Niyogin Fintech Limited (538772) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Niyogin Fintech Limited Q3 and 9 Months FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ravi Udeshi from EY Investor Relations. Thank you, and over to you, sir.

Thank you, Sejal. Good evening, everyone. On behalf of Niyogin Fintech Limited, I welcome all of you to the company's Q3 and 9 months FY '25 earnings conference call. To discuss the company's business performance, we have with us today Mr. Amit Rajpal, Non-Executive Chairman and Co-Founder; Mr. Gaurav Patankar, Non-Executive Director and Co-Founder; Mr. Tashwinder Singh, CEO and Managing Director of Niyogin Fintech; Mr. Debiprasad Sarangi, CEO, iServeU; Mr. Sanjib Parida, CTO, iServeU; Mr. Akash Sethi, COO of Niyogin Fintech; Mr. Sanket Shendure, Chief Product and Growth Officer at Niyogin Fintech; Mr. Abhishek Thakkar, CFO at Niyogin Fintech; and Ms. Trivenika Avasthi, Investor Relations Officer at Niyogin Fintech. Before we proceed with this call, a disclaimer. Please do note that anything said on this call during the course of the interaction and in our collaterals, which reflects the outlook towards the future or which should be construed as a certain forward-looking statement must be viewed in conjunction with the risks that the company faces and may not be updated from time to time. More details are provided at the end of the CEO Letter and the other filings, which can be found on our website, www.niyogin.com. Should you have any queries or need any further information, at the end of this call, you can reach out to us at the e-mail addresses mentioned in the company collaterals. With that said, I now hand over the call to Mr. Amit Rajpal. Thank you, and over to you, Amit.

Thank you, Ravi, and good evening, everyone. This is a unique call for Niyogin Fintech in the sense that we're announcing a significant transaction, which represents a commitment to value. We are today announcing a demerger of the company into 2. And I wanted to take you through it from a Board, founder and shareholder standpoint, from all 3 standpoints. I would, first of all, request you to look at the presentation that's titled Composite Scheme Overview & Strategic Roadmap for Listed Entities. That is the presentation our management team will use today to go through the business prospects and targets and propositions that they have over the next 12 to 24 months. But as -- I want to take a step back and highlight kind of what is Niyogin about? Why did we set Niyogin up, firstly. And as founders, both Gaurav and me wanted Niyogin as a tech-centric and partnership-oriented financial institution that's open architected, that goes after difficult areas which are implicitly big white spaces like the rural areas, like the MSME businesses, but do it in a manner that's high engagement and has high transaction intensity, to be able to create decisioning and delivery which are better than what the conventional system is able to achieve. We have no intent to be the 1,000th NBFC with feet on the street chasing the same piece of business in a commoditized format. So sometimes when you're different, the journey isn't a straight line but the opportunity set is tremendous. The payoffs are asymmetric. And we continue to invest and believe in the potential for both the businesses of Niyogin. And this deal where we split the company is a representation of that and is a commitment to the value we see in both the businesses. So from my standpoint, kind of as Founder and Chairman, I really see 3 reasons for us to consummate this demerger transaction. Firstly is simplicity. So we have 2 businesses. The first business is iServeU, which is a payments infrastructure business. The second business is Niyogin, which is a tech-centric NBFC with an AI kind of potential. These are 2 independent businesses with significant opportunity in front of them but they don't have much in the way of common. They're operating in 2 very different segments. We're confident that we can scale them both in the next 18 to 24 months to create relevance. The transaction we've announced today will take an 18-month time line to accomplish. So the scale should match the time line required to consummate this demerger transaction. But we want to simplify for people who want to invest in the payments infrastructure company, they can do so directly. For people who want to invest in the NBFC that's tech-centric and has AI potential, they can do it as well. The second reason to do it is to create alignment. For the longest time, our company didn't have full alignment because reporting and operating companies were not the same company. So our 51% holding in iServeU meant that iServeU was the operating company, whereas Niyogin was a reporting company. And the NBFC of Niyogin was hidden within the overall entity and will now be built in its own right. So 2 things will happen. Firstly, the lack of alignment on iServeU will be solved. The reporting company will become the operating company. And secondly, the Niyogin NBFC will be built in its own right by its own management team in a way that aligns to its interests. And so we're looking to create that alignment. The third thing that this deal accomplishes is accountability. So we now have aligned management teams who own their targets and execution, which should be able to put us in a good position to realize the opportunity. They also have direct ownership in the individual companies, which will allow them to participate in the wealth build. We continue to, therefore, upgrade and upskill our teams with a clear focus as well. And this is why on this call, you will hear from our aligned management about their targets themselves, right? So we are looking to create that accountability once we have got the alignment. We're also very excited to have brought on Akash and Sanket, both of which who've joined us recently, who will be responsible for the Niyogin execution. And I couldn't be more excited as the Chairman of the company. I know our Board couldn't be more excited as well with the objectives that we've set for this demerger transaction, which is to make Niyogin simpler, to create better alignment and to have much greater accountability, something which I think we have lacked in the past. And so with all of these 3 things now hopefully pointing in the right direction, we can achieve the clarity of purpose that Niyogin was set up from. Again, it won't be a straight-line journey. There's no straight lines with start-ups. This quarter-to-quarter volatility does exist. But we're confident in the bigger picture. We're confident in the potential for us being unique and adding value and for our proposition as having significant growth potential and scalability. I will now hand over to our CEO, Tashwinder Singh, who will talk you through the demerger transaction and some of the details associated with it. Over to you, Tash.

