DiGiSPICE Technologies Limited (DIGISPICE) Earnings Call Transcript & Summary

Good morning, everyone. A warm welcome to the earnings Zoom webinar of DiGiSPICE Technologies Limited for Q2 and H1 FY '25. We have with us Mr. Dilip Modi, Chairman of DiGiSPICE; and Mr. Sunil Kapoor, Whole Time Director and Chief Financial Officer, Spice Money. Before we begin, I'd like to state that some of the statements made in today's discussion may be forward-looking in nature. The actual results may vary as they are dependent on several external factors. A statement in this regard has been included in the results presentation sent to you earlier and also uploaded on the exchanges. We will commence the call with the management taking you through the operational and financial performance for the period under review, following which we will have an interactive Q&A session. I would now like to invite Mr. Dilip Modi to commence the presentation. Over to you, Dilip. Thank you.

Good morning, everyone. Welcome to the Quarter 2 Earnings Call for DiGiSPICE Technologies. It is indeed a pleasure to connect with all of you once again on this call. At DiGiSPICE, this is a great opportunity for us to engage with the investor community at large to share with them the progress that we are making at the company; provide any clarifications on how we are progressing; share with you strategically how we are looking at the business going forward; share with you, of course, in more detail the earnings that we have achieved in the quarter gone by and what is the trend looking like; provide any answers to any questions you might have. But thank you for taking the time out to be on this call and to spend this time with us. It's really an honor to get to spend time with all of you. We have a brief presentation followed by which we will want to take questions. But just to share with you, DiGiSPICE Technologies did, just as a recap, we were a company doing multiple businesses in the technology space. Last year, we took a decision to just focus on our fintech business and exit all other verticals. That is something that we've now managed to achieve. DiGiSPICE Technologies is now a very focused fintech company targeting to serve the unmet formal financial needs of Bharat, the emerging Bharat in semi-urban and rural India, under our brand Spice Money. As you're aware, we are also going through a process of merger of our subsidiary, Spice Money, into DiGiSPICE Technologies. So effectively, I would encourage all of you to see us as Spice Money going forward. So obviously, all our presentation is going to be on our FinTech business in terms of how we are progressing. Also in terms of our discontinued business, you will see in the financials of how the numbers have also moved and how we have brought down the costs associated with the discontinued business, something that Sunil, our finance head, will walk us through. And then, of course, we'll talk about some of the new businesses within the fintech area that we are focusing on. So we'll start the presentation. Can I request if you could move to the executive summary, please? So friends, if you look at it, we are very focused on 4 key building blocks for our strategic vision. The first is to consolidate our share for the core assisted payments industry. As you know, digital payments continues to grow exponentially in our country, and there are 2 models of self-serve and assisted. DiGiSPICE, we are significantly growing our business in the assisted digital payment space. This is an area that we will continue to consolidate our share and grow our share of the market and eventually double down in terms of top line growth, which will finally convert into bottom line growth going forward. So this will continue to be our focus in terms of our core business. In terms of then leveraging this platform business that we've built in terms of the network of merchants we have and the platform through which we are able to access these merchants will give us an opportunity to continue to bring strategic formal financial products to many parts of India, which otherwise from a unit economics point of view, product manufacturers aren't able to reach. So whether it's in the area of savings or investments. Our goal is to connect formal financial providers to customers and merchants in semi-urban and rural India at cost economics that are really attractive. Of course, credit is something that is part of our growth strategy going forward. As you know, we have put in plans to bring in an NBFC into the structure, and this is something that we're going through with the regulator in terms of seeking approvals and their blessings to be able to start this business under Spice Money. And then our final fourth building block is around UPI. This is an area where we are, as a country, are totally committed at about 400 million UPI users in the country. The opportunity and the challenge we have as a fintech ecosystem is to get the next 200 million customers on board. At Spice Money, we are a market leader in the AEPS segment, which is also 400 million as a market. So there are 400 million UPI users in the country and there are 400 million AEPS consumers in the country. We, at Spice Money have a 17% market share in the AEPS segment. And our goal going forward is, a, to grow this market share in the AEPS and also contribute towards the next 200 million UPI users in the country, and I will talk about that. If you look at the quarter gone by, which is quarter 2 FY '25, the 2 main highlights I would like to call out is on our collections business and on our saving account business. While we look at numbers in more detail, we've seen that how this quarter over last year has now shown a growth in gross transaction value by close to 30%. In the AEPS segment, which is our core product business as well, we have been able to maintain our market share above 17%, and our goal is to continue to grow this going forward, and we have plans in place how to do that. On the current account, savings account business, this has been a significant focus product for us at Spice Money. And the goal is to be able to enable customers in semi-urban and rural India to be able to open 0 balance bank accounts, but then start using our network to transact with those bank accounts and effectively move cash to digital. We've seen significant growth in this product in the last 1 year. And today, we are opening over 2,000 accounts a day, so a run rate of nearly 60,000 new accounts being opened on a monthly basis. As far as our corporate restructuring plans are concerned, we do have that process on the way. It's going through various steps and we are working with the advisers and going through that. Eventually, our end goal is to merge Spice Money into DiGiSPICE, so DiGiSPICE Technologies become Spice Money. And with the blessings of the regulator, if we are able to receive them, we'll be able to also bring in an NBFC under the structure as a subsidiary. So overall, at DiGiSPICE, we are now a focused fintech company with a mission to serve the unmet formal financial needs of Bharat. And this is something that we are excited on all 3 elements of AEPS, UPI and credit. Moving to the next slide. Our customer base are the small merchants in semi-urban and rural India, who we refer to as Spice Money Adhikaris. This network over the last 5 years has continued to grow. And we've seen from 241,000 merchants on Spice Money Adhikari in FY '20. We've closed September FY '25 at close to 1.4 million. So we've seen significant growth. From the close of the financial year '24 to September, we've also seen a 5% growth. We have now got a pretty dense network in a large part of India, North, East, Central, and we are now expanding in terms of density in the South as well. So more than a number of Adhikari is going to be now in terms of number of transacting Adhikaris and also in terms of number of products per Adhikari. So eventually, our goal is to consolidate this network and to be able to drive more products, penetration through this network because now we've achieved a good size in terms of over 1.4 million Spice Money Adhikaris onboarded on the Spice Money platform. We are now present -- we are present in close to 2.5 lakh villages in the country out of a total 6 lakh, and in all the blocks in the districts that we are, 6,475. So we have a point of presence across India. When you see the darker shades, it's more about dense presence versus lighter presence. The fact that we are present across India gives us an opportunity to tap into each of the markets, but our goal is to make sure that if you look at the India map, mostly all of it goes dark in the next couple of 2 to 3 years where we are lighting up the villages with our Adhikari points, both in terms of ATM and banking products. Can we move to the next slide, please? These are some of the 3 headline metrics that we track, the customer gross transaction value. Associated with that are service fee revenue and associated with that are service fee gross margin. If I look at quarter-on-quarter, we've seen a 2.5% growth in our customer gross transaction value, INR 26,300 crores from last quarter, INR 25,600 crores. The impact of this is reflected in our service fee revenue