Emerald Finance Limited (538882) Earnings Call Transcript & Summary

A very good morning, and warm welcome to the webinar of Emerald Finance Limited. From management team, we have Mr. Sanjay Aggarwal, the Promoter and Managing Director, having over 30 years of experience. And the webinar will be hosted by Mr. Ayush Agrawal. He is a SEBI registered research analyst who does SME, microcap and multi-cap research. And now I would like to hand over to Mr. Ayush Agrawal to take forward this webinar. Handover to you, sir.

Yes. Thank you, ma'am. So just before we begin, quick 2 lines. So I am a SEBI-registered research analyst and any content that would be displayed today or would be discussed today should be purely construed for information and knowledge purposes. And from our side, this is not a buy or sell advice of any kind. Because we are SEBI-registered, so this should not be construed as a buy advice of any kind. And investment in securities market is subject to market risk. Please read all the offer documents carefully before investing. And registration by SEBI and certificate grant by NISM is not a guarantee of any performance. So please -- and any intermediary does not provide any assurance for any return to any investors. So this is basically just a quick disclaimer that we needed to get out of the way before starting the Microcap Minute Meetups, which we are doing. And today, we are doing it with the management of Emerald Finance. So with that, I would like to begin. So sir, thank you to you and your team, firstly, for giving us this time for our Microcap Minute Meetups. And we appreciate that you've given us this valuable time. So sir, you have an extensive background in the financial market. And you work with banks like ICICI, Kotak, HDFC. So can you share your experience in the financial space and also tell us a little bit about Emerald as well as banks?

Hi, Ayush. Good morning to all. See, with me is Gurmeet Kaur. She has worked with Citi Financial and Fullerton, and she was CRO at the Bajaj Finance, and she is currently working as Chief Risk Adviser with us. Also with me is my younger son, Talin. Talin is CTO for the company. All the technology piece, he is handling. So about our background, we started operations in 1998 with AFCO Financial. AFCO was the first U.S. multinational to enter into India in retail finance. So we started working with them as direct selling agent. So we used to do personal loans, car loans, loan against property with them. So then after that AFCO business, we joined other banks like HDFC, ICICI as DSA. Currently, we are working for almost 40 large financial institutions. Basically, you name the financial institution, we're working for them as direct selling agent. As a matter of fact, we are the third largest right now for HDFC gold loans pan-India. And in 2015, our company got listed on Bombay Stock Exchange, Jan 2015. And the same year, in November 2015, we got NBFC license. When we got an NBFC license, then RBI suggested that we park the DSA business into a separate company. And that same year, we floated a subsidiary by the name of Eclat Net Advisors. And all the syndication business, currently, we are doing in that company. And in the main company, Emerald Finance, we are doing loan on our books. And when we got listed, our capital at that was INR 3 crores only. Then we came out with 2 rights issue, one in '19 for INR 6 crores and in year '21 for INR 20 crores, which took our equity to INR 29 crores. In June '22, we participated with an American company, Rainpay, for doing Earned Wage Access in India. Rainpay was a very large EWA fintech in the U.S., and we joined hands with them to start this Earned Wage Access program in India. In November '22, they invested in our company also. They took about 750,000 shares in our company. And in the same round, NAV Capital, Singapore, they also participated in a small amount. Unfortunately, in December '22, Rain received about, I think, $300 million-odd funding in U.S. and the new investor put a condition that Rain withdraw from all other countries wherever they're operating and consolidate operations in the U.S. So we've received a call from them on 31st December that they'll be existing in India, and in the next 2, 3 months, they'll be shutting down their operations in India. And we did the last transaction for Earned Wage Access on, I think, March 4, '23. But in the meantime, my younger son also joined me in May '23, and we started developing our own Earned Wage Access program. He hired a team of about 5 people, techies, and we developed our own Earned Wage Access program and soft launched it in December '23. So currently, we are almost working with 34 corporates. We have registered with 34 corporates and 25 of them are active, and I think balance 9, 10 will start operations in December and max Jan next year. So our short-term target is, until Jan, to register about 50 corporates and then by the next year, about 250, and in the long term, to register about 1,000 corporates for EWA program. In December '23, we also got INR 15 crore limit sanctioned by State Bank of India. And the same year, RBI conducted our audit and we received the audit report in the first quarter of '24. And it's all more or less very clean chit was given to us by the RBI. They checked all our systems and everything, and we were given -- in the first quarter, we received the final report from them. Ours is the dividend-paying company for almost last 5 years. We first paid dividend in 1920 (sic) [ 2020 ]. And since then, we have been consecutively declaring dividend every year. And I'm very happy to report, the first 6 months, till September results, there was absolute 0 delinquency in our books. And hopefully, it should continue in this year also. Our system is very robust. It can handle about 20,000 transactions per second. And among the 34 companies we have joined, one of them is -- we also joined with Municipal Corporation of Chandigarh. We are funding to their safai karamcharis. Plus now we recently tied up with Urban Shelter Corporation in Delhi, and Moradabad Safai Karamchari Corporation also. So I hand it over to Ayush. Any other questions, please?