Thanks, Amit. Good evening, everyone. Glad to be back talking to all of you. I'm excited to announce that the Board has approved the proposal for the composite scheme of arrangement and amalgamation among Niyogin Fintech Limited -- Niyogin Finserv Limited and its 51% subsidiary, iServeU. As a result, as Amit alluded, both the NBFC businesses and iSU will be individually listed at the end of this journey. Let me outline the 2 resulting businesses. Post demerger, the newly incorporated subsidiary will house the operations of the scaling NBFC, acquired AI capabilities and Moneyfront, our wealth business. The entity will have an expanded emphasis on growing its book driven by the fintech partnerships, which Akash and Sanket will speak more about. The partnership model has been -- has provided us with certain advantages such as differentiated data for superior underwriting, a low customer acquisition cost and an extended reach to underserved customer segments. We will continue to capitalize on these benefits and build a high-margin, scalable lending book powered by the data-driven decision-making, obviously levered through our AI capabilities that we've built. The recently acquired AI capabilities vertical, which has already achieved some early success in the insurance space, we aim to scale and monetize this vertical as a stand-alone business, which will hopefully further enhance shareholder value. iServeU will chart its own path concentrating on its core business areas with autonomy and agility. The iSU business is transitioning to a SaaS-based revenue model, as I have detailed in the previous calls. This model minimizes the pass-through revenues sharing with partners. The model affords us key growth drivers that are increasingly under our control, providing a stable and predictable growth path as iSU deepens established relationships and introduces new product lines for banks and other fintechs and other customers. This decision reflects our commitment to creating 2 distinct agile and high-performing entities that can independently focus on their strengths, pursue growth opportunities and deliver enhanced value to our stakeholders. Moving to a little bit on the details of the transaction. The composite scheme will have 2 phases, but will be executed as a whole. In Phase 1, the NBFC business, Niyogin AI and Moneyfront with its subsidiaries will demerge into Niyogin Finserv Limited, which is the new entity we've created. The resulting entity will issue shares to NFL shareholders in the ratio of 1:1, which means for every 1 share of NFL, shareholders will receive 1 share in Niyogin Finserv. The resulting image, therefore, will have -- the resulting entity, therefore, will have a mirror structure. Niyogin Finserv will have 100% ownership of Niyogin AI and 60% ownership of Niyogin -- of Moneyfront as it is today. In Phase 2, the remaining NFL, which will become a shell company then, will amalgamate with iServeU, eventually listing iSU in the process. iSU will issue shares at the ratio of 2:1, which means for every 2 shares in NFL, shareholders will receive 1 share in iSU. This ratio has been computed as on the date of approval of the scheme, including taking into account things like dilution due to the outstanding warrants, et cetera. This transaction is obviously subject to customary regulatory approvals, including approvals from shareholders and creditors, RBI, BSE, NCLT and SEBI. Thus, we expect the entire process to conclude between 15 to 18 months, as mentioned by Amit as well. I do want to take a moment to also welcome Akash onboard. He has now joined us in Niyogin as our Chief Operating Officer. Akash is going to focus on streamlined operations, driving efficiencies across the business and positioning us for a stronger performance moving forward, working closely with our Chief Growth Officer, Sanket, to deliver the results that we expect from our NBFC business. Before I hand over the call to Debi, Debiprasad Sarangi, our Chief Executive Officer for iSU, to really talk about the iSU model and our right to win, I want to thank -- I want to take a moment to thank Ms. Subhasri Sriram, who has recently ceased to be a director upon completion of her term. We appreciate her valuable contributions and guidance provided to the company and to me personally during her tenure. Thank you so much for joining this call, everyone. We will speak again when we come down to the Q&A. But right now, I'd like to hand over to Debi to really take us through on the evolving iSU model and our right to win there. Debi, over to you.

Thank you, Tash. Good evening, everyone. Today, I will speak about how our business has evolved over the past few years and what the future holds for us. I'll also highlight how our client profile has changed over the last 7 years. In our early days, we focused on onboarding smaller regional fintech players, and this strategy allowed us to thoroughly test our platform and gain invaluable experience and refine our offerings to meet the needs of larger clients, which was our ultimate target. This groundwork enabled us to secure clients like CSC, which is one of the largest distribution network in the country, India Post Payments Bank, and by demonstrating our ability to manage complex transaction processing at scale, we positioned ourselves to become a trusted technical service provider for some of the major banks and fintech companies in the country. These large clients offer more predictable revenue streams, which are essential for our business growth. We have successfully onboarded clients such as banks like Bank of Baroda, Canara Bank, Kotak Mahindra, Axis Bank, securing long-term contracts with a worth of more than INR 350 crores in net revenue with a significant amount of upside potential, and this revenue is expected to be realized over a period of next 3 to 5 years. This year also, we have seen a shift in our revenue mix. Last year, the TSP revenue contribution was only 8% of the total revenue. However, till date, till third quarter of this year, TSP revenue has grown substantially and now the -- now it represents around 53% of our total revenue. This clearly demonstrates the success of our strategic shift towards targeting more TSP or SaaS business. Now I would like to invite my Co-Founder and CTO to talk about our competitive advantages and what gives us the right to win. Sanjib, over to you.

