Release Date: February 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Niyogin Fintech Ltd (BOM:538772, Financial) is actively evaluating the acquisition of an AI-based toolkit to enhance digital legibility and improve OCR accuracy, which will streamline KYC processes.
- The company successfully resolved UPI business issues ahead of schedule, demonstrating agility and dedication to rapid problem-solving.
- Lending business increased by over 18% to INR159 crores, with a comprehensive strategy centered around partner-led distribution, risk management, and technology-enabled cost efficiency.
- Gross transaction value (GTV) for Q3 FY24 stood at approximately INR11,259 crores, up 219% year on year, indicating strong transaction growth.
- Niyogin Fintech Ltd (BOM:538772) added new partners like Karma Life, which provides finance to gig and blue-collar workers, enhancing its lending platform and potential profitability.
Negative Points
- Receivables issues on the iServeU platform have persisted for three quarters, with 80% of receivables more than 90 days overdue being provisioned.
- GTV for January 2024 was INR3,450 crores, indicating a flattish trend for the third consecutive quarter, raising concerns about meeting the INR1 lakh crore GTV target for FY25.
- The banking-as-a-service business had a subdued Q3, with GTV including payouts at about INR11,259 crores, and transaction volumes remaining flat compared to the previous quarter.
- Adjusted EBITDA loss, although narrowed, still stood at INR1.4 crores in Q3 FY24, indicating ongoing profitability challenges.
- The AePS sector slowdown due to regulatory changes and fraud concerns has impacted overall industry volumes, posing a challenge for future growth.
Q & A Highlights
Q: My first question is with respect to the receivables in the iServeU platform. This is the third quarter now that we're having some issues with receivables. What are the nature of these receivables? How confident are you that they will not repeat in the coming quarters?
A: We normally break up our receivables between bank and non-bank receivables. The receivables this time are driven by the ECL model, which is based on the aging of receivables. None of these are specific to any individual customer. The model throws up a number, and that tells us to provide a certain amount. We anticipate significant recoveries in Q4.
Q: GTV for January stands at INR3,450 crores. How confident are you of meeting the INR1 lakh crore GTV mark for FY25?
A: The UPI volumes have to come back, and we are confident they will. The card stack will also contribute significantly. We expect to achieve a run rate of INR60,000 to INR65,000 crores for next year, starting out. The growth of next year will help us get closer to the INR1 lakh crore mark.
Q: With the UPI issues behind us and the loan book scaling up, is it a fair assumption to make that Q4 will be our first EBITDA positive quarter?
A: The aim is to become profitable as soon as possible. This quarter has been satisfying. If the provisions come back, there is a high probability that we could be EBITDA positive. The entire team is focused on achieving this milestone.
Q: We stick to our guidance of closing FY24 with a loan book of around INR200 to INR210 crores. Can you comment on the way we are scaling up the distribution income?
A: The loan book target of INR200 crores is visible. We are disbursing between INR25 crores to INR30 crores a month. On the distribution side, we are seeing good traction. We typically make about INR30 lakhs to INR50 lakhs a month of gross fees, and we expect this to scale up significantly next year.
Q: You mentioned that the provisions made this quarter are based on the ECL model. Are these provisions on the loan book or against the receivables to the banking partners?
A: These provisions are related to the banking partners, not the loan book. This is on the iServeU balance sheet, not on the Niyogin balance sheet. The ECL model throws up a number based on the aging of receivables, and we are required to provide for that amount.
Q: Could you delve deeper into the solution implemented for the UPI issues?
A: We became the TSP (technology service provider) to the bank, which now does all the settlements. This required a tech development and revising agreements with banks. Our economics are protected, and the customer sees no impact. The implementation took time, but the structure is now compliant with regulatory requirements.
Q: Can you provide more details on the NiyoBlu platform and its potential?
A: NiyoBlu is a digital platform where customers can apply for loans. We have more than 30 lending partners. The platform is scaling up, and we expect to make between INR4 crores to INR4.5 crores of gross revenue this year. Next year, we aim for INR10 crores to INR12 crores.
Q: Are we still contemplating going ahead with the PA/PG license?
A: There is value in getting a PA/PG license. We are exploring whether to get the license or partner with someone who has it. There is merit in acquiring regulatory licenses like PA/PG.
Q: Any update regarding the remaining stake in iServeU?
A: No significant update to report. We are focusing on M&A situations and want the business to start becoming profitable. It is on the cards, but nothing to announce right now.
Q: Can you give us a timeline on the SuperScan deal?
A: We aim to wrap it up this quarter. Diligence will be completed in the next week or 10 days. Post that, we need shareholder approval, which will take about 25 to 30 days. Integration will start immediately after diligence.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
