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Edited Transcript of INFIBEAM.NSE earnings conference call or presentation 9-Aug-19 10:30am GMT

Q1 2020 Infibeam Avenues Ltd Earnings Call

AHMEDABAD Aug 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Infibeam Avenues Ltd earnings conference call or presentation Friday, August 9, 2019 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Hiren Bachubhai Padhya

Infibeam Avenues Limited - CFO

* Purvesh Parekh

Infibeam Avenues Limited - Head of IR

* Vishal Ajit Mehta

Infibeam Avenues Limited - MD & Director

* Vishwas Ambalal Patel

Infibeam Avenues Limited - Executive Director

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Conference Call Participants

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* Gunmeen S Kohli;KRChoksey Group;Investment Advisor

* Parvati Rai

K.R. Choksey Shares & Securities Private Ltd., Research Division - Head of Research

* Shruti Dhumal

ValueAdd Research & Analytics Solutions LLP - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Infibeam Avenues Limited Q1 FY '20 Earnings Conference Call hosted by K.R. Choksey Research. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Ms. Parvati Rai from K.R. Choksey Research. Thank you, and over to you.

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Parvati Rai, K.R. Choksey Shares & Securities Private Ltd., Research Division - Head of Research [2]

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Thank you, Melissa. Good afternoon, everyone. On behalf of K.R. Choksey Research, we welcome you all for the Q1 FY '20 conference call of Infibeam Avenues Limited. I take this opportunity to welcome the management of Infibeam Avenues Limited represented by Mr. Vishal Mehta, Managing Director, Mr. Vishwas Patel, Director; Mr. Hiren Padhya, Chief Financial Officer.

So we begin the call with a brief overview by the management, followed by the Q&A. The management may make forward-looking statements on the call today that are based on the current expectations and assumptions and, therefore, subject to risks and uncertainties. The actual results could vary materially from those projected.

I now hand over the call to Mr. Vishal Mehta for his opening remarks. Thank you, and over to you, sir.

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Vishal Ajit Mehta, Infibeam Avenues Limited - MD & Director [3]

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Thank you. Good evening to everyone. On behalf of the management present on the call, I welcome everyone to our first quarter FY '20 earnings call. It's my pleasure to present to you the consolidated and stand-alone accounts of the company. Our financial results, earnings press release as well as the investor presentations have been uploaded on our website, which is www.ia.ooo.

I hope everyone had a chance to go through all the financial releases. They've also been updated on the stock exchanges. I'd like to start by communicating that we conducted our AGM on 30th of July. And we hope that all of you have received the annual report for FY '18, '19, which is uploaded on our website. It highlights our achievements of a successful year last year, insights on the milestones achieved as well as our continued efforts for value creation that reinstate the fact that we are on course to add value and multiply growth for our shareholders. We think, based on the results that we are about to talk about, that we have set the pace for growth already with a focus on our core web services business.

Last year, 2019, was a transformational year. We strengthened our payments business in India and expanded in international markets, successfully launching our payments business in UAE. And we also announced launching of the business in Saudi Arabia this quarter. We restructured our platform business to focus on enterprise clients requiring robust software frameworks. The likes of Government e-Marketplace in India, the likes of Saudi telecom in Saudi Arabia and the Middle East. We will continue that focus on enterprise client going forward. We have built our digital infrastructure for both digital payments and technology platforms to be able to significantly scale by building a very high-speed data center infrastructure in GIFT City in partnership with companies like Schneider as well as IBM. We are one of the only companies in India with very high compute LinuxOne capability, and we have formed strategic alliances for utilization of the data center framework, not just for our own captive use, but also for third party -- external third parties.

We have formed strategic alliances, both in India and international markets to strengthen our payments and our enterprise platform business. We divested some of our noncore businesses, which were related to marketplace e-commerce, so that we can sharpen our focus on the core payments in the enterprise platform business. This has resulted in improved cash flows to support our high growth and expansion plans. In FY '20 and going forward, our revenues will comprise of web services, which include digital payment solutions, data center infrastructure as a service and technology platforms. We call this a payments infrastructure platform web services, it goes by the acronym of the PINP in our language vocabulary. In FY '20, we will focus largely on building our payments business, both in India as well as in international markets to keep achieving the high-growth rate consistent with our past record of double-digit to 3-digit growth rate year-over-year.

Having said that, I will now hand over the call to Vishwas Patel to give you updates on the payments business. And later, I will request our CFO, Hiren Padhya, to walk you through the financial performance.

Vishwas, over to you.

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

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Thank you, Vishal.

(technical difficulty)

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Operator [5]

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This is the operator. Sorry, but we are unable to hear Mr. Vishwas Patel? Okay.

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [6]

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Okay. Thank you, Vishal. Is this clear?

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Operator [7]

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Yes, sir. Please go ahead.