growth of also 2.8%, which is about INR 104 crores compared to INR 101 crores in the previous quarter, and a 4.6% growth quarter-on-quarter at the service fee GM level, which is INR 42.6 crores from INR 40.7 crores last quarter. You would see that compared to the 2.5% to 2.8% growth in the top line, we've seen a 4.6% growth in our gross margin, and this has been due to product mix, which I will explain on the next slide. Year-on-year, while our customer gross transaction value and service fee revenue has dipped by close to 3%, our service fee gross margin has actually grown by close to 3.8%. A lot of this dip in customer gross transaction values because of the headwinds we faced in the AEPS business, something I will talk through in more detail. But really, we've been focusing in terms of our product mix to make sure that we can continue to have a healthy growth in our gross margins. And you can see this on the graph that we've seen both a year-on-year as well as on a quarter-on-quarter growth. Moving to the next slide, we'll show you more detail, the different product lines that we have and what is the contribution of each of the product lines to our gross margin number. So if you really see, our product lines are split into 2 key buckets, one is our transaction business and the other is our distribution business. The transaction business is really linked to what we call the gross transaction value and the distribution business is more in terms of -- there are a number of accounts, number of loans and a number of other products that we enable. So these are 2 different buckets. The first bucket of transaction is linked to the GTV number that you saw on the previous slide. So if you really look at this slide, you can see we've highlighted in green 3 key product lines of collection, subscription pack and banking. And the share of these 3 product lines has grown year-on-year. So from quarter 2 last year, these product lines were contributing close to 26%. Now these product lines are contributing close to 33%. And it's really the shift from 26% to 33% to our gross margin that has led to an absolute gross margin growth both year-on-year and continues to be quarter-on-quarter as well. So collections and banking, something I highlighted in the executive summary continues to be a big growth strategy for us. Subscription packs has been an interesting one because having onboarded a significant number of Spice Money Adhikaris on our platform, now we are focusing on driving lifetime value from the merchants. Subscription pack is a great opportunity because it helps us build a loyalty program with all our merchants where they subscribe to a monthly come bimonthly 2- to 3-month packs. And because of that, they get higher commissions per transaction, but it also allows them to focus to bring more of their counter share on the Spice Money platform. So it is a win-win situation and it's something that is helping us on our gross margin front as well. Moving on, I'd like to talk about each of the service lines that we have. Can we move to the next slide, please? Yes. So if you look at the first core product of ours, the Aadhaar-enabled Payment System, these are 3 buckets. And for those who have not seen this format earlier, I'd just like to walk you through this. So what we show is both in terms of year-on-year as well as quarterly update. So if you focus on the first bucket, the one in highlight, the overall industry of Aadhaar-enabled Payment System on a quarterly basis about INR 70,000 crores, right, which is basically the money being withdrawn using the AEPS stack by customers. Out of this, about nearly INR 12,000 crores in quarter 2 has been the transaction value done on the Spice Money platform, leading to a market share of 17.19%. So when we say we have a market share of 17%, it's really the amount of gross transaction value using AEPS stack on the Spice Money platform compared to the industry. If you really look at it at an industry level, we've seen a decline, and that's why you've seen a year-on-year decline on the GTV front. Obviously, this is something that if you see year-on-year, we went from INR 81,450 crores as an industry down to INR 70,000 crores, which is nearly a 13% decline. And obviously, that translated into a decline of nearly 13% on our market -- on our gross transaction value as well. Now the way we read this is that this is an ongoing dialogue we are having within the industry in terms of looking at new use cases that this network can be used for because the majority of this gross transaction value is linked to cash withdrawal. As of now, cash deposit using the AEPS stack on the office network has not been enabled across all banks. We believe that this network today is serving more like an ATM network, and it can also move towards serving as a CDM network. So from cash withdrawal, it can also become a cash deposit network. And this is a big need in semi-urban and rural India, where consumers are also looking at ease of deposits as much as the ease of withdrawal. So then there are other initiatives we are working on. So our goal is to grow the pie, which is right now close to a run rate of, let's say, INR 2.8 lakh crores, how do we grow this pie, and these are areas which we believe will help us to grow the pie. As far as transaction metrics are concerned, quarter-on-quarter, this quarter, we've seen growth. So INR 7.4 crores transactions attempted in quarter 2 compared to INR 7.2 crores in quarter 1. Our success rate has also improved and the number of transacting customers have also improved. The reason this has happened is because to control risk, there was an industry-wide implementation of a 2-factor authentication for every transaction. In quarter 2, this was removed by every transaction, which is the first transaction of the day. And that has translated into more transactions happening because of the ease of having to move the 2-factor authentication on every transaction. The good news is that the fraud and the risk associated with the product, which was a major concern in the ecosystem has been addressed. So we are feeling like now as things are easing up, we'll be able to control risk as well as drive transaction growth. In terms of these Spice Money Adhikari metrics, we segment them in terms of large, medium, small business in terms of throughput per merchant and throughput Adhikari, what we call the large AEPS SMAs. Our SMA is doing a gross transaction value of greater than INR 5 lakhs a month. the medium, what we call Aadhaar-enabled Payment System SMAs are the ones doing INR 1 lakh to INR 5 lakh a month, and the small ones are less than INR 1 lakh. Our goal continues to be to grow number of transactions per Adhikari. Obviously, some of the large Adhikaris have got more impacted because they had more footfall. And because of these restrictions that impacted them more than the smaller ones. But effectively, we think that this will start kind of improving as new products like cash deposits get enabled on the platform. And this is something that we are committed to enabling. We do have a significant concentration in a few states compared to others. So UP, Bihar, West Bengal continue to be our top markets, which contribute to more of the AEPS GTV. And as we grow density in the other states, we see this growing as well. So AEPS continues to be an area that we will work on in terms of new product lines as well as growth in our transacting base. So this is something that we are -- we will continue to focus because it gives us an opportunity to extend the reach of ATM banking to every part of rural India. Moving on to collections. The next slide, please. This is the Cash Management Services product line. So within collections, we have 2 product lines, Cash Management Services and Bharat Bill Payment System, and I'll talk about both of them. This slide is about Cash Management Services. This is basically a product where we tie up with MFIs, NBFCs, e-commerce companies who are looking to collect cash and bring it to their branches and then from the branches go and deposit this cash in the bank. What we enable to them is to reduce their cost and time to cash, which is basically bank branches being closed weekends, odd timings, instead of having to travel to the bank branch, they can come and deposit that cash at our Adhikari point near to them, and we can help them to move that money digitally to the bank. This is a business that is something that we've seen very good growth. Effectively, we're becoming like a utility platform when it comes to collections for MFIs across. So if you look at the number of large CMS SMAs who do more than 30 lakhs GTV per quarter. This actually increased 15% year-on-year. And we've also seen the business that they are contributing has also increased by 31% year-on-year. So basically, it's a sign that bigger enterprises are doing more business for us. If you look at quarter-on-quarter GTV, now we are at a run rate of INR 8,836 crores for quarter 2 compared to INR 7,924 crores in the previous quarter and INR 6,874 crores in the last financial year, quarter 2. So we're seeing good growth. And really, this is a sign that as a utility platform, we are offering a much more efficient way for the enterprises