in the last two quarters. We talked about in the beginning of this year that we will double our expense settlement in terms of growth driver. We are actually about, instead of 2X, we are about almost 4X. That is one thing. Second thing is that we have said in Q2 that we will do an AI-driven intelligence platform for our credit services and lending services.
I think as we committed, by December end, we have launched actually, our TrustAvenue platform, even though technically it launched today, but actually it got ready actually in December end, and we are waiting for the actual launch date actually. This is going to be another driver, for our lending business and credit business, which is going to be a huge opportunity, and we believe that this is going to be a next generation growth actually for the company. Number three is that on Digital India, as you know that digital push, which actually we are just about 20%-21% in terms of the overall market opportunities, and still 70%-75% is non-digital.
The conversion of non-digital to digital is happening, and that is helping us actually in terms of our legacy business doing a front-end PG payment infrastructure services business for merchants. This has really led to the total TPV of INR 75,000 crore, almost $10.2 billion as we speak on a quarterly basis. The same number, about the same quarter of the previous year, the number was INR 39,000 crore. It's been almost doubled actually, not only in the TPV but also in the bottom line, basically. For all practical purposes, with our push of digital, our legacy business will also continue in pan-India.
For all practical purposes that we are getting into the offline mode through our technology framework partly now it's created and partly acquired actually through Uvik acquisition. That is going to be an addressable market to really capture the accelerated growth, and this is the fourth growth driver. Just one as we have mentioned that India itself is a huge opportunity and however, we started in UAE about three and a half years ago, again from scratch, zero. Today, we are about almost AED 4 billion dirhams, almost close to $1.1 billion actually of processing which we are doing. With our Oman presence of credit card payments and we are about 90%+ market share, and that is also likely to go up.
Now, with the new joint venture being formed actually with the primary investments from Royal Family of Qatar, we at the management, we at the company sincerely thank you know our Royal Family of Qatar for their active you know interest in the company and to accelerate payment business in Qatar. We believe that in the medium term, that is going to be a huge growth opportunity for the company. Of course, but for the COVID, we would have by this time started two more countries. COVID has really slowed down our process of new country operations. Still, we believe that the COVID situations globally have now settled, even though in India it has settled partly, but globally it has not been settled.
Once it gets settled, we will accelerate our growth opportunities in the new country operations, at least two or three countries actually going forward.
Thank you, Ramesh.
Thank you. Again, if you would like to ask a question, please press star then one on your telephone keypad. The next question is from the line of Emil, an investor. Please go ahead.
Thank you for the opportunity. My question is, and maybe it's more I just wanna hear your viewpoints, is let's say in the next two, three years we achieve our target of $100 billion or let's say doubling, more than doubling our current quarter's GMV rate. Where do you believe this, given the rate of competition, competitive intensity, the reality of the technology going on in the market, the amount of smartphones we have and not have, and where do you believe our this take rate will go? The 6.2 basis points which you believe will improve going forward. Of all the opportunities that we are doing in lending, how much can it improve our margins too? Like, do we have a ballpark viewpoint on that or yet it's still being fleshed out?
Yeah.
Okay. Look, on the part, the GMV and the payment business is increasing, right? There's a misnomer that because of UPI being zero MDR, the MDR, nobody is earning in the payment business, right? That's not the case in the sense that even on the UPI MDR, government has given out INR 1,300 crore back as an MDR for those who did not earn anything for the past one year. We expect that zero MDR somewhere down the line, either government will compensate all that. There's money to be made on every option. UPI is still a debit option. There is still credit which is growing phenomenally well. Like, I mean, if you have seen, credit has grown 100% in just one year, the credit card systems that are there, right?
There are so many other. India has the maximum number of payment options in the world, more than 200+. Net banking is not affected. That is also growing. Wallets are coming in. And then subsets of those payment options be it then EMI, spending instructions and others. That business is growing. You can see from the GMV also, we are almost double what we did the last year, in nine months alone. More than double. From that perspective, growth payment business is growing. Where the real opportunity now starts coming in, kicking in with the, with backward integration as well as forward integration, how we put it. Backward integration is the platform that we have built. We are earning in technology where every trans.
Giving it to the banks and others, that for every transaction we process, we are making money. For every merchant ID we open, we make money. For every support we give, for every resource, we make money. That's the backward integration that we have gone into with the CPGS product. In the front end, many value-added services from the merchant. Lending is just one of them. Many other services that we will continue to roll out, which will be accretive. Payment processing is the growth engine, which is a fast-growing commodity item. The services behind and the services ahead, the value-added services that we can give merchants based on lending, but many other of our platform services, there is money to be made.
The whole idea here is that payments being the core, you go do backward integration as well as forward integration, you make good money. That's the whole strategy we are about.
I see. You believe that the take rate will improve like dramatically, like it'll go from 6.2% to like 8%, 9%, 10%, like. I know it's difficult, but do you believe that
It can grow, as I said, those take rates went down, not primarily because of UPI, but because during the COVID period, the main thing like entertainment, travel, everything went down, which are in percentage-based, and the utility items like bill payments, education, other, which is typically in a flat fee, went up. That's why the take rate in flat fee is lower than in a percentage-based model where I'm charging them often say 2% and our cost is 1.64, something like that. Percentage earning on a transaction cost is always much higher than irrespective of the transaction amount, we are charging INR 4 a transaction or INR 3 a transaction, and where you're earning 25 or 50 paise per transaction.
Those percentage-based businesses, be it travel, hospitality, entertainment, all these are coming back and those take rates will increase. Overall, if you see the whole Indian market dynamics, it's only 27% which is digital. There's a whole new universe of 73% that we still have to go and capture. The entire healthcare is not done. We have a list of 1 million schools which are still not accepting fees online. There are so many other businesses, B2Bs, that we have launched, where the corporates, the vendor payouts, the vendor payments, so many things that we can do. Payment as a business is core to the growth. As India moves towards a $5 trillion economy, this thing will keep growing.
The margins also, because the government has realized the zero MDR for UPI is not helping the payment system because acquiring is not growing. Hence, the finance ministry paid out INR 1,300 crores for last year. Going forward also, it will continue to compensate. Those take rates and other things will grow and the value-added services will take it to another level.
Thank you. Just one last question. This NUE that we had applied for to RBI, any update from RBI on that? Like are they coming out with any update on who's gonna get the license anytime soon?
We have absolutely. Look, I am also the chairman of the Payments Council of India, and in all fairness, I have to say that we did put a question to RBI on what they are thinking is, but they said that as and when anything happens, we'll let you know. Maybe internally they are collating or putting up the idea of how to with so many players and consortiums applying. Maybe they might be doing the internal due diligence and the process. I think similar should be like how they did for a Small Finance Bank where they made a committee and it gave out. I think those plannings will happen. RBI is not the one who will backtrack on not giving a license or anything.
They've got through in pulling up this whole process and so many consortiums have worked so hard in putting up such a big applications and other things. RBI will definitely come out sooner or if not later.
Thank you, sir. Thank you for my questions. I appreciate it.
Yes.
Thank you. This concludes our question and answer session. I would now like to hand over the call to the management for closing comments.
Thank you. Thank you all for joining our earnings call, and we will keep you updated on the new launches and new things the company will be undertaking as we go along. Thanks for your participation and have a good evening.
Thank you very much. On behalf of K.R. Choksey Research and Infibeam Avenues Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.