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [8]

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Okay. So the payment industry in India is set for an exponential growth with the industry expected to reach USD 1 trillion by financial year 2023. That is growing at almost 30% annually. And as costs have tumbled, the digital usage in India has grown significantly. So if you see the chart on Slide #8, you'll observe that the monthly data prices have tumbled by over 95%. So the data usage, smartphone users, the number of Internet and hence the number of cash use transactions have all significantly increased from 2014 and 2018. And the projections also are very encouraging for India, where 37% of all transactions in 2025 are expected to be digital from the current 13% in 2015. RBI and the government are working to increase the number of cashless transactions by 10x to 220 in 3 years and from 22 in FY 2019. The person-to-merchant payment, or what we call in our lingo, the P2M market, is projected to touch USD 224 billion in FY 2020, and all on the back of 300 active monthly digital payment users -- 300 million by 2022, 700 million smartphone users in India by 2020 and 475 million online softwares by 2022. We believe the P2M market can double to $500 billion by 2025, offering large rooms for digital payments growth due to the strong tailwinds prevailing in India, like the government's effort to make India a cashless economy, RBI and RBI's efforts in deepening digital payments, digital bill and utility payments and penetration of the Bharat Bill Payment System across India. 30% of 16 million MSME that are digitally engaged and connected but not active online. The growth in the GeM procurement business, the government procurement business, and the digital payment methods for payments to sellers and service providers. The strong growth in e-commerce, ride hailing, food delivery, education and the recent introduction of businesses of about [INR] 50 crores to compulsory offer digital payments. And increasing use of mobile banking and 2-factor authentication offering safety and security to transact online. We are already seeing a huge growth in mobile banking, as reported in RBI and its monthly bulletin payments system indicators.

If you refer to Slide #11, you will see that the mobile banking transactions have increased to 6 billion transactions in FY 2019 from a mere 172 million in 2015, while the value has increased 28x to INR 28.7 trillion from the INR 1 trillion that was there in 2015. The volume has tripled in the last year while the value has doubled. Given the current run rate of the data available on April and May 2019 and given the tailwinds mentioned earlier, mobile banking to nearly double to INR 54 trillion in FY 2020, approximately USD 771 billion.

We are very optimistic on the online payment industry growth, and we believe the high growth rates will continue for many more years due to the sheer size of the market opportunity as well as due to the fact that India has predominantly been a cash-based market. And even with majority of the demonetized money coming back into the market, the industry growth has been phenomenal. Imagine the growth as the economy moves towards less cash and digital eruption increase even further. In this quarter, our focus has been -- primarily been on the education sector where we achieved 30% growth in transactions process. Some of the notable names is the Podar Group, the Podar Education Jumbo Kids, Podar International School and the International School of Business Management (sic) [Indian School of Business] of Hyderabad, and many others.

We also added some well-known corporations like AU Bank, Sharekhan and Bajaj Auto Finance as the merchants. The payments processed in this quarter increased nearly 40% year-on-year to INR 14,500 crores up from INR 10,000 odd crores in the same quarter last year. The payment process in the UAE increased 75% year-on-year. In UAE, we have been very strong in growth, and we expect to do a sizable business for the next 18 to 24 months. We are targeting to process payments worth USD 1 billion in the UAE alone in the next 2 years by 2021. We currently have over 500 merchants there in UAE using our payment solutions and including some of the market names in the UAE, including Burj Khalifa, At The Top, Emaar, DAMAC, Nakheel, some of the top realty firms there, Qatar Insurance Company, Tejari, DHL couriers, BookMyShow and many more in the UAE market.

We will also be going live in Saudi Arabia by the end of this month and will add much more volume to the Middle East business and increase our revenues. As you are aware, Saudi is nearly 4x bigger by population compared to UAE and nearly twice by GDP. Saudi and UAE constitute 3/4 of the overall Middle East digital payments market.

Bill payments in India is a huge market opportunity. We have discussed in the past that millions of bills get generated every day, be it on mobile, landline, DTH, electricity, water, gas, insurance, education, credit cards, you name it. So in which the RBI NPCI wants to make it easy for the consumers to pay bills from a single window rather than going to different places to pay all their bills, so the main highlight of the system is that RBI, just last week, has allowed agents to accept payments in cash and to convert cash offline through digital platforms. Our BillAvenue platform does exactly that. We are targeting the huge offline market compared to the congested online market, which most competitors are targeting. To give a boost to the BBPS, as I said earlier this week, RBI announced expanding of the number of categories through which the bill should be paid and also the number of biller categories plugged into the system. So the new categories, which is really exciting for us, is insurance.

Education, now education from KG to the postgrads every year were collection through the BBPS system. Government taxes, credit card payments, club fees, housing societies, all are going to soon going to be added on the BBPS. BBPS is also expected to add nearly 2 million agents across India to further the bill payment network. NPCI planned enrolling agent institutions, money transfer agents, business correspondents, CSCs and cooperative banks and plug them to the central unit and provide assisted payment to those who are not, say, tech savvy or do not have access to platforms.

We believe that our network that we have developed over the last 2 years of over 0.5 million agents spread in 2,600 cities and towns across India and serving millions of offline customers daily are best positioned to capture this small group. We added 2 broadband billers to our bill payment solutions, taking the total count of billers to 25. And now we have 121 live agent institutions with another 17 applied pipeline. When you're main agent institutions -- with agent institutions like UAE Exchange, (inaudible) all Saudi bill payments for their network through our BillAvenue solution.