Very good afternoon, everybody. My name is Sanjib Parida, CTO, Co-Founder of iServeU. I'd start by positioning iServeU a little bit for everyone who is on the call. So we are a technology platform to process transactions, both on the issuing and acquiring side and in a nutshell, for simplicity, let's call it payments for now. So what are we trying to do is we are trying to take care of all the use cases that is for debiting and crediting accounts that is outside of the core banking system, which is today being used by the banks. As we have seen over the last few years or so in the Indian banking industry and also across the globe, the frequency and the use case for the number of real-time transactions has increased manifold. The value has been increasing and the number of transactions also has been increasing. As a result of which, nobody is making money on this transaction because the technology that the banks are using today to process this as legacy tech, developed over a 25 years period of time where the number of transactions processed were a fraction of what they are today. And hence, what we are building is the need of the hour. And that is our right to win because we are the right team at the right time, at the right place. So what has happened over the last few years is observable and scalable technologies, which were the fiefdom of larger companies in the past have become open source and the learning curve with them has reduced drastically. As a result of that, it has been more easy, more accessible for a larger set of companies, especially of the size like us to build technologies which can scale at will and hence, process transactions at a lower cost because unlike the usage of legacy technologies, where the only way to scale or only way to solve transaction scale was by throwing expensive hardware at it, we are able to solve this by using lower cost, highly available, cheaper public cloud availability. And what has also been helping us in this is the right policy regulatory environment. If we brought the kind of solutions or the kind of stack that we are dealing with now about 5 years ago, we probably may or may not have a market because the regulator at that point of time and hence, our customers, which are predominantly banks at this point of time, didn't have a cloud policy to deal with. They didn't know how to do a SISO operation on a cloud. Today, all of our customers have a set cloud policy, even RBI and also regulators across the world, they have specific policies around the cloud because that is the need of the hour. And hence, we are the right place to do -- right time to do it. And over the last few years that we have been working, 8 years to be precise, we have been taking care of high velocity, high-volume use cases. As a result of that, we have at the vantage point of having built a team around taking -- building technologies that process transactions with a high fidelity. And that is our strength today, which we have been building on. And that engineering strength, which we have been able to build on, is able to create new transaction form factors, new product form factors, which are not only taking care of transactions that are happening today, but also futuristic in nature, something like UPI didn't exist about 7 years ago. It is with us, and it is scaling very rapidly. There may be a future transaction form factor that will come. What we have today is a technology stack plus a team which is well thorough in the domain of processing transactions. And hence, we are very confident to build into the future. Thank you. Tash, over to you.

Yes. Thanks, Sanjib. That was good. I think the only thing I would add to what Sanjib has said is that the company is at an inflection point given some of the marquee banks that the company has broken into. Debi alluded to them, Bank of Baroda, Canara Bank, Suryoday Bank, Common Service Center, et cetera. So I think delivering against that promise is the priority for the company right now. Moving on, I'm going to invite Akash to come and talk to us about the NBFC business and how that business is evolving. Akash, over to you.

Thanks, Tash. Good evening, everyone, and thanks for joining us today. I'd like to start by talking about Niyogin AI. We're still in the early days of building this business, but we are confident that this has the potential to be a strong independent revenue stream while also supporting the NBFC business with process automation and better underwriting. Today, financial services have a fair amount of inefficiencies, especially around the KYC and onboarding processes. We're tackling that piece by piece. We've gained significant traction with one of the largest insurance players in India. We started with on-prem Aadhaar masking deployed under a 5-year agreement and are now expanding into OCR solutions for identification documents and invoices. Further negotiations are underway to extend this to financial documents and medical records with rollout expected later in the year. Additionally, we are running proof of concepts in OCR solutions for educational documents and Aadhaar masking from videos, creating new potential revenue streams. This client engagement alone is set to more than double in revenue. The strategy is simple, solve a workflow, expand into adjacent areas and increase stickiness. Once embedded, the switching costs become high. By FY '27, we expect Niyogin AI to generate anywhere between INR 3 crores to INR 5 crores in ARR, driven by both deeper penetration with the existing clients and new customer acquisitions. This is not just a support function for the NBFC, it's a skill business in its own right. Coming now to the lending business. There are strong fundamentals here, but there are also areas where we see room for improvement. Our embedded lending model has been a key driver of growth. By working with the various loan service providers, we tap into existing user bases, gaining access to prequalified borrowers at a lower acquisition cost. These partnerships allow us to scale distribution efficiently without the high cost of direct sourcing, making this a major focus area in the near term. Our plan is to shortlist partners looking to monetize their existing user base through lending services. We intend to prioritize those with highly engaged user bases, frequent transactions and stable cash flow cycles. Our thought is that platforms with high user dependency will provide better lending opportunities, ensuring stickier relationships. Beyond traditional financial metrics, our underwriting will benefit from alternative data like cash flow insights, repayment behaviors and liquidity trends, which we believe will give us a more granular risk assessment. For instance, our EDI product with some of our key partners is one of the more successful products that we have created. It has high frequency repayment cycles, generating continuous data points on borrower behavior. This feedback loop allows us to refine our underwriting dynamically. Constantly improving the quality of sourcing and underwriting remains a core focus. Lending is fundamentally a business of risk management. Our current models effectively assess a borrower's ability to pay by analyzing incomes, transaction history and cash flows. However, intent to pay is equally critical. And to strengthen this aspect, we are experimenting with alternative data signals such as digital footprints and engagement trends on partner platforms to enhance predictability and reduce defaults. With that, I'll hand it over to Sanket, who will walk you through the partnership business in a little more detail.

Thanks. Thanks, Akash. Sanket?