Yes, sir. So basically, thank you for giving such a wonderful introduction about your company and briefing me all the details. So sir, on the EWA product only, I wanted to start the discussion off with the EWA product. So what gaps did you observe in the Indian financial market over the years that inspired you to introduce the EWA product in India? Firstly, I wanted to understand from you and your team on this particular aspect. And I know there may be a lot of participant questions also. So we had prepared ourselves 20, 25 questions. So I'll try to curtail them to 10, 15 questions, so we can take some participants' questions also, sir.

Gurmeet, would you like to take that?

Yes, sir. So please, can you just tell us about the EWA product. Sir, what gaps did you observe? So...

Gurmeet, would you like to take that question?

So what gaps did you observe in the Indian financial market that basically inspired you? Over the years, you observed some gaps that inspired you to basically introduce the EWA product, Earned Wage Access, the Early Wage Access product, like whatever it is to be called in our country, sir.

So can I take that, please?

Yes, Talin.

I think there was a major gap that we saw. So if I tell you our demographic of the people transacting, so these are people primarily earning less than INR 50,000. So they make up about 70% of our transacting users. So a major gap here is that people get a salary on the 1st of the month or the 2nd of the month, and they have to live with it in its entirety. So towards the end of the month, that is after 20th, 25th, people tend to run out of cash. So basically then they're hassling here and there for money. Let's say, if someone has a credit card, they can just swipe a credit card. But the credit card penetration in India is less than 5%. Us, as sir mentioned, being a DSA for 40-plus banks, we even sell credit cards through [indiscernible] banks. And we have seen the acceptance rate by these banks. It's less than 5%. So majority of people earning less than INR 40,000 or INR 50,000 a month do not have a credit card. So at the end of the month, let's say, they have an emergency -- medical emergency or any other emergency they have, or they have a want, so they have to wait for their salaries to come in, which tends to come in the first week of the next month. So what do they do then? So they're essentially haggling their employers for money, advance [Foreign Language]. They're asking their relatives, their friends for money. Again, this is all lengthy processes. They take time. There's uncertainty whether you'll get the money or not. Whether they'll charge any interest or not. So that's where we saw a gap that towards the end of the month, people tend to run out of money. So they might as well withdraw a certain percentage of their accrued income, [Foreign Language], might as well withdraw 10 days' worth of income, at least I'll have some liquidity on me to get through the month end. So again, what this does is this even gives them a sense of financial security [Foreign Language], so I know I have this app on me. I can just log in, withdraw instantly the money hits my bank account. I do not have to haggle here and there for money. [Foreign Language], money hits my bank account. I'm not essentially troubling anyone -- I'm not troubling myself. So this financial security, this peace of mind itself is a big booster for employees and employers.

Okay. Awesome. So sir, we have a few questions in Q&A also. So what I'll do is I'll take one question from the Q&A, then I'll jump. I'll ask one question that I needed to ask. So how much equity dilution over the next 5 years are you looking at or are you projecting to grow the business? Or will you look into taking more debt? That is one question that has been asked by one of the attendees. So could you just give a little bit clarity on the same?

See, we've not finalized. We are taking debt also, and we continue to -- whatever is necessary, we'll continue to do that. We recently diluted 8% to Investi Global. And now we are diluting about 3% to Minerva Capital. Majority is Minerva Capital, this is a Mauritius-based fund. And we have already credit line from State Bank and they'll continue to enhance their limits. So we have a large branch in Chandigarh and the local DGM power is about INR 100 crores. Recently, we have just only withdrawn up to INR 15 crores. So capital is not an issue. Capital or the debt is not an issue. And also, we have excellent track record with a lot of other NBFCs. So money will not be an issue. We have to find the right mix for that.

Sir, in terms of EWA, now one question I wanted to ask like there is such a crowded space of fintechs and NBFCs. So what makes your EWA product stand out or what will make it stand out? And in terms of the EWA product, like what is the typical customer profile of your EWA product to determine the average loan size or the average base size or the size that they'll be taking out? Because if you have told me a ticket size of INR 50,000, so the safai karamchari will not have a salary of INR 50,000. So could you just give a little bit clarity on the same?