Daily average bill processing value has increased from INR 12.5 million to INR 15 million, which we plan to increase to INR 25 million by the end of FY 2020. Today, currently, there are only 154-odd utilities on the Bharat Bill Payment Systems. Since you have entire network ready, as soon as this biller uptake goes up to around 1,000-odd billers on the system, then the growth will be phenomenal.

Now coming to our subtle solution, it's right on track to sell 1 million room nights by the end of the year, and we will double the number of hotel properties to 2,000 from the over 1,000 in FY 2019. Our investments in high-growth opportunities in digital payments through companies offering cross-border payments and digital payments for the under bank and nonbank offline population are growing at a rapid pace. We hope to see doing -- banks doing sizable business in the next 18 to 24 months. We have provided key business updates of these invitee companies on Slide #21.

Now before I end the speech, I would like to mention that digital payments in India offers great potential, and we are best positioned to capture the market. Organized players like us, maintaining prudence in our business and sharing profitable revenue growth will go a long way to create a significant value for our shareholders. Those burning cash to get businesses which suffer the problems faced by the e-commerce industry where many have lost out and have to set businesses where only a couple of large cases, companies have survived.

Having said that, I'll now hand over the call to Vishal to give you the updates on the infrastructure and the platforms. Vishal?

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

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Thank you, Vishwas. In case, everyone on the call, you had an opportunity to go through our annual report. We have generated more than INR 300 crores in cash flow from operations in FY '19, that's last year. And it's 3x more than what we did in FY '18 and 5x more than what we did in FY '17. So that is exactly the reason why we want to continue focusing on web services business, and that is the payments and the platform -- enterprise platform technology framework that we talked about.

Let me share with you a few updates on the platform and the infrastructure business. On the enterprise platform, we have undergone a few changes, thereby, we have divested the product retail and the platform solution for small and medium enterprises. In fact now our focus is to serve the large enterprises where we do not have to worry about supply chain management, as in, physical, social and [medical] supply chains, and we would also like to offer the same framework and the opportunity for international clients. There are many who have used our enterprise platforms. We've given our frameworks to GVK International Airport, we've given it to Puravankara projects, Della Adventures, EsselWorld, Future Lifestyle Fashions. We have also opened up one of our largest implementation, which is the Government of India e-Marketplace. We have offered our solutions to many of the enterprises in the Middle East region, we gave given it to Axiom Telecom, we gave it to Jumbo Electronics, we have given it to Sony as a brand for both the Middle East and Africa operations, and many more that we'd like to continue to work with and have a strong relationship with for many years now.

We will offer our e-commerce platform technology to large enterprises that requires scale as well as robustness in terms of both security as well as feature sets. We are in discussions with many of the government institutions, both in India as well as overseas for possible implementations of these enterprise technology platforms in respective countries.

I'd like to share a few updates on GeM, which is the Government e-Marketplace. As you are aware, it is a portal for Government of India to procure goods and services required by them. The sellers get registered on the portal. As of date, there are more than 250,000 registered seller on the portal, which is more than the number of sellers on Flipkart as per the recent article by Business Standard. In just 3 years of launch, they have been able to recruit more sellers who are active on the platform. This makes GeM the second highest total in terms of number of sellers only behind Amazon India. On the portal an average of at least 2 sellers are registered for every product of the service. This allows for price competition and generates savings for the government. As a reference, some of the purposes why the government choose to implement Government e-Marketplace was -- and also to let go of the offline procurement model because it brings a lot of transparency and it also generates savings by allowing healthy competition among sellers.

The government achieved on an average, as per the recent communication, a 25% saving in calendar year FY '18. While these recent statistics are of last year, the savings this year are larger than what they were in the prior years. Government is eyeing savings worth INR 500 billion every year on its procurement of INR 67 trillion. By FY 2020, the government is projecting to procure goods and services worth INR 500 billion with a potential of INR 1 trillion by FY '20. Just as a reminder, Infibeam Avenues earns about 10 bps on the procurement value as a key technology partner for government e-Marketplace. As procurement doubles, the revenues also increase for us.

We will also benefit from scale, as the incremental costs are not as many as the value of the procurement business. Accumulative INR 320 billion worth of procurements have already taken place on the portal since inception. There are more than INR 250 billion worth of procurements that have taken place just in the last 2 years. The government updates GeM statistics on time-to-time basis on the website, gem.gov.in. A lot of information, including detailed statistics are also available on the twitter handle, GeMIndia.

Moving on to the data center infrastructure. We built a 2 megawatt Tier 3 data center, which is in partnership with Schneider as well as IBM to handle very high-speed computing transactions. With partnerships, we enable and promote blockchain applications on the state of the art LinuxOne hardware implementation in India. Last week, IBM has also published key study on the website in this regard. Our partnerships with other companies like Primechain Technologies is also progressing well. We ourselves have started migrating some of our workloads from other data centers and cloud service providers to our own data center. And by the close of this year, we should have been completely migrated into our own captive data center. While a lot of our data center will be utilized for captive consumption, we will also be opening up the same utility for many of our enterprise platform clients. This will also result in additional earnings when we give it out to many of the larger enterprise clients, including GeM. We will keep you updated in the progress. The rest of the unutilized capacity of the data center, of course, will be provided providing compute and storage services to third-party customers. It's a bit early to talk about that of course right now, but we will certainly let you know once we have opened up the services for stand-alone compute and storages. With this, I would like to hand over the call to our CFO, Hiren Padhya, who will give you updates on the financial performance during the quarter.