Yes. Hello, everyone. Thank you for taking the time to join us today. I'm Sanket sir, Chief Product and Growth Officer at Niyogin. We at Niyogin fundamentally believe we are at a juncture of transformation in the way how digital lending is enabled in India. We want to be at forefront of this by focusing on embedded lending and co-lending space by building our strengths around it. I'll just take a step back to give you an idea about the way how we look at embedded lending landscape. Embedded lending essentially means integrating credit offerings in the current customer journeys seamlessly in the financial or nonfinancial platforms, whether it is e-commerce platform, e-commerce app, B2B marketplace or even a SaaS platform. And this is to make lending frictionless and more contextual. We are now focusing on funneling the right kind of partners for our growth. Our path forward is very clear. The way how we look at it is funneling the right partners is crucial for us. Partners refers to platforms. We are narrowing down these partner selection criteria as follows: They should have a proprietary user-generated data for better underwriting; second, they should have a strong dependency on their product offerings, which ensures user stickiness; third, they exhibit high engagement with their existing value chain; and fourth, lending monetization and retention are high on their priority list. And this is where we come to our competitive edge, which we are trying to build around this to have a right to win in this space. We are currently investing heavily around tech and API-first integration stack, where we feel seamless integration with minimum turnaround time is the key aspect of going live with any platform, which gives scalability and robustness, ensuring that our APIs can auto scale based on traffic, validating transactions using scorecards and disburse loans within minutes without any manual intervention. And this is where we have 50-plus public APIs handing 0.5 million API hits per month with our existing partners as we speak. And this has a capability to scale 10x using our current underlying infrastructure and tech. We also focus on risk management by leveraging our advanced analytics and alternate platform data to underwrite risk, as Akash referred to it. We extend this capability to co-lending with new age NBFCs who can partner with us and collaborate with us to unlock nontraditional capital at a desired ratio such as 80-20, 70-30, and our entire stack is powered by an escrow-powered distribution or disbursement stack, which helps them to integrate faster and go live quickly on the customized programs what they want. And yes, customized and curated lending program is our key right to win here because our existing product flexibility with the tech layer gives them to innovate newer products like every day or equated daily installment product, every week installment product, bullet repayment product or a normal EMI product. Currently, we have more than 5 LSPs, which is loan service providers; with 2 EDI programs, which is equated daily installment programs; 2 EWI, which is weekly programs and 3 EMI programs with 1 bullet repayment program running. And cumulatively, we have disbursed more than INR 200-plus crores in embedded lending with current LSPs till Q3 of FY '25, with 56% allocated to EDI approximately, 16% to EWI program, 6% to EMI program and remaining 22% to bullet repayment. Our borrower profiles includes retailers, agri traders, UPI merchants, gig workers from e-commerce and quick commerce platforms and the ticket size ranges from INR 15,000 to as high as INR 5 lakh with the loan tenure varying from as small as 30 days to as high as 250-plus days. This is where embedded lending is very transformative for us by partnering with the platforms, which are focusing on scale of digital adoption, customer experience first, and they are looking to meet the unmet credit demand with data-driven decisioning. Hope this gives you all a clarity of what we are up to and happy to answer any questions once we open the floor for Q&A. Thank you.

Thanks, Sanket. So I think between Akash and Sanket, we've tried to give you a little color about how the NBFC is going to scale up, right? In summary, it's going to double down on the partnership business where we've had good success. And I think the platforms have been created to be able to provide the flexibility that our partners require and that's been the way forward for us as well, right? So I'm going to now hand over to Abhishek, who's our CFO, to talk about the quarter gone by and what the future is looking like for us from a number standpoint.

Thank you, Tash. Good evening, everyone. Today, my speech will be structured into 3 key segments. First, I will provide an update on our operational performance. Next, I'll walk you through the financials. And finally, I'll outline our road map through FY '27. Let's begin with an overview of our operational performance and key metrics. Starting with iServeU, we experienced a decline in industry-wide DMT volumes due to the regulatory challenges related to stricter KYC norms. However, this was partially offset by strong performance in our SaaS vertical, where we maintained a device deployment rate of over 50,000 devices per quarter. Additionally, our contract pipeline expanded to approximately 7 lakh devices with key wins from Bank of Baroda, Axis Bank and Suryoday Small Finance Bank. This performance underscores the growing importance and strategic value of our SaaS model to the business. Turning to our NBFC business. Our network of finance professionals grew by 10% year-on-year, reaching 6,307 as of December 31, 2024. In Q3 of FY '25, we processed 90,093 loans through our network, reflecting a 245% year-on-year growth and a 26% quarter-on-quarter increase. Let me now take you through our consolidated financials for the quarter. Our consolidated total income for Q3 FY '25 was INR 113 crores, reflecting a 110% year-on-year increase and a 55% quarter-on-quarter growth. This surge was primarily driven by Moneyfront, which introduced a new product line with a significant pass-through component contributing to higher revenues. After adjusting for trading cost of inventory in Moneyfront, our consolidated adjusted total income stood at INR 60 crores, representing a 12% year-on-year increase, but a 17% decline compared to the previous quarter. Income from the sale of devices in the quarter was INR 10 crores. Adjusted EBITDA, excluding ESOP costs for Q3 FY '25 showed a loss of INR 2 crores compared to a loss of INR 50 lakhs in Q2 FY '25 and a loss of INR 1.4 crores in Q3 FY '24. This increase in losses is primarily due to the impact of lower DMT volumes, as mentioned earlier and higher ECL provisions for the quarter. Our AUM, including off-book exposures stand at INR 242 crores. As of December 31, 2024, consolidated cash and cash equivalents stood at INR 78 crores. On a stand basis, total debt for the lending business was INR 67 crores at the end of Q3 FY '25. Now let's look at the road map for our business, starting with the NBFC. Currently, our AUM stands at approximately INR 250 crores and we plan to close FY '25 with an AUM of around INR 300 crores. By FY '26, we aim to reach INR 550 crores and by FY '27, we project our AUM will reach INR 800 crores. To fund this growth, we plan to rely primarily on debt, maintaining a debt equity ratio of 2:1 with some funding coming through equity. As many of you know, we are set to receive an equity infusion of approximately INR 60 crores from the maturity of our warrants next month. We are targeting a return of equity of around 15% by FY '27. Next, let's move on to iServeU. We expect iServeU to generate net revenues of approximately INR 70 crores to INR 80 crores by FY '26 with projections to double that figure by FY '27, reaching around INR 150 crores in net revenue. This growth is expected to be funded through a combination of debt and equity with about INR 50 crores expected from each. In terms of profitability, we anticipate iServeU's EBITDA margin to be in the range of 12% to 15% for FY '26, improving to 18% to 20% by FY '27. That's it from my side. With that, I now hand over the call to Gaurav for his remarks.