Sure, Ayush, I'll take that one as well. So as you mentioned, I think in terms of competition, the market is just getting started. I think other than us, there would be 4, 5, max 6 players in the market. We, all of us together haven't even scratched the surface yet. So I'll be more than happy if more competition enters the market, as it enhances consumer awareness, employer awareness that there is a product of this out there and there are providers providing this. So I think -- and what makes us stand out is 2 things, I would say. So one, if you see our competition, they are primarily fintechs who depend on lending partners to essentially power this entire program. But in our case, the entire thing is powered by us. From lending to technology to distribution, everything is us. And us being a regulated entity, we are heavily audited by the RBI. And this sort of gives a comfort to both the employer and the employee that [Foreign Language], that this company will not just sort of disappear or do a fraud on us, because they are again a regulated entity. [Foreign Language], we can always go to the regulator. So this is a great sense of comfort we feel with the employers when we pitch to them, right? And the second, again, is the distribution, I would feel. So again, everything for us is in-house. So all our margins are essentially covered with this. So essentially, we can offer a lower rate and still remain profitable as compared to our other competition. And coming to your second question, what is the typical profile? So these people are typically earning less than INR 40,000, INR 50,000 a month. So our average withdrawal per month sits at about INR 20,000, INR 25,000 per person per user, right? And as you mentioned, a safai karamchari would earn almost INR 20,000, INR 25,000 a month. So they would be withdrawing close to 50% of that.

Right. So sir, we have another question from, again, the Q&A I'm taking. So what is the current loan book? And if you could give a little insight on how many agents or sub-agents we have right now?

See, it's almost about 1.4 right now, monthly run rate. And we have 9,000 registered employees with us and active users about 7% to 8%. About 600 are active users as of date. So we have tied up right now with 34 corporates, and out of them 20, 25 are active. And I think the 9 balance should be active this December or max by January. And now they are the big ones. We have recently tied up with large corporates, who have average about 1,000-plus employees, and I assume they should activate by the month of December or max Jan.

Sir, can you also give a drill-down of the MSME loan book?

MSME loan book, I think. yes, that is around INR 55 crores as of date and that is performing really well.

Okay. Awesome. So sir, you mentioned earlier, your company is having a collaborative partnership. So you have collaborative partnerships with lenders and different financial partners for distribution. So can you highlight their role and explain how Emerald fits into the value chain? And are you exploring any new partnerships in terms of technological innovations or to enhance, say, the customer acquisition or streamline payments more in the future? So if you could give a little bit insight into that?

We're working as a DSA for almost 40 banks. That is primarily a fee income. We don't carry any risk in our books. So we continue to enroll with more and more banks. Like recently, we are tying up with Avanse for funding to schools. I think the partnership start off with next week.

Right. So sir, we'll take another question from the Q&A. So in case we grow the -- this is a follow-up question basically to a question which was asked that how much equity dilution would be there in the next 5 years. So in case the -- basically, we have enough capital to grow, why would we be diluting the 8% and 3% equity that you have called out? This has been asked.

See, we're diluting at decent rates. And I mean, we've got sufficient -- our equity stake is right now almost 62% with the promoters. So we're getting a decent, very nice this thing, fund houses, just at about 2% to 3% NAV.

Right. So sir, now you recently mentioned that you have around 25 corporate clients and you aim to increase that to 40. So what are the key drivers for corporations to sign up with the EWA program? And basically, how long does it take to onboard a corporate client? Could you give a little bit insight into that?

No, we have already tied up with 34 corporates and 20, 25 are already active. And we plan to enroll about 50 corporates by Jan '25.

Right. And the time, sir -- sorry to interrupt, sir. And the time it takes, like the onboarding time, the onboarding time...

One day. One day. Once we sign the agreement, we can onboard the same day.

Okay. And sir...

Once we get data from them, we can onboard the same day -- employee data from them, we can onboard the same day.

Right. So sir, this is a question, this is again coming in from the Q&A I'm taking. So as more corporates are targeted, will we be required to invest heavily into the sales resources? What's the cost-to-income ratio guidance? And will there be an impact on margins as we scale up, or some operating leverage is built in? So any question which you feel that you would not want to take up at this point, sir, you don't have to take up. I'll just be asking all the questions one by one, one that comes in into the Q&A and one that we've prepared from our end. So yes.