Hiren, over to you.

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Hiren Bachubhai Padhya, Infibeam Avenues Limited - CFO [10]

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Thank you, Vishal bhai. In the last fiscal year, the company decided to focus on the core businesses of digital payment, data center infrastructure and technology platforms for government and e-enterprise clients. In staying with this strategy, company divested its noncore business that is online e-commerce marketplace, product retail and platform solutions for small and medium enterprises. Thus, the revenues in the prior quarter ending June 30, 2018, March 31, 2019, as well as the year ended March 31, 2019, include the revenue of noncore business, as mentioned earlier, which is not reflected in the current quarter ending June 30, 2019.

Our consolidated revenue was INR 1,855 million. There is a decline of 27% year-over-year. Revenue decreased due to divestment of noncore businesses. The comparable revenue actually increased over 90% year-over-year. This is mainly due to the robust performance of digital payments businesses where transaction volume increased by 44% year-over-year to INR 38.6 million. And in terms of value of successful payment sources that has increased by 40% year-over-year to INR 148.7 billion or INR 14,870 crore. In the UAE, value of payments processed increased by 75% year-over-year. We are seeing a great traction in the UAE businesses. Once we go live in Saudi, we expect to ramp up the business in there. The EBITDA for quarter 1 FY '20 was INR 553 million and that is an increase of 80% year-over-year. EBITDA margin improved significantly to 30% compared to 12% year-over-year. This was on the back of saving in operating expenses related to divestment of noncore e-commerce business.

Going forward, EBITDA margins can be expected to improve as revenue increases nonlinearly compared to operating expenses. This will lead to better cash flows. This can be used for (inaudible) away high competitive intensity in payments industry in India, invest in technology, higher talented resources at all levels in the organization and expand [offices]. Our profit after tax grew by 129% year-over-year to INR 288 million mainly due to higher EBITDA, as mentioned ago. Operating expenses have decreased due to divestment of e-commerce businesses. This has resulted in cost related to purchase of stock in trade going down. The strategic move of divestment of noncore business has further led to significantly reduction in the other expenses. That is 4.4% revenue compared to -- of the revenue compared to 32.2% of revenue in the same quarter last year.

The depreciation and amortization are expected to be in the same line, around INR 200 million per quarter. The tax rate applicable to the company is over 30%, which is also reflected in our consolidated profit and loss statements. Our debt levels are significantly low. We are one of the very few companies globally that are profitable in our industry and had relatively strong cash flow consistently. Our business partners (inaudible) achieving scale with low cost and low capital expenditures.

I would now like to hand over the call to Mr -- Vishal bhai to present the outlook for the company and then hand over the call to the operator for Q&A.

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

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Thank you, Hiren. In the past 3 years, we have been doubling our digital payments processing business year-over-year. We processed INR 495 billion of digital payments last year. And if you would recollect, in the past 3 years, we went from INR 12,200 crores in FY '17 to INR 21,500 odd crores in FY '18 and INR 39,500 crores in FY '19. In the coming 3 years, we hope to continue this growth at high double-digit to 3-digit growth rates.

As a reminder, it's reasonable to assume that the company records an average revenue of 100 to 125 bps and processing volume, while the EBITDA margins, they average between 10 bps to 15 bps. If the business volume continues to grow at the same CAGR for the coming 3 years, this business can generate in annual revenues of INR 4,000 crores to INR 5,000 crores annually with an EBITDA of INR 500 crores to INR 600 crores on annualized basis. With additional processing volumes from existing merchants, growing payments across new categories like utility payments as well as international expansions into multiple countries, we will work very hard to deliver on these numbers. On the platform business, Government e-Marketplace is one of the largest implementations on the platform. The company targets to earn about 10 bps on every transaction that gets processed.

In public information, GeM is expected to target between INR 50,000 crores to INR 1,00,000 crores this year. And there is also a significant growth rate attached year-over-year. We believe that the size and scale of the procurement of the government is significant and that this kind of growth rates have double digit to 3-digit percentages, may potentially also continue given the focus that the government has in terms of bringing transparency. As far as our data center infrastructure business is concerned, it is going to support all our digital payments as well as other enterprise platforms so that we will scale. We will offer the data centers infra as a service also to clients for hosting compute and storage. It may be reasonable to assume that the business has a potential to reach an EBITDA of INR 300 million to INR 500 million in the upcoming 3 years.

And finally, I would like to draw to your attention Slide #31, which is giving you some comparisons about the payment industry and how Infibeam Avenues is structured in that. You'll notice that the enterprise value over revenue, first one with the competitors in India, is somewhat exceptionally high compared to the international markets. But even in international markets, there is significant EV-to-revenue ratio despite them losing money. One of the international clients, which is based out of Netherlands, they have made quite a bit of information available on the stock exchanges with the listing, where the EBIT-to-revenue multiple is about 15x and is currently trading at over 11x its revenue. We compare it compared to how Infibeam Avenues is listed, we believe there is a significant amount of opportunity and headroom in terms of growing our payments business and also growing value for our shareholders. Our payments business currently is at a run rate of INR 60,000 crores to INR 70,000 crores in 2020. We believe that this can command quite a bit of increased value for our shareholders, and hence, our focus on digital payments will continue building out both in India and international.

