AvenuesAI Limited (539807) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the AvenuesAI Limited Earnings Conference Call Q1 FY '27 hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rajat Gupta from Go India Advisors. Thank you, and over to you, sir.

Yes. Thank you, Anuska. Good evening, everyone, and welcome to AvenuesAI Limited earnings call to discuss the Q1 FY '27 results. We have on the call with us today, Mr. Vishal Mehta, Chairman and Managing Director; Mr. Vishwas Patel, Managing Director and Chief Executive Officer; Mr. Sunil Bhagat, Chief Financial Officer; and also Mr. B. Ravi, who is advising AvenuesAI on corporate and financial strategy as an independent consultant. We must remind you that the discussion on today's call may include certain forward-looking statements and must be viewed in conjunction with the risks that the company faces. I now request Mr. Vishal Mehta to take us through the company's business outlook and financial highlights, subsequent to which we'll open the floor for Q&A. Thank you, and over to you, sir.

At the outset, I want to let you know that we had strong revenues this quarter. Revenues increased by 109% year-over-year. We have been concentrating on building volumes and absolute profitability, and both have gone in the right direction with the profit after tax going up by 45%. I want to walk you through the AvenuesAI strategy, and we believe we have got 4 focus areas. One is payments, second is consumer, third is intelligence and fourth is credit, and they increasingly reinforce one another. Payments is our foundation. CCAvenue moves money for merchants and continues to fund our investments in the next phase of our business. Consumer is Rediff; Rediff, RediffOne, RediffPay, RediffTV, they give us direct relationship with consumers and business, something most fintech companies simply may not have. Intelligence is Phronetic AI, which is now proposed to be merged with AvenuesAI. We are putting AI on top of transactions, payments and enterprise workflows to create new products and capabilities. Credit is our emerging distribution layer. Through strategic minority investments in regulated financial institutions, we can distribute credit without putting lending risk on AvenuesAI balance sheet. The important point is that these are no longer separate businesses. They're becoming one integrated platform. We've been building Rediff into a broader consumer and enterprise platform. RediffPay is progressing well as our UPI-based consumer payments platform. It will be out of CUG this month and into production. RediffOne is evolving into an operating platform for businesses bringing together commerce, communication, compliance and intelligence. RediffTV as in news and RediffGurus, they add content and community. The opportunity is therefore much bigger than legacy Rediff business. We are connecting Rediff's consumers and business with AvenuesAI learning from payments and AI capabilities and unlocking value from the ecosystem. AI is the next layer of payments. We believe the next generation of payments will not simply move money faster, it will enable machines to transact. Through Phronetic AI, we launched PayCentral, which we believe is India's first agentic payment platform built on Google's Agent Payments Protocol. It enables AI agents to transact directly with one another without requiring a person to manually initiate every payment. Think of it simply, an AI agent understands the intent, finds the product or service, makes the decision and completes the payment. We call this Uberizing payments, removing the friction between intent, commerce and payment without replacing the merchant or the consumer. We believe this can now become a layer of digital commerce. That is the reason why we've changed our name from Infibeam Avenues to AvenuesAI. We are no longer a payments company that does AI. We are building AI-first fintech infrastructure company that started with payments. Payments give us scale, Rediff gives us consumers and enterprises. AI gives us intelligence and credit partnership gives us access to financial products without balance sheet lending risk. This is the ecosystem we are building. In the first quarter FY '27, we actually made meaningful progress across each of these pillars. We received in-principle approval from Central Bank of UAE for Retail Payment Services, which is a Cat III license for Avenues. UAE is already one of our strongest international markets. The license will allow us to broaden our customer reach and product suite and strengthen our long-term international payment strategy. In India, RBI authorized AvenuesAI to set up payment system for issuance and operations of prepaid payment instruments. These approvals further strengthen our regulated payments infrastructure across India and international market. In terms of our asset-light expansion on credit, we've moved from strategy to execution in credit. We have progressed well in proposed investments of up to 2.5% in RatnaFin Capital, which is an RBI registered NBFC with a very strong SME lending franchisee. We also approved a strategic investment of up to 7% in online PSB loans, India's largest public sector-backed digital credit platform. Our model is deliberately asset-light. AvenuesAI provides AI payments infrastructure and merchant distribution. Regulated partners provide the balance sheet and underwriting. This allows us to participate in India's digital credit opportunity without taking lending risk onto our own balance sheet. As far as trust is concerned, on the intelligence side, we are building another important capability. Enterprise AI that stays inside the enterprise. Through Phronetic AI, we are developing on-prem AI solutions using small language models, in specific about $1 billion to $10 billion parameter range. These models can be deployed, trained, monitored and retained within clients' own infrastructure with sensitive data remaining inside the organization. Our platforms are built specifically around this requirement. For enterprises, particularly those handling sensitive data, sovereignty, security and controls, these model capabilities are becoming increasingly important. We believe this allows us to compete on trust, not simply on model size and creates a new AI native revenue opportunity beyond payments. The Board of Directors have also taken 2 significant decisions this quarter. First, Nueromind, which is our fully owned AI-based subsidiary is being merged into AvenuesAI. This will give us synergies and seamless operations and lead to cost benefits and data consent also. The second we are doing is a reverse split, which is a face value of share, which was INR 1 now is being increased to INR 10 per share. Consolidating the face value to INR 10 instead of INR 1 has a significant impact on how our shareholders will perceive us as well as on the liquidity. I will now hand over the call to Vishwas to take you through the payments business. Vishwas, over to you.