Yes, I can take that. So Ayush, as we are scaling up, we've been constantly hiring more agents, more sales channels on us. So primarily, our sales channels, these people work on a variable commission with us. If we are earning, they are earning. So that doesn't impact our margins at all because that was built in from day 1. So that's been our primary source of distribution that is the channel partners. And as we grow, we are constantly hiring more people on our payrolls as well, but we do not expect it to impact the margins much because that sort of subsets the variable pay.

Right. So currently, we have a tech team of 5 people, and our system can handle about 20,000 transactions per second, that's about 12 lakh transactions per minute. As we scale up, we don't need to hire too many more people. Maybe just 1 or 2 more quality controllers as number of corporates and the volume increases. So there will be no proportionately...

Yes, yes, sure. I just want to add 2 things here. Ayush, as the business will grow, strategically, there would be some key positions that will be added as we go forward. Yes. However, coupled with a high level of automation and the system robustness, you do not need a lot of manual intervention typically in an EWA product.

And what is the breakup of the revenue, like the EWA, syndication fee and the loans?

As on date, majorly right now it's loans, but going forward, we expect major mix to change. We expect major income to come from the EWA product. As of date, now it's MSME loan book only, majority from the -- plus the DSA business fee income what we get.

Can I just add one more thing here, Sanjay, if that is okay?

Yes, yes, sure.

See, you have to also understand that EWA and high ticket size business loan and personal loan, there is one fundamental difference in the product, because EWA is a credit line. So we do an agreement with the employee for 12 months. However, every month, whatever that he withdraws, the next month, on the salary date, the employer is going to deduct that amount and pay it to us. So this is a running book. So while we will increase the top line in terms of the amount of disbursal that we will do in a month, at some point of time can match our business loan. However, it will also run off the book much faster because it is like a 1-month facility. Yes. So Sanjay, that is there, right? Our disbursal amounts can go extremely high, and it could match our business loan book. But at the end of the year, if you say what is the book size of EWA versus the book size of personal loan, because personal business loan is an installment-based scheme, so it stays on your balance sheet for a longer period of time. So end of the year, so from that perspective, the book size of business loan would always reflect as big. However, the disbursal amounts monthly would become bigger for EWA.

Okay. Awesome. So we have a question on the DSA business. I think someone has asked in the Q&A. But before that, I would just like to take up another question on EWA, which I had prepared. So there's a lot of talk on this product actually, and it does aim to disrupt traditional lending. So could you give a vision for the next 2 to 3 years of where you see this product and how you plan to scale the EWA product, specifically your EWA product?

Would you like to take that?

Yes, please. Talin, do you want to start and then I can add?

Sure. So Ayush, I think going forward, there's a huge market for this. As I mentioned earlier, us with the competition together, we have barely scratched the surface yet. And there's very limited awareness in the market that there is something -- a facility like this out there. So as the market grows, we expect our share to grow as well in it. So starting early has given us a great advantage here. As I mentioned, in the 2 to 3 years, as the market will grow, and we expect an exponential rate of growth, given that more competition is coming in, that's great for us. So we expect quite a healthy growth at least in this market. And as you've mentioned that it disrupts traditional products, I would differ there a bit because these are the people who are not essentially getting any credit before EWA. So essentially, we're not sort of disrupting any product because it fits very perfectly between a credit card and a personal loan. And these are the people who are not getting either of them. So we're just catering to an untapped segment there. And we believe, as we grow, this untapped segment will keep growing, and we can grow with it.

I'll just add 2 more things here, Ayush, and it's -- thanks, Talin. One of the key things is that what is EWA doing is that earlier, most of the employers always would have some fund or capital they would block for giving advances to the employees. Now as the businesses grow and then there are new businesses that are coming up, this particular -- the employers do not want to block their own capital. And hence, these kind of tie-ups for an Earned Wage Access, which is equal to a salary advance, works in their favor. So they also showcase this to their employees that it is like a welfare program for them. At the same time, what it is also doing is that it is also helping a lot of these unscored customers. They could be first-time lenders, borrowers, also helps them create their credit score. Because if this guy continues to pay me on time via deduction by the employer, in 6 months' time there is going to be a score that is going to come for him. And this particular score further allows financial inclusion of this particular sector, wherein if he needs another product, he needs a consumer durable, he needs a credit card, or he needs a personal loan or he wants a 2-wheeler loan, it facilitates that.

Okay. Okay. Awesome. So this is actually a very nice way of looking into things. So this -- even I did not look at it that way. So ma'am, there is one more question, which was regarding the DSA business, which came in the Q&A. So are we looking to close the DSA business in the future? Or what are our plans for the DSA business going forward for the future?