to deposit cash back into the bank. Effectively, we've seen the number of transacting enterprises grow. We've consolidated and therefore, the idea is more business per enterprise, more large enterprise and more large CMS SMAs. So if you look at the number of CMS SMAs that are in the large category, like I said, it's seen a growth of 15.6% year-on-year and 3.2% quarter-on-quarter. So now we are nearly like on a quarterly basis, 4,000 large collection counters in the country. And it's effectively becoming a great -- again, a win-win situation where agents are able to deposit their collections closer to -- from where they collect it which is having multiple benefits in terms of cost time and effort involved. So our goal is to continue to onboard more large enterprises, demonstrate the value to them and continue to grow business per enterprise. I also want to say that both the CMS business and the AEPS business are significantly complementary to each other because effectively, in one business, you're collecting cash and the other business, you're disbursing cash. So there is an efficiency sitting in terms of cash availability and making sure that we are able to reduce the cost of cash management and therefore, enable efficiency across the board. The next service update is a very strategic one for us. Can we go to the next slide, please? This is the Bharat Bill Payment System license that we have from the regulator. This is a product of NPCI. Again, something that we are super excited on because what this does is it enables people -- enterprises to get onto one stack, looking for collections, starting with EMI, electricity bills, DTH, recharge, gas, water, number of use cases that are coming on this platform. If you see this product line from FY '21, we were at INR 419 crores. And FY '24, we closed at INR 4,190 crores. So you can see the significant growth from INR 400 crores to INR 4,000 crores that we achieved in a matter of 3 years. So exponential growth in this product. Quarter-on-quarter, we've grown 6%. Like CMS' large collection counters, BBPS has smaller collection counters. So we have 4,000 per month over there. Here, we have nearly 1 lakh counters, which are serving as collection centers in deep rural and semi-urban India. Our goal is that as more and more enterprises connect with us and use our utility platform to collect money, we can also work with them to encourage their customers to start depositing their EMIs and paying their bills close to where they live in the community itself using the BBPS stack. So even reducing the cost of their agent having to go to the village to collect cash. The customer can just come and deposit their EMI at a merchant point close to them. What I would like to highlight on the table below is the unique customer accounts. So if you look at EMI collections, we've seen a growth on this year-on-year. So if they have about 15 lakh customers in quarter 2 last year using the BBPS platform to deposit cash now, make their EMI payments, that's gone up to 19 lakh customers. That's close to 1.9 million customers who are paying their EMIs using the BBPS platform. The other encouraging point for us is that majority of these customers, at least half of them are repeat customers, which means there's a behavior that's evolving where the agents and customers are able to regularly use our Adhikari points as ways to go and deposit their EMIs. And there's a kind of a recurring behavior to this as well as if you could see our average ticket size of collections is also growing both year-on-year and quarter-on-quarter. So from INR 1,696 quarter 2 last year, it's gone up to nearly INR 2,000. So a 23% year-on-year growth or 10% quarter-on-quarter growth. Our goal here is to work with NPCI to see how to bring more billers on this platform, drive network density. So we go as close to the customer as possible for him to pay his EMIs and builds and drive this organic repeat behavior. So effectively, if you see the 3 key pillars of our transaction business is the AEPS business, the CMS business and the BPPS business. And all 3, we are focused how to grow gross transaction value and ultimately serve more customers, which will also lead to gross margin improvement in our business. Needless to say that there is competition on the ground and therefore, there continue to be pricing pressures on all these products. But as a platform that significantly scaled, we believe that we are perhaps better placed to absorb some of these pricing shops and be able to work to continue to scale the business and offer more value to both enterprise as well as consumer. Moving on to the financial products, current account, savings account. So I think to begin with, if you see the network that we've built out in semi-urban and rural India is really an ATM collections network, but now it's moving towards becoming more like a branch network for banks. So we have now onboarded 2 banks with whom we work very closely accessing an STL payment bank to open accounts for them. If you see the first graph between last year, we closed quarter 2 at about 2 lakh accounts. Quarter 2 this year, we've closed at nearly 5.8 lakh accounts. So nearly 1.7x growth and a 38% quarter-on-quarter growth in savings account open, 30% growth in current accounts open. And the last graph that I would like you to see is the SMAs opening more than 5 accounts, and that's a number that we track. So out of our total base, nearly 22,000 Adhikaris in the quarter gone by opened more than 5 accounts. So effectively, they are becoming more like kind of digital bank branches, and the goal is now going forward to be able to cross-sell more products into these accounts. Of course, we earn a margin per account, but the whole goal is to open more accounts and get people to use the accounts. The challenge we have as a country is that a lot of accounts being opened, but if they are dormant, they have limited value because we want people to transact with their accounts. And having an Adhikari on the ground, very close to them, functioning like a bank branch can lead to more digital literacy education about what all can they do with this account. So growth in average bank balance per account, cross-selling more products into this account and getting more SMAs opening more accounts, the key 3 key building blocks for this product. Our goal is to bank the underbanked and make sure that they can get access to formal saving and credit products. So we want them to not only open an account, but to transact with that account and then to be able to get the benefit of that account to grow income. So this is kind of a strategic platform for us. So like we have a strategic platform for our transaction business. This is becoming a strategic platform for our -- going forward, our banking business. Moving forward, I'd like to close with credit. This is an area that we are going very, very carefully. We are very conscious of the fact that we're working in rural India while there's unmet needs of MSME in rural as well as formal credit for the consumers, we want to be very careful because we have noticed that unsecured lending has been something that we all read in the newspaper has been something of a concern amongst MFIs. So if you see the collections business that we are building, the utility stack on collections that we're doing is actually helping the MFIs collect cash and that's something that we hope can help them to reduce NPA pressures. But as far as ourselves giving credit is concerned or partnering with lenders is concerned on our platform, we are focusing more on secured loans. So if you see quarter 2 this year compared to quarter 1 last year, we've actually grown our secured loan book work with lenders a lot more. So if you see in terms of number of loans, we were similar to about 1,700 to 1,600 loans, but effectively, you see the value, it's gone up from INR 29 crores to INR 57 crores, the red part of the graph. And this is really secured loan products like loan against property, commercial, vehicle and all that. So as far as third-party loan distribution is concerned, we've significantly moved from secured to -- from unsecured to secured. And our goal is to work with lenders more on the secured lending side, and that is something that we will continue to multiply in terms of offering our platform as a way for lenders to responsibly do secured lending and also help them on collections. So effectively help them to close the loop to build a healthy book in semi-urban and rural India. And we do hope that we can help in robust lending but also robust collections. I'd like to now hand over to Sunil, our CFO, who can -- on Spice Money, who can run you through the financials. I want to come back and talk about PPI, our UPI product that we launched 2 days back in Bihar, something that we're excited about. We are really committed to the next 200 million UPI users in the country. And because of the base of merchants and through them, the consumers we have, we see an opportunity for us to really add to the UPI growth story of the country, something that we can talk about during the Q&A, and I'd love to talk more about that. So before that, over to you, Sunil, if you could just run us quickly through the financials.