Thank you, Vishal, and good evening, everyone. Vishal has laid down the strategy. Now let me bring in down to what we are seeing when merchants -- with merchants and consumers. Our strategy is simple. We are not trying to add another payment option. We are trying to become a more deeply-embedded in the merchant's workflow. A good example is the integration of CCAvenue payment gateway with Shiprocket Checkout. Shiprocket's B2C and SME merchants can now access same-day settlement, international payments, no-cost EMI and payment links across WhatsApp, SMS, Instagram and e-mail without managing a separate payment relationships. We are applying the same model across other verticals. Our form builder has onboarded thousands of education institutions and even merchants. Our BillAvenue platform process millions of utilities, mobile recharges and bill payment transactions with agent-led adoption, driving deeper financial inclusion. Our ResAvenue platform, that is our integrated reservations and payments platform is scaling across thousands of hotels and connects with systems such as Opera Micros-Fidelio, Property Management Systems and leverages our AI-based tools to help them implement smart pricing and optimize occupancy rates. The principle is consistent, make payments part of the workflow, create more value for the merchant and the transaction volume follows. Our transaction processing volume for the quarter grew 74% year-on-year to INR 1,479 billion with continued strength across utility payments, government payments, retail, B2B and hospitality. Our performance reflects that. Strong execution in our core payments business, completion of a broad and defensible regulatory stack, measured progress in AI-driven commerce and consumer platforms, continued discipline around scale, profitability and risk management. We remain focused on building trust, compliant and intelligent payment infrastructure at scale while selectively investing in platforms that extends our long-term growth runway. On the consumer side, RediffPay will continue to scale as the UPI platform once it has passed the CUG stage. We see RediffPay as a genuine second leg of the payment business, bringing consumer transactions increasingly onto our own payment rails. RediffOne is also expanding beyond e-mail and communication into commerce, compliance and intelligence, making it an operating platform for businesses. On embedded lending, our merchant network is becoming the distribution layer. As RatnaFin and OPL progress towards closing, we expect merchant financing, checkout financing and working capital products to become available across the CCAvenue ecosystem with lending risk remaining with our regulated partners. With that, I hand over to Sunil bhai for the financial performance. Over to you, Sunil bhai.