Thank you. With this, I would like to hand over the call to the operator for questions and answers.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have the first question from the line of [Piyush Shah], an Investor.

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Unidentified Shareholder, [2]

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Mr. Vishal, we have divested our noncore business, right? But still the revenue is the same. So the main revenue is coming from which segment? I'd like to know that, please.

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Vishal Ajit Mehta, Infibeam Avenues Limited - MD & Director [3]

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See the revenues come from (inaudible) payments and checkout business, it's in debt services. If you recollect last year, we divested our product business as well as our frameworks that we are offering to SMEs. Businesses that required less amount of capital and were very scalable, highly scalable were the businesses that we defined as core to us. So if you look at digital payments, digital payments become very core because as we keep on increasing the amount of transactions that flow through us, that potentially gives us significant amount of value and revenues. So if we look at our year-over-year growth, if you look at Q1 last year versus Q1 this year, that our -- if you compare apples to apples, the growth is more than 90% in revenues. Given that we had divested the business, in the first quarter of this year, we don't have that reflection. Hence, you will see that you see a dip in terms of revenue. But actually, when you look at the numbers between last quarter versus this quarter, that you will see more than a 90% growth. That also reflected same thing in the P&L as well.

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Unidentified Shareholder, [4]

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And what are the bps we are earning in the digital transaction?

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Vishal Ajit Mehta, Infibeam Avenues Limited - MD & Director [5]

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So like I had mentioned, the digital transactions, it's reasonable to assume that we earn about a revenue of 100 bps to 125 bps. And if you look at the EBITDA margins, the EBITDA margin is reasonable to assume that it varies between 10 to 15 bps.

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Operator [6]

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(Operator Instructions) We have the next question from the line of Shruti Dhumal from ValueAdd Research & Analysts (sic) ValueAdd Research & Analytics.

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Shruti Dhumal, ValueAdd Research & Analytics Solutions LLP - Research Analyst [7]

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My first question was regarding the ResAvenue. So in that, can you just tell me how much were the bookings translated through channel manager and through Internet?

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Vishal Ajit Mehta, Infibeam Avenues Limited - MD & Director [8]

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Yes. Vishwas, you want to take that question?

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [9]

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I think Purvesh will have the slides answer. I don't have the exact channel-wise distribution of the current one. So Purvesh will have those slides. You want to join in?

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Purvesh Parekh, Infibeam Avenues Limited - Head of IR [10]

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Yes. So just so that you know, we -- there is a ResAvenue framework that we give to hotels, there are more than 1,000 hotels that utilize this solution. As far as the breakup of the amount of value that they generate through channel manager versus Internet, we typically don't give that information. It's not available on the public domain. But it's reasonable to assume that channel manager is a very successful one for the company. And there is also quite a bit of growth that happens through people directly booking onto the hotel on the Internet. So like I said, we don't have the exact percentages, but maybe if there is a way that we'll be able to provide you some reasonable estimate, we'll be happy to do so.

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Shruti Dhumal, ValueAdd Research & Analytics Solutions LLP - Research Analyst [11]

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And one more question. For this quarter, the transaction process in millions were INR 38.6 million, but I would like to know how much were there -- how much they were Q4? The only Q4 number, the quarter number, not the annual, Q4 FY '19.

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [12]

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So Vishwas here. I believe it was INR 12,500 crores processed in Q4. This quarter is around INR 14,200 odd crores, subject to final exact numbers (inaudible). I think -- yes, so the...

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

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Is your question around the value of the transactions or numbers?

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Shruti Dhumal, ValueAdd Research & Analytics Solutions LLP - Research Analyst [14]

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The value of the transition.

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

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Yes. So like Vishwas mentioned, it was INR 12,000 odd crores in Q4.

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [16]

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And it has increased to INR 14,900 odd crores this year in Q1.

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Shruti Dhumal, ValueAdd Research & Analytics Solutions LLP - Research Analyst [17]

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Okay. And I would also like to know how much was the daily processing in the BillAvenue in crores for the last quarter -- for Q1 last year, Q1 FY '19? Like this year, it's INR 1.5 crore...

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Vishal Ajit Mehta, Infibeam Avenues Limited - MD & Director [18]

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Per day -- INR 1.5 crore per day, we are doing right now on BillAvenue. Last quarter, it was around INR 1.2 crores a day.

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Shruti Dhumal, ValueAdd Research & Analytics Solutions LLP - Research Analyst [19]

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Yes. (inaudible) FY '19?

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Vishal Ajit Mehta, Infibeam Avenues Limited - MD & Director [20]

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For FY '19, (inaudible), so the last quarter of your Q4, it was INR 1.2 crores a day. It's increased to INR 1.5 crores a day.

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Operator [21]

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(Operator Instructions) We have the next question from the line of [Manish Goyal] an investor.