Well, thank you, Abhishek. Good evening and namaskar, everyone. I'm Gaurav Patankar, one of the co-founders here at Niyogin. As Amit rightly said, this journey has been anything but a straight line like it is expected to be and also several unexpected things. So it's been a tremendous journey of learning when the team has come together. And I'm going to hit back on the same 3 themes that Amit highlighted, simplicity, accountability and alignment. But I think I'm going to add one dimension to it. The corporate action that has been accomplished by this Board, for which I congratulate the Board, I think, is the key theme here is a simplicity of focus, right? I mean there is really specificity now in the journey going forward. The simplicity embedded in each of the 2 journeys. I mean, of course, we're going to try and solve complex problems at scale and attack the white spaces where there's an opportunity, but I think there's going to be some simplicity to each of the journeys. I'm very excited about the team that we have. I think you've heard from a new-gen team here, which has been really focused on solving all the right problems. I think there is good accountability and alignment. And the path forward, hopefully, is much more exciting and accretive to all investors, including all of us. So with that, I'm going to hand back to Ravi, and hopefully, we can go to Q&A.

Thanks, Gaurav. So I think, Ravi, we can start the -- we can open the line for questions.

Yes, sir. Sejal, please open the line for question and answers.

[Operator Instructions] The first question is from the line of [ Darshil Jhaveri ] from Crown Capital.

Hope I'm audible.

Yes, please go ahead.

Yes. I'm sorry, I think there was some disturbance on my line. So when you were guiding about -- I just wanted to just reconfirm, sir, that the NBFC business by FY '27, you want to take it to INR 800 crores, right, the AUM?

That's right.

Yes. And what kind of a ROA are we looking at like for the NBFC business?

I think on the ROE side, we've already indicated on the return on equity, I think it's about 15% is what we have -- well, are you asking ROA or ROE?

A, ROA.

ROA is I think 6%.

ROA is about 6% by FY '27. Yes.

Okay. Fair enough, sir. And the iSU business, we were thinking of doubling in FY '27. But the profitability, I just wanted to know what is the current profitability? And how do we reach like 18% by FY '27? And by profit, we mean PAT, right, or operating profit?

So I think we're talking about -- I mean, we can talk about EBITDA profitability, whichever factor you want to look at. I think FY '26 will be the first year of profitability, both at EBITDA and PAT level. If you look at this quarter and the last quarter, iServeU has generally been flattish on EBITDA as in -- it's been right close to INR 20 lakhs, INR 30 lakhs, INR 40 lakhs of EBITDA negative. So it's not a big number. I think from Q4 onwards, we will start seeing profitability at EBITDA level in iServeU. And FY '26 onwards, we will start seeing profitability even at net level in iServeU.

Okay. Okay. So the 12%, 15%, we mean the operating profit, right, sir? EBITDA, right?

Yes, EBITDA. Yes, that's right.

Yes. Okay. That helps a lot. So just wanted to know like overall, like what gives us the confidence like we are trying to like double both businesses by FY '27 so in 2 years. You're also doing a lot of corporate restructuring so just wanted to pick up on what you feel with the business and how will it journey because both -- handling both side-by side will take a lot of your energy also, right, sir? So just wondering about that.

Yes, I think if I may just try and address or direct you to the comments that Amit made at the beginning, the corporate restructuring is a process that is now linked to basically approvals, right? I think the day-to-day managements of the 2 businesses are not involved in how those approvals get done. We have a core team, which is managing all the approvals and making sure that we get the approval. It will take us 15 to 18 months to get all the approvals and to give effect to the corporate restructuring. The management teams that you've heard of from today, whether it is people like Akash and Sanket on the NBFC side or Debi and Sanjib on the iSU side, these teams, these people are fully dedicated to building the business. So they are not involved in managing any part of the corporate restructuring process. The 2 businesses are still operating as they were prior to this restructuring as independent entities are delivering results. So they have their targets set for themselves. The management teams are fully geared up to deliver against the promise of the business. And that's how we have structured it. The idea today was to tell you about what's happening on the corporate restructuring, but the operating teams are not necessarily impacted by what's going to happen in the restructuring as we progress towards getting the restructuring in effect.

The next question is from the line of Yash Modi from Ashika Group.

So my first -- I have a few questions. The first question was fundamentally on Niyogin as a platform. So when we started Niyogin, it was supposed to be a platform wherein we were looking to acquire good fintech companies or looking to acquire basically companies like say, iServeU came about being like that. And now post this corporate restructuring, the sense I am getting is we're looking at 2 different entities wherein iServeU is one company and Niyogin, the NBFC is another company. So are we still looking at fundamentally Niyogin as a financial platform wherein we'll do more acquisitions? Or will now -- like has it now become 2 platforms? How are we fundamentally looking at the company?

See, Yash, this is Tashwinder, how are you doing? Good to hear from you.

I'm good. Good, good, yes, I'm good, thanks, yes.

So I mean, I can take a stab at that. And Amit, I don't know if you want to come in and address this question?

Yes, sure. I mean I can address this question kind of from a Board standpoint.

Yes.

Yash, so I think that's a good question. I think, look, we've done this demerger for the 3 reasons I said earlier, right, to make it simpler, to make it more aligned, to make it more accountable. I think we first need to be able to deliver on both aspects of our business at more meaningful scale. Once we've done that, Niyogin will continue to assess strategic transactions in a way that aligns with its NBFC and AI businesses. So we won't go further away from that. We'll continue to build strategic value that is adjacent to where we operate. And I would also expect for iServeU to think similarly as well. So part of the benefit of being listed for both entities is to be able to use that listing strategically as we have. We have used our listing strategically to your point, where we've acquired iServeU or a majority stake in iServeU previously. But I think the initial focus is to be able to generate enough business at scale with profitability and commercial application on both sides and then to be able to leverage that with strategic kind of transactioning and deal making, but that will follow. That will not now happen for the next 15 months, obviously, when we are going through this restructuring process. But on the other side of this restructuring process, assuming our execution has delivered to the outcomes that we've documented today, we will, on both sides, retain that optionality.