Thank you, Vishwas sir, and good evening, everyone. Let me start with the key quarter 1 FY '27 numbers. On a consolidated basis, our gross revenue from operations stood at INR 2,680 crores, which is up 109% year-on-year. Our net revenue stood at INR 147 crores, marginally down by 3%. Our EBITDA, excluding other income, stood at INR 100 crores, representing 41% increase year-over-year. Our profit after tax for the quarter stood at INR 85 crores, which is up 45% year-on-year. These performance builds on the strong full financial year '26 trajectory, where our gross revenue was INR 8,116 crores, which is up 103%. Our net revenue was -- full year INR 603 crores, which is up 15% and PAT was INR 295 crores, up 25%. So far as our FY '27 outlook is concerned, our company expects FY '27 consolidated revenue to be in the range of INR 11,000 crores to INR 13,000 crores, that is growth of around 35% and above and also expects the FY '27 EPS to be in the range of INR 8.75 to INR 9.5 per share, which is based on the proposed post corporate action face value of INR 10 per share. Our cost base remains front-loaded as we invest in AI infrastructure, international expansion and our new financial services capabilities. We are, therefore, not building for a short-term margin spike. We are building for a structurally stronger and more scalable margin profile through FY '27 and FY '28 as these businesses begin to compound. With this, I will now hand over the call for Q&A.

[Operator Instructions] The first question from the line of Amish Kanani from Knowise Investment Managers.

Congrats on a good growth. Sir, we had filed for this DRHP of Rediff and I understand it was confidential. Last quarter also, I had asked this question. But if you can give us one, the progress on the same. And we were more worried about this corporate action that we are taking, whether that could impact our timing of the issue because one, if you can just remind us of this -- reason for this corporate action? Was it so critical and whether that impacts the time line for Rediff? Because I understand the valuation of our company would really be unlocked if Rediff has a separate way of valuation because the data is also not coming out in total. So, one, if you can address that?

Sure. So this is Vishal here. Basically, we don't see any impact of the corporate action on the filing of Rediff. They are 2 separate events. The corporate action is, to remind you, just increasing the face value of the share from INR 1 to INR 10. And so that applies to the shareholders of AvenuesAI. So...

Are you [indiscernible] the merger of that other subsidiary that we are merging with AvenuesAI...

Correct. So the fully-owned subsidiary of the company is merged into the parent. So that has no bearing to the shareholders of AvenuesAI. Basically, it's a 100% subsidiary of AvenuesAI. And so, the proposed corporate action that we have suggested is to merge the fully-owned subsidiary, which was undertaking the work of AI models, AI frameworks and all the opportunities related to that. We believe that if we bring that company directly as part of AvenuesAI, then the AI adoption will grow much faster. It is part of the -- we've also recently in our press release mentioned that we plan to build out transaction intelligence scores and many more. And so with that kind of -- you see in AI, data becomes extremely critical and important, consented data. And so what we believe in is that if it becomes part of the main entity, then the growth opportunities and trajectories are significantly more. So we don't believe that this corporate action of merging the subsidiary into parent has any bearing to the proposed filing of Rediff.

Any update there? Or it's too early to speak.

It's slightly early to directly talk about it. But yes, I think that we have followed the due process. And you can see some updates which are there on the SEBI website.

Sure, sir. And sir, this Pay central thing that we are doing, if you can give us update on how is the commercial traction there in terms of merchant onboarding? And a related question there, sir, is this -- last week was all over place about MDR. And this time 2 quarters back, I had asked you this question if and when the MDR comes, whether it will be a beneficiary, and you did mention it will be a beneficiary to us. The only concern that now in the public domain is being discussed is that the large payment providers will get a larger share of the MDR and hence, maybe the market gets consolidated. Given our market share being near to be on a lower side, would it be an opportunity or a threat in that context, sir?

Vishwas, do you want to take the MDR first?