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Unidentified Shareholder, [22]

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My question is regarding this digital payments. In the last major finance bill. The Finance Minister has given this -- India will not be given -- or to the payment -- digital payments operators. So how you are going to tackle this problem because ultimately, it will affect your profitability industry payments. So what is the plan? Because I know that this -- PCI has given some memorandum to the finance ministry, so how far it is in works?

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [23]

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So Vishwas here. Let me answer this. So you should also see the good news, first the good news was that every merchant has to offer a digital payment option, so that's looking like a headwind of only 13% digitized, there's a headroom of 87%, which will have to compulsory offer. And big merchants in excess of INR 50 crore volume has to compulsory offer otherwise Joint Commissioner of Income Tax can fine them INR 5,000 a day. So that's one part. So that way the merchant base will increase. Second part, if you read closely through that, the circular does not say credit cards and they say only certain debit cards. But we assume it is only (inaudible) but it does not include the Master, Visa, RuPay card. If you see we have seen internal traction, UPI and RuPay debit card constitute less than 13% or 14% of overall volumes. Secondly, in those also if it is 0 and there it does not say that the service provider will not be paid, it is put up to the banks and the Reserve Bank of India to compensate the service providers like us. So for us, it's better because for the merchant it will be 0, but the banks will -- banks and the RBI will pay our charges.

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Unidentified Shareholder, [24]

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So has that been settled with RBI? Or it is still under discussion with the government?

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [25]

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This act comes into place on 1st of November of this year as per that mandate. So there is still not a lot of clarity. So the banks, since they will earn more on this -- on the cash because there's a tax put on cash withdrawal, since -- so that's why they will be earning a lot more, saving the money on cash management, so that it will route that money to pay us as a service provider. Whereas, it helps is that if the merchants gets at 0 and we get paid by the bank as it is currently happening for debit card transactions for below INR 2,000. So that's very simple. And it makes...

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Unidentified Shareholder, [26]

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What I wanted to ask is that you are anticipating this, but has this been settled with the government and RBI?

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [27]

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No. It's been very clearly mentioned that the finance ministry and everybody that they will compensate that. And without compensating...

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Unidentified Shareholder, [28]

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No. As far as the new reports are there that PCI is representing to the finance secretary in the first week of August, and they were change (inaudible) finance secretary -- I mean the position -- I mean the new person has come. So I wanted to know because whatever has been written from the PCI front, whether it has been done or not? Or it is anticipated?

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [29]

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So let me be very clear on what we are -- as the PCI seems to have also and the chairman of the Payment Council of India. I can tell you for a fact that we are representing on having a lot of clarity. The act has been passed and this payment option will this go to 0 MDR is not clear. Second thing is that their needs for a Fintech government initiative to help those further. So what clarity we are trying to reach here is that there needs to be a very clear-cut compensation structure, very clear -- given to the banks, just like when the debit card was made to 0 for below INR 2,000 transactions. We needed a similar clarity. So that's what PCI is trying. That has already passed, but it will be helpful because for the merchant, if they receive cash INR 100 (foreign language) INR 100, if they receive through digital payment also they'll lease you INR 100 (foreign language) INR 100. So that means the growth will be great and whatever for processing that INR 100, the banks, what we are getting are reaching nearly of -- you see in the debit card also, INR 40 was paid by the government for all debit card below INR 2,000.

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Unidentified Shareholder, [30]

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You are not seeing any profitability loss in terms of the percentage basis on payment? Can't we?

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [31]

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No. In fact we are seeing a huge growth potential in -- out of merchants in India.

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Unidentified Shareholder, [32]

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Revenue is going to increase. My question was...

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [33]

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The merchants will be forced to accept. Yes.

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Unidentified Shareholder, [34]

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Yes. My question was on EBITDA on the payments.

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [35]

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No, it will not. It will not -- it will grow significantly because now merchants are costing us because they have to offer because the legal -- this thing first time ever that there is a legal obligation to offer electronic business payment. So the headwind is so strong given the merchant signs ups we are seeing a huge escalation from now only though the app comes into first come, first serve.

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Unidentified Shareholder, [36]

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So are you thinking on the lines of incentives? Are you demanding some incentives in the government as they are pushing through for the digital payments? So as a payment industry, are you asking for some incentives in the governments also?

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [37]

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No, we are just asking -- our stand is very clear from the share perspective. Now that -- there is clear cut margin as when the debit card was made to 0 for below INR 2,000. However, 40 bps was very easily but clearly demonstrated by the government at that time. So similar -- this time also what option is first included, and it is definitely -- it was very clearly mandated. So the banks are aware of this. So that's what we are all trying for.

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Unidentified Shareholder, [38]

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Yes. Okay. And the second question is, what is the revenue visibility of data center or -- at GIFT City because what I am constantly hearing is that you are going to utilize this for your captive consumptions at the most and some state, capacities to -- I mean we'll be outsourcing. So as a return on investment because you have spent a huge money on -- around INR 300 crores on this GIFT center -- data center. So I mean what is the return on investment? How much you must be saving on your own expenditure in terms of your own operational expenditures, what you have been given to other cloud services providers, which you are now doing and you're now managing to your own campus? So what is the savings you are going to get per year in terms of your shipping from outsourcing to the captive data center? And what is the revenue visibility from other parties?