Yes. Thank you, Dilip. Good morning, everyone. This sheet about the consolidated financial highlights. And I want to emphasize on the quarter 2 results, where we have seen that customer GTV has grown by 3% quarter-on-quarter. And consequently, that the gross margin has improved by 4%, better than the customer GTV and even the revenue is flat. So we can -- and service fee revenues also increased by 3%. So we can see that there is an improvement in the gross margin due to product mix. And if we see that where it's coming from, that's primarily from the CASA that we are opening for the banks. And increase in collections and the subscription packs, which is important for us to engage our Adhikari to work with us for a long term. And if we see on the indirect cost side, there is an increase of almost INR 5.5 crores. This is because of 3 factors. One is with respect to that we are working on the corporate restructuring, which is a -- one, as a merger and also the acquisition of NBFC, so there's some costs related to that. And another is cost related to the increment cycle for this quarter and seeking some new business investments, hiring the people for the -- for these new verticals of credit and Spice Pay or PPI. And consequently, the EBIT is having the impact of this indirect cost increase. And PAT is negative INR 1.5 crores against INR 4.5 crores. However, if we see on the YTD side, then we have INR 3 crores PAT against INR 4.8 crores in the last year for the first half. And on [ 8 ] point, there is an investment we have in BG Asia Buyers, which is a mark-to-market as per the accounting standard, we have to recognize if there is any gain or loss, so that has been recognized for INR 5.7 crores. So it's a mark-to-market gains and loss. That has nothing to do with the impact on the cash flow. And PAT, if we see on the discontinued side, that has almost come to closer to nil. So discontinued business of DiGiSPICE is almost done, and we will be having a very less impact. If you see on the last year, we have a INR 38 crores loss and quarter 2 of the previous period was INR 7.4 crores loss. So this will help us to overall improvement in the overall results of the company at the consolidated level. And consequently, overall total PAT is INR 7.3 crores, which is primarily coming from the mark-to-market gain or loss which has no cash impact. Can we move to the next slide, please? Yes. Here, in this slide, we want to just emphasize on that whatever the investment we are doing in the new business, which is credit and UPI business, and if you see that we have increased investment in last 2 quarters, almost INR 3 crores and INR 4.5 crores in this quarter in these businesses, because this will be the more on the customer side because we are, as of now, B2B2C player. But we are working on these 2 businesses on the B2C customer to own the customers and we can do have a cross-sell and upsell opportunities to capture. So in effect, the platform business is doing the positive picture and barring whatever the onetime cost. And we forsee that with these new businesses coming in, more engagement with our Adhikari network will be there, and we will have a mutual kind of new business and also in the platform business have better margin going forward and better profitability. Thanks. That's all from my side. I'm handing it over to Amit.