Yes. So MDR UPI is significantly growing on our base. Today, almost 22% of our transactions are on UPI. So any kind of monetization on that UPI will add additional revenues definitely to our platform. Right now, as we stand, the act has been passed by the Lok Sabha. It still awaits Rajya Sabha and still awaits President's approval and then the gazette and then we will know what kind of pricing and monetization that NPCI and RBI is allowing to be done. But we know for sure that it's going to be on big merchants and for higher value transactions. But once the final bit come in, then maybe we'll be able to [ proper gauge ] what kind of revenue can be generated. As far as threat is concerned, there's no threat as per se. There are options like UPI, which runs across -- deeply across all kind of payments that happened. So there is something for everybody in the system, in the ecosystem to gain out of it. And there is no consolidation on the acquiring side. On the issuing side, yes, where a lot of TPAPs have some base. But on the acquiring side, on the online acquiring side, it's quite evenly spread out. So we do have a significant 8% to 10% share of the overall market. So let's see, as and when monetization happen, it will be good only. It is an endeavor that we ourselves as a company and myself have been working on it to get that monetization going for the last couple of years. So finally it is [indiscernible], let's see.

Sure, sir. Congratulations on that. And sir, any update on the merchant onboarding in PayCentral, how are we kind of progressing.

It's early days still. So -- in other words, the protocol is new. I think internationally, it's growing a little bit faster than in India. I think the Indian protocol is actually working fairly well. I think as far as using AI for merchant onboarding and productivity, I think there are 3 things that typically you can do with this. One is, you can actually increase productivity significantly, which is AI is actually complementing the human in terms of getting productivity through. I think there, we have made massive amounts of progress. Second is replacing humans. I think it's dystopian, but it's not something you can rule out. So, in other words, if you take it further, that particular opportunity can replace a human actually in the loop. And then the third thing is actually AI will end up doing things that you could technically not do in the past. For example, reconciliation of every single transaction as an audit. I don't think that from that perspective, it was possible in the past. You could do sampling, you could do many more, but now you can. So just giving you an example of what you could do now. So we think that all these 3 things are happening as we speak. As far as consumers opting to actually transact using agents, that is still in the early phases.

Sure. Sir, last question before I fall back in the queue. This quarter, we were saying that you are not chasing gross revenue top line growth, but a net revenue. But unfortunately, that number has not grown. And still, we have been able to increase our operating profit, which seems to be coming more from compressing the expense line item. So if you can explain what is happening there? And what is the trend like? Should we be focusing more on gross revenue or net revenue? Because the guidance also, I think we have given it in terms of gross revenue.

Yes, you should focus on net revenue in our opinion because that is the one which will perhaps give you the best indications in terms of how the company is progressing. Yes, we will -- there are certain specifics that you would take up, including the ones that we talked about, which is distribution of credit and so on and so forth. And that should all pour back directly into the net revenue. So we think that, that is something that one should definitely take a look at. Gross revenue may fluctuate based on mix and other specifics.

Sure, sir. So the operating EBITDA margins -- operating revenue margins are increasing more from the expense line item, right, sir?

Yes, that's right.

We take the next question from the line of Deepesh from Maanya Finance.

On the enterprise SLM PrivateGPT, there's a new unproven line competing against the well-capitalized global players like OpenAI, Anthropic. So what is the go-to-market strategy or the target customer and the expected revenue contribution time line?

So we find that SLMs are very good at solving specific problems. A lot of it is actually -- if you come to think of it and if you try it out, you can increase -- you must be user of many of the LLMs. But if you keep on prompting, prompting, prompting, you actually get much better results. In this particular instance, what you do is you take data, which is specific to a particular company, you vectorize it, you build out knowledge graphs on top of it, SLMs and then some application layers. We find that enterprises like where data is critical, financial institutions, critical operations in some ways, they would all want this kind of a setup, which is SLM driven. I think the opportunity is significantly large. it is still in early phases. I think it actually reduces the token cost also significantly. And what we realize is that many of these companies, they can solve a lot of problems building workflows. You don't even have to use tokens and then perhaps optimizing it using SLMs. And that becomes specific to that particular setup. So we think that it's -- I mean, how do we productize it is a bigger opportunity. And if we are able to give some kind of a DTX and something which consumers and enterprises can start utilizing, it becomes valuable. In terms of impact to our business is concerned, I think it's about anywhere from 9 to 18 months out, where you'll have -- you'll start seeing some good impact, we believe.