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Vishal Ajit Mehta, Infibeam Avenues Limited - MD & Director [39]

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Sure. So I'll tell you -- or one thing I'd like to just maybe correct is that odd INR 300 crores is not spent in data centers, it's in the GIFT City office as well. We've invested in the office -- as in the building as well. So we also own a few lakh square feet in GIFT City office.

Now with that said, yes, we believe that the investment in data center is significant. And in that investment, our appetite is that we'd be using it for our own captive usage. So there are 2 reasons to do captive, one is you have control over quite a few things that you do, and it's not very uncommon for companies with this kind of a tailwind to be able to go and build out. I think there's an advantage because there is already a mandate from RBI to hold all financial data in the country. So anything which is payment and finance related, it has to be held up within the country, not even backup or disaster recovery can be potentially managed outside.

Since we work in the core payment space, so we believe that there is a lot of opportunity to be able to continue building up. This is a 2-megawatt data center, which means that we are focused heavily on compute. We may be able to handle quite a bit of transactions as well as we are opening up our infrastructure for Fintech related applications like blockchains. So you're right, the first thing is to move our workloads into the data center, so that's phase 1. Within that, while we are using captive capacity outside, we think it will not result into savings. You won't see EBITDA, by that, the EBITDA level, you will see expansion in margin. But even the depreciation and others that you will not see a savings at the net level. So that's one.

But you are right, the expenses that you would've incurred in outside will potentially be taken and realized internally.

The second thing is that as you can virtualize capacity and you can actually build up a framework, so it is just not bare metal. It is not leasing data centers. It's actually virtualizing it and then giving capacity similar to what Amazon Web Services and others do. So that is the phase 2 where we will give it out externally. If you also know, we also have very large platform clients like Government e-Marketplace and others. They also require compute and storage from time to time. And if we are able to offer such compute and also earn on every transaction, so it is actually more transaction-based and not necessarily just giving it out as rental or a bare metal, much like what many of the other data centers do. That is the strategy and the philosophy we follow. As far as the EBITDA is concerned, it's reasonable to assume that we'll be able to generate INR 300 million to INR 500 million in EBITDA in the next 3 years.

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Operator [40]

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(Operator Instructions) We have the next question from the line of Gunmeen Kohli from K.R. Choksey.

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Gunmeen S Kohli;KRChoksey Group;Investment Advisor, [41]

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I just wanted to take the question on the data center a bit further. Could you fill us on global players which are present in the business model that we are undertaking in the segment?

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Vishal Ajit Mehta, Infibeam Avenues Limited - MD & Director [42]

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Sure. So I mean the largest, of course, in this is, you may have heard of Amazon Web Services. They have got a lot of services. It is just not compute storage. They've opened it up and they've actually kept on increasing the number of features and services that they offer. So that would be a classic way to think about infrastructure as a service and not just backbone infrastructures.

You will also see the likes of Azure and others in the global arena, who actually have such offerings. I think most of the players in India and companies in India, they have used data center more as a leasing opportunity. So they thought of it as real estate and power and not necessarily infrastructure as a service.

So while many have attempted to get into the cloud infrastructure, you would've heard of the likes of Netmagic who initially started out thinking about it as bare metal as well as leasing and co-location, they have started building out cloud services. But yes, that is the landscape that we deal with as far as web services is concerned.

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Gunmeen S Kohli;KRChoksey Group;Investment Advisor, [43]

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Okay. And lastly, with the new data resolutions which are coming out and you have a significant investment in this segment, what is the opportunity that Infibeam might hold in the future to provide the same -- our solution to new entrants who are (inaudible) thinking about putting up new capacities in the country?

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Vishal Ajit Mehta, Infibeam Avenues Limited - MD & Director [44]

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You see I think we have a very strong chance because it is, like I said, most of the times, if you think about it, the industry has thought about it as putting your own hardware in somebody's data center and managing that, whereas the new avatar is actually more hybrid, which is you have some compromises, but the rest of it can potentially be on a cloud. And so once you actually do that, it becomes a very strong opportunity to be able take up because it is just not buying hardware or putting up real estate and hardware, it is actually about having a solution on top of it that allows the user to do a lot of activities while it actually works for them and they don't have to reach out to anyone. So it's a similar example of maybe in the back -- in the old day, you would have actually used the encyclopedia versus now going on Google, where you can do a lot of search and many things yourself as opposed to actually waiting out. So we think that, that becomes the new opportunity. I do believe that we are not there yet. So the first part of this will be to actually migrate all of our workload in payloads. We also have many clients for whom we outsource data center activities, it is being used for third party. A classic example would be even a government client. So our appetite in there, if you are able to save a few bps, I think it's a significant saving at scale. So those are the opportunities that we go after. We have clients onboarded. We are working on adding external clients as well. And we think that, to your question, that because of the regulation and the rule to store data, I think that becomes an added feather in the cap. That is not the business case we started out with though.

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Operator [45]

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(Operator Instructions) We have the next question from the line of (inaudible) from (inaudible).