Thank you, Sunil. And also thanks to Dilip, for those fairly detailed and kind of insightful opening remarks. I'd now like to open the floor for Q&A.

[Operator Instructions]

Amit, I can see a question in the chat box. Can I pick it up on it?

Yes, please, sir. Please go ahead.

So the question comes from Naman from Ventura. Two questions. First is pertaining to the credit distribution business -- is there some kind of default guarantee arrangement between you and the lender. If yes, could you give me a brief idea about what are the terms of such a guarantee? And the second part is talking about the NBFC business, how do you plan to fund the operations of the business? Thank you, Naman, for that. Basically, Naman, as far as the credit distribution business is concerned, there is no default guarantee arrangement we have with the secured loan providers. The whole goal is to become more a loan origination platform, where we are able to generate leads for the lenders to be able to get access to customers and of course, help them in terms of processing those leads. So that is something that, as we go forward, our focus, as I said, Naman, will be -- on the distribution side, will be more on the secured credit distribution, where we will not want to enter into any guarantee arrangements, especially on the distribution side. We want to be more on the secured lending side. As you're aware, under the LSP guidelines, there is a first loss default guarantee arrangement that is allowed. And of course, if we were to do that, we'll kind of work in line with that. But as of now, our focus is more on secured loan distribution. As far as unsecured loan distribution is concerned, our focus is more on lending to our own Adhikaris, when it comes to secured loans, and that is going to be predominantly through our NBFC once we have all the approvals in place. And really, on that, we just want to make sure that we focus on Adhikari lending to borrowers who we know who are on our platform where we have more confidence on ourselves as a lender, how we can engage with them. As far as funding of the NBFC is concerned, Naman, as a business, as we've exited the non-fintech businesses, we are looking at the consolidated balance sheet of DiGiSPICE, something that's out there in the public domain. And we do have the balance sheet strength to begin to fund the NBFC acquisition as and when we get the NBFC as we get the approvals. And then going forward, we will see based on how the business evolves, how we should think about the capital requirements and the mix between equity and debt. So that's something we can consider. Sunil, do you want to add anything to that?

Yes, of course, that's what you have mentioned. I think from a lending standpoint of view, because we have a distribution strength and we have an experience with respect to some banks about the distribution of secured product. And we have seen a design on acceptability and scalability. So we will be focusing more on the secured distribution and where we will be able to participate with the other lenders in [ core lending ] or on our balance sheet. So what Dilip mentioned is secured lending is -- will be our focus.

Thank you, both of you. Just one clarity. It seems the first round of question has gone directly into Dilip's direct message. So request if people can ask questions on the common forum. The next question is from the line of Mohit Bansal. He asks, when will the merchant gets completed and what will be the benefits to the consolidated entity? What will be the shareholding pattern post merger?

Thank you for that question. I think we are working with the advisers where there are steps involved in terms of merger because we have multiple licenses at Spice Money, which is being merged into DiGiSPICE Technology. So the first step is to get the NSE approvals from all the authorities who've given the licenses as they move into the listco. And of course, then there is other statutory approvals that we need to go through. We are trying to see how to expedite the approvals. But what we are given to understand is that it is a 9- to 12-month process, and therefore, really it moves to the end of the next calendar year, but we are trying to see how to work to see how to do this as soon as possible. As far as the benefits are concerned, I think clearly, the main business of DiGiSPICE, which is the fintech business gets housed in the listco itself instead of sitting in a subsidiary. So it is kind of removing a layer. So it's simplifying the structure, and this is something that we've always received feedback on that simplification leads to value unlock better. So this is something as well as if you have multiple entities, it does lead to more costs, and therefore, it also becomes a more efficient -- cost-efficient way of creating value. So simplicity, efficiency are the 2 key positives that have led us to take this decision of merger and something that we believe will allow people at large to then directly get exposed to the fintech business and participate in this journey with us. Sunil?