No, no, no. There's absolutely no plans. We want to grow that business. And there's a lot of cross-sell opportunities now. That will be huge income from the existing clients what we get in EWA. We can cross-sell a lot of the products, home loans, big ticket size personal loans. So there will be -- but that will be entirely fee-based income for us. That will not be on our books, but somebody else's books. We'll just get a neat commission on that.

Right. So we have 3 questions again from someone in the Q&A. So I'll ask them one by one, actually. So whenever a company starts to make profits, let's say, INR 30 crores to INR 50 crores, which is our target in the next 3 to 4 years? Then there's a higher possibility that big lenders want to enter the business. If that's the case, what will be our edge when compared to them? So I asked this earlier that what is our edge in the EWA product. But I think this is what one of the people want to ask. And then the next question, they've asked that we had a target of 10x, which was INR 40 crore PAT in FY '27, '28, so which is...

8x to 10x.

8x to 10x, which is a CAGR of 75% plus. So how confident are we in reaching that? And the third question from the same person is like what is the TAM, the total addressable market, of our product?

Total, come again?

Total addressable market.

See, I think it's about $900 billion.

Right, the EWA product.

In Indian rupees, that would be about I think...

Yes, [ INR 90 billion ], yes.

Okay. And the first 2 questions, sir, the question about big lenders entering if this blows up?

Gurmeet, would you like to take that?

Yes, please. I think, Ayush, as per the current market dynamics and looking at the cost of funds, coupled with where we stand in terms of financial inclusion, all the existing established players typically do not want to come into this particular space because this is also a space which requires a lot of rigor and almost daily monitoring. And for them, this particular margin may not be that interesting enough, yes. And when I talk about this, we separate the lending landscape into 2 bits. One is NBFCs and one are the banks. The banks have their CASA account and that gives them the leverage to give multiple products. And banks, by the RBI, as they are regulated, they cannot give nil interest loans to anybody, okay? So this particular product is more of a fee product and, hence, we are not charging any rate of interest. So this particular product actually is not lucrative to them because of the operational nuances and that they cannot do a 0%. Now the second thing is that most of the established NBFCs, their business models are more attuned towards certain products, which are acquisition products and then they do high level of cross-sell. So again, this particular product, for them, establishing relationship, creating a new framework, new system may not be so lucrative enough because they already have the bandwidth of customers, right? I have seen already 1 or 2 kind of big NBFCs trying to attempt that and then in about 6 months, shut it down because of the operational nuances that it calls for. Number three. This particular product is a very, very tech-savvy product because it is less about risk, it's more about operational management. So there's a lot of tech integration, data flow from the employer, on-time deduction from employers. So it is a more tech plus an operational-intensive product. So it depends upon what would be a bank or an NBFC's priorities. And this particular product, in the gamut of all that they are lending, may not be their priority. So I don't see a challenge there currently. Yes, there would be new age NBFCs who would be coming in, who are completely driven by automated tech processes. And they would definitely, in order to have the base level of customer, so that they can do more cross-sell, they may come into this space, but competition is welcome because the time you don't have competition, sometimes it also becomes difficult to convince an employer that why this product works in your favor. But then there are 5 banks they are offering, he understands that this product makes sense to me.

And ma'am, regarding the 8x to 10x target that we had given in terms of the growth target, that was approximately a 75% CAGR that we had given in terms of the PAT growth. So like this was I think the main question that the guy who asked the 3 questions wanted to ask that how confident are we in terms of achievement or walking the talk, as they say, that how confident are we in terms of that? If you would -- like skip it if you want, you can give a...

Talin, would you like to give an answer to that?

I shall take that.

Sanjay, you take it.

Yes, we're already doing -- for the last 3 quarters, we are almost overachieving our projections. And we're confident of achieving that. See, next 2 to 3 years, we plan to tie up with almost 1,000 corporates. Once we do that, I think we should have a very robust top line as well as the bottom line.

Right. Okay. Awesome.

So Ayush, if I can just add to that. So I think when we gave the guidance, we gave the guidance about 5 to 6 months back. And since then, we have already posted 2 quarterly results. And I think our sales growth and our PAT growth is very much in line of what we have given. It has even exceeded of the guidance we've given. And we hope to continue this trend.

Okay. Awesome. So one question I wanted to ask in regards to the government entities versus the private entities that we are onboarding. So how is the -- is there any key differences in the onboarding process of the government entities versus the private entities? And do we give preference to the government entities or to the private entities? Could you give a little bit clarity on that, for the EWA product?