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Unidentified Analyst, [46]

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Congratulations to the management on great set of numbers. My first question is, if -- since we already have a proof of concept in terms of government procurement via GeM in India, have we been in talks with other governments around the world to implement such an infrastructure for them? And if yes, what is the kind of feedback or response that we've been garnering from them?

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Vishal Ajit Mehta, Infibeam Avenues Limited - MD & Director [47]

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Sure. I think early in the call, I did mention that we believe that is a significant opportunity to take enterprise platforms to other markets. If you look at India and you just saw there's a quite a few hedge conditions. Like I said, we don't -- it'd be really hard to talk a bit forward looking in this particular instance. But certainly, I think both from a platform implementation as well as payments that India is in the forefront in both these areas. The kind of implementations and the kind of progress that the country has made in terms of ensuring that the opportunity scales up, I think it's significant. And I think a lot of countries are checking and also reviewing and figuring out how to implement something similar in those respective countries. And I do believe that we will have -- we will stand a strong chance in terms of exploring the opportunity in those regions.

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Unidentified Analyst, [48]

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Great. And a question to Mr. Vishwas. I'd just like to have a flavor of what is the difference between the card values that are -- that you guys experienced in India and something that you experienced in UAE and something that you are expecting out of the Saudi Arabian market going forward because I believe will be a significant difference. The -- generally, the transaction values per transaction is pretty small in India, but significantly larger in the overseas market. So could you just throw some light on that?

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Vishwas Ambalal Patel, Infibeam Avenues Limited - Executive Director [49]

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Sure. So if you see, look, India started off with a world of low ticket transaction size. If you see the averages ticket size that's gone down to INR 350 mainly because the low ticket sections were the first mover for the Indian through digital transactions like say, mobile recharge. Mobile recharge is a category mostly because India is 96% prepaid, only 4% is postpaid. So when you see that 800 million mobiles need to do 2 recharge transactions every month, so you're looking at a 1.6 billion transactions a month just on mobile recharge and 90%-plus was on offline, going to a local (foreign language) and doing it. And so online then came in, the transact mushroomed, but the ticket size -- average ticket size came down.

Now similarly, goes for bus tickets and a lot of other low ticket size because that's where the Indians are just maturing to these things. But what we are seeing in UAE and others, today, by the way, in India, average ticket size has moved up, now changed to right now around INR 1,300. But when we see in UAE, the average ticket size is coming in excess of AED 400, so that is around INR 3,700 or something. So that's a good ticket size to have with the number of transactions. And it's a much more evolved market. It's 100% smartphone-penetrated market, it's a full credit market. Debit is only 25% versus 75% being credit there. But if you see in India right now -- as you see in India, India is a full debit market. It's not a credit market, so India is like (foreign language). Well, I guess, if you have money in the bank, then they use a debit card or UPI or net banking more than a credit card, so it's a total different market, and it is a high ticket size, highly evolved -- as I said, in a span of, this, 1.5 year, we're already -- going to touch AED 1 billion already and on a way to touch a $1 billion in a year or 2.

Now when we visited Saudi, so that when we are launching in Saudi, Saudi in first 5 years what Dubai used to be in 2003, 5-year straight, it's something what is happening in Saudi right now. It's a huge market. And from our solutions perspective, from payments, from hospitality, it has a huge, huge, huge potential because Saudi being there -- every Muslim has [been] once in a lifetime there that currently also more than 2 million hajis are there right now, so it has tremendous potential on tourist. It has tremendous potential on digital payments as full smartphone-penetrated markets that lots of population, like almost 10x the population of UAE. And you see everything that is happening in UAE is being mimicked there, so there's Entertainment City coming out in Saudi. It's like $8 billion, outside Riyadh, and then there is all the F1 is being planned there and every other thing, what is happening, all the projects of Dubai like Arabian [matches]. So we see that we are just at the right point and their vision 2030, they will like be 8 to 10x bigger than UAE, so it's the right time to get in, not too many players there. And we have lots of cross-border in Dubai, who are also focusing on the UAE markets. So all the top drives that we have in UAE also have a Saudi presence. So we're looking at a good uptake there.

And Saudi also has NPCI equivalent there called Mada, so all debit card goes to the local switch. So once you are able to get in there and do the certification, then you are one of the unique guys who can actually do that Mada because every transaction moves through that Mada switch there. So that way it gives us a good honor. So it's the right time to enter into an established space. I think in the next 4, 5 years, great potential already exists and great potential further can be enhanced by us. So in that sense, we want to be a significant player in India and the Middle East, and UAE and Saudi are almost 85% on every other firms of the Middle East, so we want to have a significant presence.

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Operator [50]

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As there are no further questions from participants, I would like to hand the conference back to the management for closing comments. Please go ahead, sir.

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Vishal Ajit Mehta, Infibeam Avenues Limited - MD & Director [51]

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Thank you all also for visiting our first quarter conference call. We look forward to your feedback, valuable feedback, and we'll keep you updated on the progress and the new business development activities that we conduct on a regular basis. Thank you, all.

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Operator [52]

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Thank you, gentlemen. Ladies and gentlemen, on behalf of K.R. Choksey Research, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.