Thanks, Amit. Yash, you had more questions, right? You said you had a bunch of questions.

Yes, yes. So second question would be, how would your bandwidth now go, Tash? How would you be looking at your role in the company?

Yes. I think for the next 18 months, nothing really changes for us, right? As an organization, we continue to keep working like we are working today. We've obviously beefed up the teams a little bit, and we will continue to beef up teams as we think appropriate over the course of this period. As we travel through this journey, I think things will become clearer. So at this point in time, I don't think anything changes for us, right? For the current quarter, which is Q4 and the next year, I think the targets are very well set. And collectively, we are responsible of delivering those targets, both for the Street and for our shareholders. That's how I think it's going to play out. And over time, I guess, we will provide more clarity as things evolve.

I mean I would just add to what Tash said. I mean, as Tash has highlighted, nothing much changes for the next kind of, let's say, year or so. But in the meantime, we continue to upgrade and upscale our teams so that by the time we get to the time line where the company segregate, we'll have clear line of sight on to 2 credible management teams, which will then continue to deliver on the execution priorities that we've set for the 2 teams, right? So we have enough time in the middle. We will make more hires, you'll see them. And I think we're focused on making sure and the Board is focused on making sure that we continue to upscale and add valuable members to both our teams.

Sure, sure, sure. I have myself another -- other questions. I think I'll step back into the queue, if there are more questions -- I have a lot of questions regarding assumptions and the presentation that you've given. I can ask them right now. I can wait for my turn and come back again?

Yes, I think we can probably put you back in the queue and maybe hear from some of the other shareholders who might be wanting to ask some questions, yes?

Exactly, yes, sure, sure. All right.

Thanks, Yash.

[Operator Instructions] The next question is from the line of [ Sanket from SHV Media ].

Can you please give me more clarity regarding the FY '27 guidance we have given for both businesses? And also, what are the challenges do we anticipate in realizing them? As well as I would like to understand how are we differentiating our products and the success we have achieved in the Soundbox as well as PSO arena?

Yes, I think the targets that we've set for '27 have been detailed in our presentations. So if you take a look at the presentation, it will give you an indication. I think Abhishek did mention in his presentation briefly what the targets were, for example, on the NBFC business, we are talking about getting to about INR 800 crores book size and the associated revenues that will come along with that. On the iServeU business, we spoke about getting the net revenues, which I think is a relevant number to be above INR 150 crores-plus is the number. And obviously, profitability in both the entities is going to be a given. That is on the '27 targets. In terms of -- specifically, you asked about soundboxes and how the Soundbox business is going to scale up. I think one of the things that we've mentioned in our presentation is also about the size and scale of the business that we've got the contract, the orders we've got. I'm going to ask Debi to come in and just give a little brief about the kind of contracts that we are sitting on to give you an idea that the next 2, 3, 4 years are actually pretty tight for us in terms of the order book. We have significant orders there. So Debi, do you want to just come and give a little color about what are the sort of orders that we are sitting on, specifically related to devices, soundboxes, POS, et cetera, just in terms of value, et cetera.

So with some of these -- especially if you'll talk about Soundbox, we have recently signed a contract with Bank of Baroda, where we have a contract to deploy around more than 1 lakh Soundbox. And the annual recurring would be around INR 5 crores to INR 6 crores. And apart from Bank of Baroda, there are some of the 4 to 5 large PSU banks, RFP is going on. And in all of these RFPs, we have been participating, and we are hopeful we will get some of those contracts. And apart from Soundbox, with Bank of Baroda also, we have won another contract which is Bharat Connect or Bharat Bill Payment System. In Bharat Bill Payment System also, it's a long-term contract of 5 years and the total contract is around -- minimum size is around INR 17 crores because there is a per transaction commercial. So there is, of course, an upside to it. So yes, so these are some of the contracts what we have won this quarter. Also, I would like to add another contract, which is Axis Bank is a combined contract of POS and Soundbox both and the contract size is also around INR 5 crores which will -- which will be get translated in the next 3 years. So yes, these are some of the numbers we do have.

Right, right.

I just wanted to complement what Debi said. I mean the fundamental revenue mix for iServeU is changing from a very transaction-focused mix to one where we are building long-term contracts with high degree of visibility with durability and growth potential as well. So our ability to forecast -- now there's a lot of questions which come around forecasting our future revenues is getting better. And you will see that over the next few quarters because we're moving away from the transaction-sensitive business to more the Software-as-a-Service business model and that's creating more durable, more predictable longer-dated revenue streams as well, which gives us greater confidence in our future projections that we've provided you.

I hope that clarifies the question?

Yes, yes, yes. Right, right, right.

The next question is from the line of Pranav Gupta from Aionios Alpha Investment Managers.

So just a few questions on the FY '27 projections that we've thought of. When we talk about INR 150 crore net revenue pool in iServeU, is this taking into consideration all the variable costs that are associated with the ARR revenues? Or is this a revenue that we -- below which we then see all the variable costs flow in? The reason I'm asking this is because I would believe that the margins on the overall business would be much higher than the 18%, 20% that we are sort of -- that we sort of outlined. So where is the disconnect that I'm facing?