Talin, I'll take this question. So I think, Ayush, it's not about preference. It is about how do we underwrite the employer that we would like to go with. So there is a checklist of items that we kind of refer to as minimum eligibility criteria. They need to have certain number of employees, coupled with the number of years they've been into business, what is their attrition rate, what is the average ticket size, what is the average salary size that employees are paying? Are they paying salary on time every month? So it is also about the financial health, coupled with the reputation that organization enjoys. So you also need to have eligible population to whom you can lend an EWA product. So keeping that in mind, I don't think there is any preference per se that we will like to go more with government and less with private. It is more to do with who are the eligible corporates whom we would like to target. Does that answer your question?

Yes, to an extent, it answers. So ma'am, when we talk about the EWA product, like some people have this confusion, so I wanted to clear it. Who bears the transaction and processing fees? Is it borne on the organization front? Or are some mandates set on the employee front? So could you give a little bit clarity on that? Like who is...

At this point of time, this particular product is structured with a nil rate of interest and nil processing fee. We take a transaction fee, which is based on the disbursement amount. And this is borne by the employee.

This is borne from the employee end, not on the organization then?

No, because this is a loan to an employee. We are tying up with the employer to provide this facility to the employees of that particular company, provided the employee consents to taking that facility. So there is an individual loan agreement which is done with each and every employee. So we target the eligible population by tying up with the employer.

Ma'am, there's one more question that I needed to ask, then I'll move to some questions of basically the audience. So now navigation of regulations in India can be a little bit challenging, especially since the recent action of RBI on the NBFC front. So how do you plan to deal with -- yes, sir told about this earlier also, but how do you plan to deal with all the regulatory impositions implemented by the RBI? So could you...

By being 100% compliant with them. It's as simple. I don't think there are any shortcuts that we would ever take. For us, KYC policy and the fair practice code is paramount. So today, we are extremely compliant and we'll continue to be compliant. I think that is one thing where there will be no shortcuts at all. That is the only thing I can tell you. I mean if RBI tomorrow comes and says, this is the way KYC needs to be done, we'll find the ways to do KYC like that. We'll build technology around it. We'll build our support system around it.

Awesome, ma'am, awesome. This was just a question I needed to ask because this is like one of those questions that had to be asked. So thank you for answering that upfront. So now I'll move on to some of the audience questions because people have been waiting since, I think, a very long time to get the questions answered. So I think there is just 1 or 2 words. Someone has written business loan and EWA. So even I have not -- I think we might have taken this earlier. So could you give a little bit clarity on this business loan and EWA? I think he is asking about the loan book, if I'm not wrong, or asking to expand on this. So I'll just...

I think, why don't you ask them to expand on it because we can have a very big conversation...

I've done this as answered, but there's another question after that. So in the Q1 call, EWA was around INR 2 crores. In Q2 call, it was around INR 1.2 crores. So could you give an indication of how to understand this? It circulated on a monthly basis, so this amount will increase with the increase in the employees and corporate. So could you elaborate on that? This is one question which has come up. So sir, if you could take it, or ma'am, if you could take it?

So I'll just take this. So I think in the first call when we mentioned INR 2 crores, that was a cumulative disbursement we had done since the soft launch in December, up until the first call, that was, I believe, in June or July of this year versus now whenever we're giving the -- like sir mentioned, INR 1.4 crores. So that was on a monthly disbursement.

Right.

So going forward, we'd always be mentioning it on a monthly basis, right? That was the very first time we introduced this product. That's why we told them on a cumulative basis.

Right. So this is a question which has again come up. So how many partners have you tied up with -- as of today, I think you've already mentioned you have 34 partners that you've tied up with today. So we'll skip this. So 2 years ahead, the ratio of EWA against the overall book, currently, it's 4% -- someone has asked. So 2 years ahead, they are asking, what are you looking at? So if you could give a little bit guidance on the same?

So that would be a little difficult to say how much ratio between EWA and this business loan will be, but we'll continue to make maximum effort to grow both the books simultaneously, of course, along with our distribution business.

Yes. And Ayush, anyway, we also discussed the rationale for that, right? It's a monthly facility repayment and the term loan. So the book at the end of any financial year would have -- the assets under management would be mostly personal loan and business loan. But we may have the disbursement amounts, which is going to change month-on-month as we add more partners.

Right. So there's another question. So are we seeing improvements in decreasing the resistance from HR teams at corporate clients? This was highlighted as a potential issue in adoption of EWA at corporates.

Absolutely. Absolutely. As we are growing, especially in the Northern side, where our base is, we are definitely seeing a reduction in resistance and an increase in employer awareness. So even we started getting a lot of leads directly from the market itself regarding the product. I take this as a big win for us as well and for the market that employers are upfront asking for such a facility now.