Yes. So one important thing is -- with respect to this merger is simplicity. And also, this will enable Spice Money business to have a subsidiary going forward. with respect to any vertical business we can have or we can have a separate focus on that. So as of now, due to layer issue, we can't have a subsidy of Spice Money, that will also help us with that.

I think the reason behind the merger has to be simplicity and Spice Money is the only business of DiGiSPICE now and by merging it, we are kind of housing the main business. And like Sunil said, to reduce the number of layers tomorrow if we were to get the NBFC approval, then it comes in as a subsidiary of the listco directly.

Thank you. [Operator Instructions] Next question is from Rupesh. What is the primary objective will be behind this merger?

I think we've already explained that, Amit, right? Simplicity, convenience and housing the main business and the listco itself.

Next question comes from Siddharth Doshi. In what ways do the September 30, 2024, balance sheet figures reflect the company's strategic transition towards financial technology submissions?

Sunil?

So as -- the management has decided last year to come out of the digital technology services business and focus on the financial services. And Spice Money having -- you guys know about that the platform business and whatever the new business we mentioned in our presentation with respect to the credit and that's UPI or Spice Pay that we are focusing on. So now our focus is primarily focusing on the financial services business and whatever the opportunities, financial services business to us or available on the basis of the reach, what we have built on in the last 5, 6 years, we want to ride on that. So that's our main focus.

Sure. Continuation of the previous question, from Siddharth himself. And to add on previous question, what steps is the company taking to address regulatory challenges and meet compliance standards in the fintech sector?

Do you know, Siddharth, this is a very important question. And we believe that for us, one of the things when we took a decision to focus on fintech at the Board level, it became -- it became very clear to us that the 2 key value drivers, like in any business, is governance, but especially in the fintech business, it's compliance. When we think of ourselves as a fintech company, we see that it's fin followed by tech and not tech followed by fin. And so for us, being a responsible financial services participant, compliance is going to be key, both in terms of letter and spirit. As you know, this is an ongoing partnership and a journey of collaboration with the ecosystem -- we are trying to solve the unsolved. We are working in an ecosystem where rules are evolving because we are moving from an unorganized space to making it organized. So we will continue to learn. And we are placing a lot of emphasis if you look at governance, the kind of directors we have on board coming from the banking space, coming from a background of having worked on these important subjects of compliance. We have a very dedicated risk compliance function, very rigorous directly reporting it to the Audit Committee. So for us, compliance is key. And if you really ask me personally, I think given an option between growth and compliance, we're 100% focused on compliance-led growth. We are in this for the long term. We are building a business over the next 25 years. We want to make sure we build it with a culture of compliance and strong adherence to the spirit of compliance.

Thank you. I would like to merge next 2 questions coming in from Rupesh and Mohit. It's about the NBFC business. When the business is going to commence operations and when will it reflect in our accounts. Also are the [ AEPS ] business funded as of now and its leverage in the business.

So -- so obviously, we can only start the NBFC business once we get approvals from the regulator. We are awaiting that. We are hoping to get it soon. I'm hoping that we can get it within this financial year. But this is not in our hands. So this is something that we will continue to be guided by the regulator. And as they get more comfortable, we will only be able to proceed once we have their blessings. So this is an optionality that is there for us at Spice Money, but we believe there's value and therefore, we had Spice Money are hoping that we can demonstrate that there is value for us as a company to enter this space to the regulator, if they see merit in it, they will give us the approvals and if they give us the approvals, we can start. So this is something we will start once we get the approvals. We are organizing ourselves in terms of capability. Sunil showed us the numbers in terms of investments. We have invested in teams. We have people on board coming with an NBFC background, we have been working with third-party lenders over the last 3 years. So we have learnings as an LSP, what works, what doesn't work, how to think of underwriting, how to think of collections, how to think of risk models. So it's a new business. And like I said, we're going to go through this very, very carefully. We're not going to rush into credit. And in terms of scaling up for us, AUM is not going to be the key driver. The key driver is going to be a responsible credit provider that can enable our Adukharis to grow income. And we're going to use that more as a metric of growth. As far as funding of the NBFC is concerned, I said earlier, we have the starting balance sheet. To start the lending, we'll be able to demonstrate with our -- with the money we have as to how the models work. We'll test out various models. And as we test out and demonstrate that we can build viable models, I'm sure we'll be able to figure out ways to raise growth capital to scale it. Our key goal is to make sure that we build a responsible credit business, a healthy credit business and a credit business that works to grow income rather than just size of book.

Thank you. Related to this question from Mohit, what would be the cost of fund for the NBFC and the credit rating right now?

Sorry, cost of funds, I think, initially, of course, the NBFC will be funded more through equity, which is our own balance sheet. And therefore, it's more higher cost because it's cost of equity, but we believe that we are trying to build an efficient NBFC. The reason we are bringing it under Spice Money is to make sure that we can build on the learnings and capabilities and then, of course, extend it to the larger MSME ecosystem in rural India, of course, starting with equity. And then hopefully, as we move forward and demonstrate models, we'll be able to leverage with lower cost capital in the form of debt. And I guess the rating will be a function of how we scale the business as well as the mix between secured and unsecured lending.