Yes, so I think there's no disconnect. The point is, firstly, the INR 150 crore number, it's a INR 150 crore-plus number, right? We've just given an indicative number of a range of where we will land up. So that's number one. And this is the net revenue, which takes into account the direct costs. So direct costs have been taken away, and this is the net revenue number that we will land up delivering. Below the net revenue number are obviously our expenses in terms of technology expenses, people expenses, premises, all of those, travel, T&E, et cetera, those expenses come into play. So that's how we've done it. I think the reason why the 18% to 20% number has been given to you is also assuming there will be a certain level of investments that need to be done as we start making money as we start thinking about newer product capabilities. So there are full assumptions basis that, which is where we arrived at that number. I mean the business will throw out cash. How we deploy that cash in terms of redeploying into new product capabilities, newer markets is stuff that we need to think about and talk about. So those are the assumptions that have worked to arrive at that number.

Understood. And then just to close this understanding on the margin bit, assuming a INR 150 crore-plus net revenue and a 20% margin, implying almost INR 110 crores, INR 120 crores of fixed cost, that's almost more than tripling the cost base for iServeU today. So maybe could you highlight a few areas that you're looking to spend specifically going forward, which will entail such large investments?

Yes, I think there are a bunch of things we are working on. I think there are a multitude of newer projects we are working on. As you know, the business model is now moving towards more SaaS-based revenues that have been alluded by Debi and by Amit in the previous conversations, right? There is a beefing up of the management team, which again, Amit mentioned that we will end up investing in, right, creating a much larger sales force for that business. We will -- we are also toying with a couple of ideas on the international scale on opportunities that are coming our way. So the model is evolving. The business is evolving as it becomes a SaaS-based company, predominantly, technology has no borders, right? So technically, that same technology solutions can be delivered to multiple partners. There are some assumptions around those in our FY '27 numbers, which is why you are seeing some expenses going up. Obviously, the expenses have also been done with a certain assumption apart from the regular growth in terms of people expenses that happen, right? There is a beefing up of the team and expanding of the team, both at the middle management layer and on a tech resources layer.

Understood. Understood. And just talking about -- so obviously, you highlighted on previous calls the opportunity that exists on the soundbox business. And you sort of stated that in our projections that we'll be close to 30 lakhs, 35 lakh soundboxes somewhere between FY '28 and '29. But could you also talk about the POS opportunity, what the -- what our moat here would be and what kind of sort of net revenues you could generate from this business?

Yes. So I'm going to get Debi to come in and talk about the POS opportunity and more specifically about the moat. Debi on the POS opportunity specific contract that we've received from Axis Bank, et cetera, right, what is the tech capability that we've built, which gives us a right to succeed? Maybe I think Pranav will benefit from an answer around that.

So look, I think in future, what we have been assuming that -- so the POS, so the traditional POS you are seeing in the market today, what we have seen in Pine Labs or at Paytm, at this point of time, mostly it is Android operating system. Before a couple of years ago, it used to be Linux operating system. And then going forward, what we are -- what we do believe, so most of the POS will be culminated into an all-in-one sort of device. All-in-one means like there will be a POS plus a Soundbox. So today, if you see soundboxes, most of the merchants are using it separately other than POS. So what we believe like it will be culminated into a single device, which we call it all-in-one device. So most of these all-in-one devices -- so we have also signed a couple of contracts with some of the larger OEMs across the globe to sort of innovate on various form factors. And these all-in-one devices at this point of time, we are going from multiple round of certification. And in terms of distribution also, since we have signed some of these contracts with all of these PSU banks, so we believe we will try to cater into -- because this PSU bank, the benefit is that they have large distribution network through their branches. And they have both asset and liability products, which gives them a competitive advantage over Paytm and PhonePe because they can offer these devices to merchants at a much more competitive price. So that's what would be the moat we do believe.

I think just to add to what Debi has mentioned, Pranav, there is an evolution of devices that is happening, right? And you will see that in the next 5 years. The all-in device that Debi referred to is something that we are working with some of the manufacturers to bring into the country. We're not the only ones. I won't say that we are the only ones doing it, but we have some capability in terms of helping with the design and development of these devices. I don't know if you caught the news, but we've done a tie-up with a large supplier of devices at the Singapore FinTech Festival where we participated and we have made an announcement around doing a tie-up with PAX devices, which is one of the larger providers of devices globally. And that allows 2 things, right? A, it allows certainty of supply. As you know, a couple of years ago, there was a huge issue with certainty of supply, especially when there was a real shortage on chips, et cetera. So we have tried to manage to make sure that the certainty of supply is there. The tech is all ours. We've built the tech through our own capabilities. So we load our tech on that. And basically doing the MOUs give us some level of future-proofing and R&D collaboration, which I think our customers, which are effectively the banks are finding some value in it. So we are creating more through multiple levels, partly what Debi mentioned and partly through making sure that we are able to meet the delivery requirements of our customers, along with the tech capabilities and innovation through things like all-in-one devices, et cetera.

Right, right. And just one last question on the lending entity. When we think about the tech that Niyogin has used to sort of create the entire distribution network for credit, our understanding is that a large part of that sort of comes from the iSU team. Now that post this corporate action, once you have everything separated into separate entities, how should one think about the tech-related investments in the NBFC? Obviously, we know that you have Sanket as the Tech and Growth Officer. But apart from him, how should one think of the investments required on the tech side?

So I think let me first clarify, the capabilities that Niyogin has built on the tech, which is platforms like Niyoblu, et cetera, right, are all in-house built by Niyogin itself, right? That's not been created by the iServeU developers. That's been created by Niyogin. We have almost a 20-, 23-man tech team in Niyogin NBFC itself. So that's, I think, point number one. I think there are some very smart people. Number two, when we acquired the AI company, we got another 8 or 9 engineers, again, high-end engineers, we were able to acquire through that acquisition, which are also sitting at the Niyogin level, right? I think what was referred to by Amit and by me earlier is that the beefing up of the teams to make sure that both the teams are independent in operation, I think, is important. But specifically on the NBFC-related tech architecture, right, I think predominantly, it's driven by the tech team, which is based in the NBFC. There are some overlaps, which are minor, which is, for example, in the KYC process, we use iServeU as a technology service provider for the -- for doing the KYC using the NPCI’ e-KYC Setu platform. But those are all very minor changes, which are not necessarily required. So that will not impact -- the demerger will not impact any of that.