So sir, ma'am, there are a lot of questions on equity dilution that I'm seeing. So earlier also 2, 3 questions came up, I had asked you. Now also one question has come up. So could you give a little bit clarity in terms of equity dilution in just one question linked to growth. So then any other question which comes up in terms of this, we would not be then addressing this question. So could you just...

If I may request, Ayush, if you can check up with the audience, what is their main concern regarding the equity dilution? Are they raising a concern as they see? Or are they just wanting to know what is going to be the percentage of equity dilution? Because we have already answered question number one. Second thing, to fund our business and looking at what are the new products going forward and the kind of disbursal that we need to do. We would look at what is the most conducive mix of funding our business. And currently, like Sanjay said, the promoters are holding 63%. We still have the bandwidth to dilute a little more. But it will again depend upon what is the cost of funds that I'm going to be getting for a debt and versus what makes more business sense to me. So unless there is a concern that they're raising, then we can address it separately.

So I think, ma'am, this question may have answered any other question which was relating to equity dilution that the audience may have because I'm not seeing any other questions as of now. So there is one question relating to the expansion plans for the next 3 to 5 years in terms of the geographical expansion. So this even we were going to ask, but the audience questions were high, so we did not take up this question. So if you could just highlight a little bit on the same?

I believe pan-India expansion. So we've primarily -- our distribution business is already mainly into Central and Northern India. Our EY is primarily into, again, Northern India, and we are exploring pockets in Mumbai, Pune, Bengaluru. Going forward, we wanted to be pan-India. Given that our entire technology and entire operation is centralized here in Chandigarh, it's all about hiring more agents in these cities to expand.

Already, Ayush, we are working with a company in Hyderabad and Pune.

Okay. Awesome. So sir, I wanted to ask you this thing. So do employers get any sort of benefits if their employees are there in the EWA program? Like are they today getting any sort of benefit to get their employees in the EWA program?

So Ayush, there are 2 benefits to this. So one is from an employee benefit front. So employers pitch this as an employee benefit to their employees. The fact that you can withdraw a percentage of your accrued income anytime, anywhere. And the second is a financial benefit for them because it's a save on their working capital. So let's say, there's an employer, they're deploying a certain amount in working capital. So they cannot charge any interest on it. So it's essentially unproductive money for them [Foreign Language] versus it's now our money that is going to their employees. So this working capital is saved up and they can deploy it for other productive purposes.

Right.

So they don't have any problem or reconciliations and all. At the month end, it is automatically deducted from their salary.

Right. So Sanjay sir, I wanted to ask you this question, if you could address it. Like if there is a slowdown in the economy, how does it affect the new business loan's repayment capacity and the existing EWA business? Like if you could give a little bit...

Gurmeet, would you like to take that?

Yes, please. So Ayush, there are 2 or 3 ways we safeguard our business against a downturn. So there is something that we call as preventive. So most of the underwriting strategies that we design, we design it in a way that in an event there is a downturn in the economy, our portfolio still remains safeguarded. Now there are 2 or 3 things. Like I said, the first thing in EWA is an employer choice, who's going to be my employer? Who will I partner with? The stability of that employer, attrition rate of their employer, the average salary of what they're offering to their and the repayment -- the salary payment date, et cetera. So there is a great underwriting on an employer. Second thing, as a policy, we also don't want to overleverage any customer, right? End of the day, it's a salary advance. And this particular advance is being provided that people can use in case of an emergency or in case where they are falling short of income towards the end of the month, so they can use this particular money. So the debt burden percentage that we have kept or that we will offer as a policy has been done keeping the same thing in mind. The third thing is that we monitor our portfolio very rigorously. And if we see, at any employer level, any kind of strain coming because of an operational nuance, we are able to plug that gap very fast. So it is not like I'll have to sit down and I'll wait for like 3 months that something has happened. So technically, and by the contract, we have very clearly -- we can very fast make those tweaks, reducing the maximum loan amount for that employer, reducing the debt burden for that particular employer, cutting down on the approval rate on this one, pausing the limits very fast. So this is when I speak about the technical agility. This particular product is a very, very agile product. And since the repayment is on a monthly basis and then there's a new limit, 1 month trend itself can decide what I want to do the next month. Yes. So second thing, in business loans, at this point of time, our business loan book is having maximum customers who have come through references. So this is a referral network that gets us these particular clients coupled with, again, the stringent underwriting criteria, looking at stability of businesses, doing all the KYC checks and all the financial ratio checks and the market reputation checks, et cetera. We look at how much we can leverage, what kind of industry this person is into and then the loans are made. So I think we would like to also tell you that in our business loans currently, we do not have a default. We do not have any loan account which is 30-plus account even.