Right. And what is the exposure on the tokens which we use in the LLMs? What will be a risk on the token prices? And how has been the trend of the token prices right now for us?

Token is slightly inflationary, you know that. So in other words, I mean, there's lots of optimizations that one can do in that area, in that space. And then there's new stuff happening on a daily basis. So I think for us and typically, infrastructure tokens and so on and so forth, for our internal use, of course, we'd spend. But for the ones that we give to our clients, clients would actually end up paying that. So we pass on the cost. It's a pass-through for us, typically speaking. But if you think about SLMs and if you have this kind of a fabric, then your token cost falls by about 1/10 of what you would typically see because you don't have to -- the data is actually somewhat air capped. It's not going out. It's within the premises. And so the utilization and so on and so forth is significantly improved with this particular setup. So -- I mean the way we see the opportunity is that for critical infrastructure, for financial data, for many others, the utilization of LLM will be limited because of the data security concerns. It will move towards the SLM framework, and that is what most companies would end up working on. That is an opportunity that we believe will perhaps work as well. But if you can actually productize it, it's even bigger.

Right. And about RediffPay, now still prelaunch and the UAE and RBI licenses only newly received, how much of the FY '27 growth guidance is already assumed and the contribution from these unlaunched or newly launched businesses versus being a pure core CCAvenue driven?

I think we've not assumed much from RediffPay because it's a UPI payment option. So for FY '27 guidance, we have not assumed meaningful contribution from that, if it makes sense to you.

Right. And I mean, as the previous participant said that we are planning to list Rediff as a separate entity. What has the revenues? And will we list Rediff as a AI provider or we will list it as more of RediffPay and -- very similar to the Paytms of the world?

Rediff has 3 large opportunities. One is RediffOne, which is the enterprise side of the business, which has e-mails, commerce, in some ways, CRM, HRMS, ERP. Think of it as something similar to Zoho One in some ways. But I think that's one opportunity that Rediff will go after. Second is RediffPay, which is what you mentioned, which is more like the UPI payment and fintech opportunities, wealth management and many others. And the third opportunity is, we described as content and RediffTV, which is not the linear TV that we talk about, it's streaming with a lot of content. So we think that it is not going to be the legacy only business. It will be AI-enabled new version of what we think consumers and business will connect into.

So how is it going to be different from -- I mean, just -- sorry, I'm sure you wanted to add, but how is it going to be different to our existing company?

That's consumer-facing payments. This is -- acquiring is in CCAvenue. So merchant acquiring is the -- AvenuesAI will focus on the B2C payments, I mean consumers paying to businesses. And Rediff is going to focus on the consumer side of payments. We see payments as 2 different elements. Today, for example, a consumer does not download a CCAvenue app and utilize the app. They will go to the merchant where they'll find the payment options and they will pay using CCAvenue. So we are on the business side, on the acquiring side. We are not on the consumer side. Rediff is on the consumer side.

Right. And what about the AI? I mean you've excellently explained how the payment module will be from B2C and with AvenuesAI B2B. What about the AI part of our company? Will that entirely go to Rediff?

AI is completely as part of AvenuesAI. So Phronetic is being merged into AvenuesAI, which is Nueromind as a subsidiary, which is 100% subsidiary, is merged into AvenuesAI now. So the entire AI vertical, all the people and everyone else will be part of AvenuesAI.

We take the next question from the line of Gourishankar Dalal from Creators Capital.