Thank you. Next question comes from [ Pritam Bajaj ]. Sir, is there a delay in NBFC and PPI rollout, while both the new businesses will have a large investment to be done, consider one in is a B2C play where investments in brand and customer engagement will have to be done. On the other side, there is a great opportunity on lending the Adhikari and the customer. How is the funding pipeline looking like? Also, there is a peer now, which is listed and has declared a profit and have a very similar model, [ RFI ], except ForEx business -- from an investor perspective, we will have a direct competition. While you have a ForEx business as well, will it not be right to match the business under one entity from a cost and identity in market?

So [ Pritam ], there are 3 parts to your question. PPI, NBFC and ForEx. So let me try and cover all 3, right. On the PPI side, [ Pritam ], you're absolutely right. It's a B2C opportunity. It is basically the next 200 million UPI users in the country. The only difference for us, [ Pritam ], is the way we are looking at it is that unlike other players who are participating in this UPI ecosystem, we are participating on the back of the platform we already have, [ Pritam ], which is our merchant network and their customer base. So we are hoping that we'll be able to leverage this to be able to bring down cost of acquisition for UPI, right? At the same time, we'll be working closely with NPCI and the other participants in the ecosystem to see how to create revenue models. We do see that while UPI using bank account has no interchange, but UPI using the wallet, there is talk with the authorities to bring in an element of interchange. So while bringing down the cost of acquisition, we will also see how to create a revenue model associated with the UPI business. So needless to say, we will continue to see how to efficiently invest and build the UPI business. As far as the NBFC is concerned, you're absolutely right. There's a great opportunity to link to the merchant ecosystem, the Adhikari base we have. But like I said, we'll do it step by step. We will use the money that we have to test out various products to the Adhikaris, see what works. We have within the Adhikari base, new to credit, existing to credit with different bureau scores. We're going to work closely. So we're coming with a background of having scaled the collections business. So for us, we're going to make sure that when we lend, we can collect. And so we're going to see which products work, at what cost they work because our challenge is to keep the cost of credit down at the same time to drive collections. So everything has to come together for us to build the lending business. It is a business that we're going to build in a steady way. We're not going to rush into it. We're going to make sure that we are able to make our Adhikaris into -- help them effectively become responsible borrowers and really help them to improve really help them to improve their income going forward. On the ForEx side, yes, we do have another listed entity, WSFx Global Pay in the group. It is running as an [indiscernible] remittances and ForEx company. It's an independent space with a different profile of customers, which are mainly students and corporates, and people traveling for leisure. It is, again, a kind of a ForEx fintech company. So we do have 2 fintech companies in the group, Spice Money and WSFx Global Pay. As of now, there's been no discussion at either of the Boards to think about a potential merger or something like this, these companies are building out in their own spaces and have their own growth journeys as of now.

Thank you for the detailed answer. Next question is from -- comes from Rupesh. He asks about the NBFC business, are there any fundraising plan? And if so, what would be the time line for that?

So Rupesh, as far as NBFC is concerned, like I said, we get the -- once we get the approvals, we'll start the business. We'll run pilots using capital of our own to be able to demonstrate the robustness of the products that we have, and then we can follow it with a capital raise in the new financial year.

Sure. Siddharth asks another question. He says, thank you, sir, for the answer of the compliance, helps us evaluate the [ digital industry trends ]. Last question, as DiGiSPICE sharpens its focus on Financial Technology Services segment, how will it strategically allocate resources and investment to drive its growth objectives successfully?

So I think as we are becoming a focused fintech company, the profile of the people that we have on board, our own teams over the period of time, like I said, we are a fintech and not a tech fin business. So effectively, a lot of our team, which is coming from a tech background, we are kind of kind of aligning with the demands and the skills needed on the financial services side, I think, of course, our focus is going to be to build more and more capability to be able to do more. We have a business that has been built grounds up. So a lot of our understanding of products going forward will be depending on how we continue to see what works and what doesn't work on the ground with our Adhikaris and through them and with them, we'll be able to chart out this journey of serving the unmet formal financial needs of Bharat using technology at the core.

Thank you, sir. Next question comes from [ Harsh Sharpar ]. Since we are in fragmented market/industry and there are peers in the same space, how are we trying to stand out in terms of tech stack?

So yes, yes. We do -- AEPS, we have 17% market share. So of course, there are other players who are operating in this space. But if you see today, Spice Money is the most preferred platform amongst the merchant ecosystem looking to offer AEPS service. So we have invested significantly on our platform stability. I mentioned about new products that we are bringing on the AEPS side. Today, on the collection side, we are working with some of the largest MFIs and NBFCs in the country, and that wouldn't work if the stack did not work. We are investing in our capabilities to build on the UPI stack, and of course, on the lending stack as an NBFC. So I think when it compares to other players in the market, we have our own focus in terms of product lines that we are doing, and Sunil showed some of the data in terms of investment in new businesses and a lot of that investment is going in terms of people and tech.

Thank you, Dilip. [Operator Instructions] Next question comes from [ Pritam Bajaj ]. Also Jio is expected to be seen in this space in the last quarter this year. How are we preparing ourselves for a giant player entering this space? Are we looking at any inorganic growth too?

[ Pritam ], my experience has been focus on customer, not competitor. I think for me, [ I don't know ] where competition will come from. I just know that we are serving rural India with our Adhikaris and through our Adhikaris, we will stay the course, we'll stay focused. Very difficult to preempt what -- where competition is coming from, what are they thinking. We are just focused on what we are doing, and we are seeing a result of that. So we'll just stay the course, [ Pritam ], and hope for the best.