The next question is from the line of [ Rekinjeet Singh ], who is an individual investor.

[Foreign Language]

[Foreign Language] We had some headwinds related to DMT business. [Foreign Language] because of which we have broken -- breakeven at EBITDA level but we are not able to show net profit. [Foreign Language] Q1 '26 you will start showing net profit in both the companies. That is my expectation, right? Let us -- we are working towards that. So that should answer the first question. Second question, NSDL Payments Bank [Foreign Language] iSU business, because iServeU business operates very closely with NSDL Payments Bank. [Foreign Language].

The next question is from the line of Yash Modi from Ashika Group.

So what is -- so I'll come to my numbers questions. So what is the average revenue per device per month that we are assuming? Trying to understand this 7 lakh devices, INR 350 crore order book here.

Yes, I think, yes, we've not given the details of average revenue per device per customer because these are price-sensitive numbers. These are customer-sensitive numbers. So I can't share the revenue per customer that we've taken. But the point -- the way the revenues work is there is obviously some money we make on the device, on the sale of the device, right? And there is some money which is a onetime income we make if the device is being sold under the CapEx model, which means we are not keeping the device on our books. And then there is a software charge that is loaded on top of that device, which over 3 or 4 years, depending on the size of the contract, on a per month per device basis, we are able to get that, right? So -- and that varies from customer to customer, right, with every different bank. Like I said, we have contracts with Canara Bank, State Bank of India, Bank of Baroda, Suryoday Bank. Each contract is different. So that's point number one. The revenues that we make from devices is a sum total of the money we make on a per month basis plus the money we make upfront on the devices. There are certain contracts where we may be required to hold the device on our books, which we call as the OpEx model, where we are providing an operating model to the bank, wherein the bank is paying us a rental for the device plus paying us for the software on a month-on-month basis. But the device is on our books. So it's a multitude of these things, right? And every contract like I said is different, so I can't really give you details about this in terms of per device basis.

No, no, I get that. I am just trying to assess...

Tash, just I would like to...

Yes, yes, go ahead. Go ahead.

Go ahead, Debi.

Debi go ahead, please go ahead. Yes.

If I can add, the margin would vary from sort of 55% to 70%. That's what we have seen so far. Like -- but as Tash rightly said, it varies from contract to contract, but it would be a range of 55% to 70%.

Yes.

No, I was just trying to wrap my head around the numbers that the projections that we have given and in my humble opinion, what is happening here is we are underpromising by a lot in iServeU is what I -- I'll give you my assumptions, and I -- and we are overpromising in the Niyogin NBFC business by a lot, and I'll give you the reason. So see, I'll take from Debi's commentary in the call itself when he said that for X bank, the 1 lakh devices that he was giving, I think, Bank of Baroda, it was -- and okay, it might vary to bank to bank, but he said INR 5 crores to INR 6 crores ARR. It is INR 5 crores to INR 6 crores ARR. So that gives me roughly around INR 40 to INR 50 per device. I'm taking from that point itself. So now if FY '27, we are giving a soundbox plus POS assumption of 20.9 lakh here and 2.3 lakh here, which is 22 lakh, 23 lakh devices. And out of the INR 150 crores revenue that we've assumed for iServeU, 70% is coming from the POS and this new business and 30% is from the old business. So I'm leaving aside that. So this 100 -- we are assuming INR 100 crores, INR 120 crores. So that figure is not matching with this 22 lakh, 23 lakh devices that we are going to basically put onboard. So that is why I'm trying to...

See, Yash, I'll explain the number to you. The number is matching. There are 2 points which you need to consider. First point you need to consider is these are end-of-period device numbers that you are talking about, right? This is -- there will be devices that have been delivered in '25, '26, '27. The spread of those devices, the onetime spread of those devices will get booked in those years. Those spreads will not come again in '27. What you make in '27 is just the spread you make on the software loading, right? The monthly software loading charge, license fee, whatever you want to call it, that's the only thing that you will land up making. So one needs to look at that and there are different contracts. Some contracts have a larger variation in terms of -- or rather, margin in terms of the cost of those device and some have larger on the software part. So I think one needs to look at that. I can take it offline with you if you want. I can take you through the numbers in a little more detail, but there is a fair degree of math that has been done. And is there any upside in these numbers? Absolutely. There is a potential upside in all the numbers that we've given. But let's see where we come out, right? Right now, I think FY -- Q4 of this year and then FY '26 are the 2 years that we are focusing on, depending on how these years go, FY '27 obviously get revised, hopefully upwards.

Ladies and gentlemen, due to time constraints, we will take that as the last question. I would now like to hand the conference over to Mr. Tashwinder Singh for -- he will be signing off.

Yes. Thank you. Thank you for joining the call today. I understand today is Saturday, today was the Budget Day. I really appreciate all of you taking the time to listen to our story. And we are at a pretty exciting phase in our journey. I think what we will land up creating, hopefully, at the end of this journey will be 2 high-profile, high-performing agile companies. And I do sincerely hope, as investors, you would see the value in investing and staying invested in both these companies. With that, I'd like to thank all of you. I'd like to thank the management team. I'd like to thank the founders, Amit and Gaurav, for joining the call today. And I would request all of you to keep listening into our story. Thank you all, and have a lovely weekend.

On behalf of Niyogin Fintech Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.