Right. So ma'am, I had one question which I wanted to ask in terms of the revenue split. I'll ask that. And then there is another question in terms of the shareholding pattern which has come up. So I'll ask if you could give a little bit insight on it or if you want, we'll move on to the next question. So first, I'll ask my question. If you could give a clear-cut revenue split between all your offerings? And how do you see EWA as offering to stand after 3 years, 3 years from today in terms of the revenue split, how do you see EWA to stand? And since these small ticket loans carry a very high risk, like how do you plan to ensure the sustainability and the scalability of this product over the next 3 years? Just a quick question from my side, then I'll move to the, again...

So you've asked actually 2 questions. One is the revenue split. And second thing is the high risk that we associate with this product. So I think I'll answer the second part; and the first part, Sanjay, Talin, I would like you to kind of please state what is going to be the revenue split across 3 business lines. So the second part is very clear. Like before this question, what I told you, how do we mitigate risk? One, the ticket size is very small. Second, it is a monthly facility that needs to be repaid on a monthly basis on this. Third, our ability to kind of pause or tweak the funnel depending upon the quality, the worsening quality of the environment or an employer or of the customer. The first thing is there. The second thing is that in an event the employer is not able to deduct the money because of any reason, the employee has quit, he is absconding, doesn't have that much of balance, we also have an E-NACH or the ECS mandate which is set on the employee. And then the third solution is that if the E-NACH also fails, we have got our collection readiness and we have got our collection strategies in place, which will ensure that the customer is followed and we recover our money.

Okay. Okay. Awesome, ma'am. And the first part of the question, sir?

See, almost right now, 45% is our interest income, and the balance is your fee income. So as EWA grows, right now, see, 45% fee income, and out of that 55%, you can say almost majority is right now from business loans. But as we go forward, this mix will definitely change and major chunk of the profit will start coming from EWA products and from a cross-selling opportunity from the EWA product. Of course, that will again increase our fee income only.

Right. Awesome. So in 3 years' time, when we talk about in terms of revenue split, how much in terms of related terms or percentage terms you're seeing from the EWA product, sir?

I can't split in terms of percentage, but I think it will continue to grow pretty fast in the next 3 years. EWA, the revenue from income directly from EWA as well as from the cross-sell opportunities from EWA will continue to grow pretty fast.

Okay. Awesome. So sir, we'll take just one final question. Otherwise, this will turn into an AGM. So basically, the shareholding from 2017 to 2022 was from 33% to 72%. This is one person who has asked. And then now it has decreased to 62.35%. And again, this is another question relating to the equity dilution. Like I said, there are a lot of questions relating to equity dilution. So if you could just answer this question, and after that, the questions which have not been answered today, because already 20 questions from the audience have been taken apart from our questions. So if you could give an e-mail ID where the people could put out their questions, so they can basically get the answer to the questions. So we'll communicate it here only in the meeting that if anybody has any questions, they can directly now send to the e-mail ID after the meeting.

So they can send us e-mail at [email protected].

Okay. [email protected]. So I'll just write it here. I'll just write it in the Q&A itself, just a second, sir. Sakshi ji, could you just write it in the chat, if possible, [email protected]?

Yes, sir.

So yes. So regarding the shareholding question, sir, if you could give a little...

So we increased our stake from 33% to 72% through rights issue in May '21. So now we are getting a lot of FII interest in the company. It's always better to have these kind of good investors on board. As of date, we have got 3 FIIs on our Board. So that is why there's some dilution in our stake. Major chunk of dilution is to the FIIs only. Post the dilution, I think the holding went to around 10% in our company. That's where the major chunk of dilution comes from. They are helping us in getting more corporates also for...

Right. Okay. Awesome, sir. So this was more or less the questions that we had. Yes, there are many questions that are still there, like 22 questions that are open and 20 questions have been answered, but it will take a lot of time if -- we've already been here for an hour. So I would not want to take a lot of your time. So if ma'am could just put in the e-mail ID on the chat -- I'll just ask ma'am to put in the e-mail ID. Then after that, definitely, we can...

Most welcome. Ayush, we'll reply them ASAP.

Yes. So whoever's question was not answered today, so definitely, they can just put in the -- mail ID can be put in the chat. Thank you very much, ma'am, sir, for coming to the Microcap Minute Meetups and answering all our questions and letting us know more about your company. It was a pleasure to have you here, and look forward to interacting with your team again. So thank you very much.

Thank you very much.

Thank you. Bye-bye.