Release Date: August 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) has successfully commenced the fulfillment of the sound box contract, delivering over 35,000 devices across June and July.
- The company has secured marquee contracts for its domestic money transfer (DMT) business, which is expected to scale up transaction volumes significantly.
- Niyogin Fintech Ltd (BOM:538772) has expanded its product functionality on the Niyoblu platform to include fixed deposit booking.
- The company's net yields on its lending book have improved to 18%, which is expected to be sustainable going forward.
- Niyogin Fintech Ltd (BOM:538772) has successfully consummated the acquisition of SuperScan, which has significantly improved the quality of interactions with partners on the Niyoblu platform.
Negative Points
- The company's adjusted EBITDA loss for the quarter is INR6.6 crores, primarily due to muted financial inclusion solution-related revenue and provisioning against lending.
- The central elections created significant headwinds for the financial inclusion business, leading to a decrease in withdrawals in April and May.
- The company has revised its EBITDA guidance downwards to INR20 crores to INR30 crores for the year, from the earlier guidance of INR40 crores to INR50 crores.
- Niyogin Fintech Ltd (BOM:538772) faced challenges with the UPI business, leading to a loss of some customers, although the situation is stabilizing.
- The company had to take additional provisioning of INR2.5 crores on its loan book, related to an old supply chain financing transaction.
Q & A Highlights
Q: My first question was with respect to the overall EBITDA guidance that we had given last quarter. Do you think on an overall basis, if I do the math, the EBITDA guidance is being scaled down by the company?
A: I think the EBITDA numbers are also being revised downwards. We think we will probably do between INR20 crores to INR30 crores of EBITDA this year instead of the INR45 crores to INR50 crores that we had guided earlier. However, there are potential upsides from incremental contracts in the SaaS business and SuperScan.
Q: You mentioned that in this year, you would be probably looking to lever between 1 to 1.5x of your net worth. So are we looking at the loan book between INR300 crores to INR400 crores?
A: Our target for this year is INR418 crores. We are on track to achieve this, driven by our partnerships. Each new partner can scale up the loan book by INR50 crores to INR70 crores quickly.
Q: In terms of the 35,000 devices deployed in June and July, is the revenue of INR3 crores from device sales related to these devices?
A: No, the INR3 crores is from older devices. The sound box revenue is not materially reflected in Q1 numbers. Q2 will show the full impact of these deliveries.
Q: Can you explain the impact of the elections on the business and why iServeU took a beating? Will this affect future quarters?
A: The impact was due to the suspension of direct benefit transfers (DBTs) during the election period, which significantly reduced transaction volumes. This issue is not expected to carry forward into future quarters. July numbers are already showing improvement.
Q: There was a general slowdown in AePS volumes due to fraud controls. Are AePS numbers back to previous levels?
A: Overall, AePS growth has been muted due to new fraud control guidelines. However, our enterprise-led model allows us to continue growing by acquiring new partners, even if industry volumes are down.
Q: What is the need for the INR2.5 crores of additional provisioning on the loan book?
A: The provisioning is related to an old supply chain financing transaction. We are recovering about INR1 crore per quarter on this position. New loans over the last 18 months have a loss rate of less than 1%.
Q: Is there any change in the guidance for revenue from lending versus transaction businesses?
A: No material change. We expect INR40 crores to INR45 crores of net revenue from iServeU and the balance from lending, totaling INR70 crores to INR80 crores for FY25.
Q: What are the plans for incremental fundraising? Is it centered around M&A events?
A: We expect equity infusion from warrants issued last August. Additional fundraising will depend on strategic bolt-on acquisitions, which may require incremental equity.
Q: Are there any specific segments or types of companies you are targeting for acquisitions?
A: We are not looking at book value businesses. We are interested in tech solutions, regulatory arbitrage opportunities, and synergistic businesses that are profitable or near profitability.
Q: Have you made any rules about the stake you want to acquire in potential M&A targets?
A: We aim for at least a 51% stake with a clear path to 100%. We want full Board and strategy control and are not interested in minority stakes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