Next question is from Rupesh. This regards to this is with regard to the question, can you shed light on the technology advancements and R&D initiatives that DiGiSPICE is focusing on to stay ahead in the fintech sector?

I think this is an amazing question and something that we are really committed to. You see, if you think about technology and while I said we have fintech and not tech fin but technology is at the core of what we're doing. So what are the opportunities for us to work on technology. For example, there are barriers, right, in terms of ease of use. So when we are entering UPI, how do we want to build our product, which is very easy for first-time UPI users to use. So we're focusing a lot on UI and UX. Voice is going to be a big thing. So for us, we have a biometrics -- we run on the back of a biometric stack, right? So effectively, Aadhaar-enabled Payment System is using the thumbprint. Going forward, we're talking about face authentication. And many of us who use [ digitally ] day in, day out at airports knows that face authentication works. In biometrics, the leaders in the world around that as Spice Money, we're committed to investing behind biometrics. And then the question on voice. I think with language barriers, 9 out of 10 new users on Internet are non-English speaking. We have to figure out a way how to use gen AI, new language models to build voice-based vernacular solutions. So biometrics and voice are 2 big areas that we're going to commit to on tech. We are looking to partner with -- one of the things that we're excited about is to partner with academia. There's a lot of innovation happening within institutions which is low-cost, frugal innovation. I had the opportunity recently to meet Professor [ Nitin ] Gupta, who's working on grassroot innovation, someone from the [indiscernible] background as a country, fintech has made us really given a lot of confidence to us as a country that we can innovate. We were -- from followers, we are becoming leaders on innovation, and UPI has shown the way, right, that the world is looking at UPI. And we believe that AEPS is effectively going to become the top of the funnel for the next generation of UPI users in the country. So for us, technology is something that we are building homegrown as a country, as an ecosystem. Fintech is doing stuff which is amazing. And we at Spice Money want to participate and contribute to this. So a lot of focus on technology. The key is going to be people. The key is going to be about attracting the right talent and working with the right talent. So that's something that we continue to work on. We hope that we can go out there and convince great talent to solve for rural. We are an impact story as much as a for-profit growth story. And I'm hoping we can -- I met Professor [ Nitin ] Gupta 2 days back and he made a statement. He said, can we create hunger amongst the best minds in India to serve the poor? If we can do that as a country and as a company, I think we'll see amazing tech being developed, which will solve for rural and we'll be able to demonstrate to the world that rural can actually implement the best of technologies and can actually compete ahead and offer the best even to consumers who can't afford to pay a lot.

Amazing answer. [ Pritam ] says, thanks for the reply to the question that you answered. Next question comes from Harsh Sharma. Also, our presence in different geographies, has it remained stagnant, any particular reasons for that?

I would not say stagnant, but yes, we've not grown as much in the South as we would like to. I think it's just a factor of time. I guess there have been lots of things that we've been working on, on the product side and on the tech side and all of that stuff. I think there's been competition also coming into some of our strong markets, and we've been trying to make sure that we don't lose our positioning over there. But yes, to that extent, if you see our market share has been holding at [ 17 ]%, ID should be growing. And yes, that's the thing we have to turn the needle. We have to move from holding market share to a growing market share, and we at have Spice Money are committed to that.

Before I move on to the next question from Rupesh [Operator Instructions]. Rupesh has a question. I think it's a continuation of the last question. What is the -- previous question. What is the percentage of your overall budget, which has been allocated to technology innovation? And how much has this changed over the past few quarters?

Rupesh, if you ask me, really, this is something that Sunil and I talk about a lot in terms of how to do the investments, we're actually now beginning to show the segment between investing in current business and new business. It's not as much as I would like it to be. Actually, I want to invest a lot more in technology innovation. I'm hoping that once our corporate restructuring is over, we can start allocating more capital to innovation. So right now, I don't want to talk to you about numbers because it's not as much as we would like it to be. I want this number to grow. And maybe in the coming quarters, we'll talk more about this number.

Sure, sir. [Operator Instructions] As there are no further questions, I would now like to hand over the call to Dilip for his closing remarks. Over to you, sir.

Well, I would just like to say thank you for all those who showed up on the call. I know many of you have come to these calls multiple times. It's so amazing to see people giving time to listen to what we are doing. I can just conclude by saying that we at Spice Money are a mission-focused company. We are a purpose-driven company. We want to solve for the unsolved, we want to solve for the unmet formal financial needs of Bharat. We have an amazing network of merchants, hungry, committed, driven to serve customers and small businesses in rural India. We're very conscious of the ecosystem we are working in. We want to be a responsible participant in the financial services ecosystem. We share the concerns of the regulator when they talk about NPAs and the need to build a robust financial services sector. We want to be a responsible participant in the financial services space. Of course, it comes with a lot of responsibility, but it also comes with making sure that we give up on many opportunities if we feel that it could lead to concerns from a systemic risk point of view. So we will continue to trade very cautiously and very carefully because we are working in a part of India that's financially vulnerable because there is issues of financial literacy. And we want to make sure that we, as a responsible player, not only were able to grow business but also be able to organize the unorganized financial services sector. So we'll make our humble contribution towards that. Thank you so much for showing up on these calls. If there's anything, please do keep reaching out to us. We need as much support in this journey. We are on a long-term journey. But together, we can build [indiscernible] in Bharat. Thank you so much.

With this concluding remark, we now close the call. You may please disconnect the call. Thank you.