Veefin Solutions Limited (VEEFIN.BO) Earnings Call Transcript & Summary

Good afternoon, everyone. Let's begin. Management, if I could request you all to switch on your audio and video. Thank you. Great. So good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal, CEO of Valorem Advisors. We represent the Investor Relations of Veefin Solutions Limited. So firstly, on behalf of the company, let me thank you all for participating in this CXO Meet. And I'd also like to take this opportunity to thank the management for giving us this opportunity to host them. So thank you, everyone. As you all know, the Valorem CXO Meet is a first-of-its-kind virtual analyst meet event series, and our intention with these virtual CXO meets is to take advantage of technology platforms like this by reaching out to a wider audience and to create a better understanding and bring awareness about our client company's fundamental business, provide insights into their specific industry, financials and future growth strategies. The format of this analyst meet will primarily be in a Q&A interview format, where I will start off by asking the management some broad-level questions and then move on to questions from the participants. [Operator Instructions] Now before we begin, let me mention a short cautionary statement. Some of the statements made in today's meeting may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. Let me now introduce you to the management participating with us in today's meeting. We firstly have with us Mr. Raja Debnath. He's a Promoter Managing Director and Chairman of the company. Mr. Raja is a veteran fintech leader with global experience at IFC, E&Y, Citibank and Kotak Mahindra Bank. He has advised 25-plus financial institutions worldwide and led multi-bank supply chain finance programs in emerging markets. At Veefin, he combines deep banking expertise with entrepreneurial vision to drive next-generation digital lending and SEF innovation. We next have with us Mr. Gautam Udani, Whole-Time Director and Chief Operating Officer. Mr. Gautam is a serial entrepreneur and technologist who has built scalable digital products for over 250 institutions through Infini Systems. He has founded and exited multiple tech ventures, including India's first midnight food delivery platform. At Veefin, he leads product strategy and technology execution across global markets. We next have with us, Mrs. Payal Maisheri, Chief Financial Officer; Mrs. Payal is a qualified Chartered Accountant with a bachelor degree in management studies from NMIMS. She brings rich experience from Deloitte and her own consulting practice with deep expertise in taxation, compliance and financial governance. At Veefin, she drives the financial strategy, planning and overall fiscal discipline. We next have with us Mr. Sorabh Dhawan, CEO of PSBXchange. Mr. Sorabh has over 18 years of experience across banking, digital lending, operations and transformation. He brings a deep understanding of large-scale financial ecosystems having worked with well-established financial institutions like Kotak Bank, Aditya Birla Finance and HDFC Bank. In his last assignment as Chief Executive Officer of SG Finserv, he had established an NBFC from ground up, which is now a prominent name in the supply chain finance industry as well.

Now without any further delay, let me start with the opening questions. I'll start with Mr. Raja. Raja, first question for you is maybe if we could start with a brief history and background about the company in our -- to some of our audience who are looking at the company for the first time and take us through your journey so far.

Thank you. So as you pointed out that I used to be at IFC. And while at IFC, we saw a huge opportunity when it came to supply chain financing because there are very few players globally who could provide supply chain finance technology to banks. And that is the reason why most banks who wanted to get into supply chain finance were struggling. So Gautam and I got together, and we started building out this product. Actually, the first line of code was written in the year 2016. And then over a period of time, we kept adding modules in supply chain finance. We signed our first client in 2018. And then over a period of time, we have now moved into supply chain finance and some other products also. That's the journey.

Moving on, can you start by telling us more about the main product solution offering of supply chain finance, the market dynamics, why the need for such a solution and how does it differentiate from legacy platforms or solutions used by other financial institutions today?

Sure. So what is supply chain finance for people for whom this is a new topic. There's usually a corporate who pays their suppliers late. And there's a corporate, which wants to be paid by their dealers early. That's the reality of life. So whenever the supplier has an invoice, which is approved by the corporate, they can go to a bank and get it discounted. That's the supplier finance side. On the dealer finance side, it's where a corporate is able to go in and go to the bank, get money and then pay the supplier of the good. Now these are supplier and dealer finance. All other loan products, which a bank has requires the bank to only look at the corporate, which is borrowing from the bank. It is only in supply chain finance, where you not only have to look at the supplier or dealer, but you also have to look at the larger corporate. So it's a three-party system. The normal traditional banking systems do not support this. Because just imagine what you're talking of. You're talking of one supplier putting up 100 invoices at a point in time. Those invoices may have a different time on which they will be paid by the corporate. So each of them is a separate loan. Normal systems can't handle it. And that is the reason why this was a big challenge for the market before players like us came in. That is the solution that we brought in the market for banks to then use our solution which was then connected to the core banking of the bank, connected to the ERP of the large corporates and manage the supply chain finance business. That's the reason why supply chain finance was formed. Before Veefin came in, our supply chain finance solution were just loan management systems on which the banks could set up their program and book it. We came in using the banker's hat and said that what you needed was an entirely digital solution where the entire underwriting would happen on the platform. Then it would be seamlessly integrated with the loan management solution. You will have apps, mobile apps for all parties involved so that they could request for financing, they could approve the financing, all of these things on a mobile app. So these are things that we brought about in supply chain financing. And that's the reason if you see in the last 2 years, the supply chain finance vendor universe, which is there. There's a report which comes out every year in terms of where the vendors are placed. We are the number 1. We are the industry leader. The only company to be industry leader in both years in the last reports. Recently, we again won the Euromoney Transaction Banking Award as the most innovative supply chain finance company in the world. That's been the supply chain finance journey for us.

Okay. Just to add on that, Raja, if you could talk a bit about how this product has -- how has been the acceptability of it? How many banks have we already deployed it into? A little bit more on its performance because this is a big revenue generator today for us.

Correct. So this is the core business of Veefin. It has been the core business of Veefin. This is a tried and tested product. We have close to $40 billion worth of transactions which happen on the platform every year. We have 50-plus banks and NBFCs globally who are using this solution. And some of these are top-tier banks. Some of the top tier banks. 50% of our clients would be in India, 50% of our clients are outside India. So that's the kind of structure that we have. Very few players from India have been able to sell supply chain finance LMS solutions. And I'm saying the LMS is basically the solution where the entire accounting entries happen, the NPE management happens out there, and it gets connected to the core bank. And the core bank is just a system of record in that sense. No calculations happen in the core bank when somebody uses a Veefin kind of solution. Just to close it out, our customers are there across Middle East, across South Asia, across ASEAN countries and in Africa. So these are the markets that we are focusing on right now.

Fair enough. Moving on, could you also brief us a bit about the other products and solutions we have built or are in the process of building like trade finance, cash management, loan management and loan origination system?

We have a bunch of products which are coming out because, see as an enterprise company, the biggest challenge of a B2B enterprise company in the BFSI segment has is the long sales cycle. So we have long, 2, 3-year sales cycle. But once you have got in, the idea is how do we cross-sell multiple products to them. So there are two things that we have done. One, we have increased the number of products that we have in the chain. Second, we have not gone for retail products. We have gone for predominantly corporate end products because that's the difficult part. So we have trade finance, cash management, corporate Internet banking, retail Internet banking, loan management solutions across corporate, SME, retail; loan origination systems across corporate, retail, SME; and AI and fraud analytics solutions. So multiple pieces. Yes, Veefin supply chain is the core. All of these other products have been built for the last 1.5, 2 years. So many of these products have now reached a stage where they are now ready. We have clients who are on the verge of signing some of these products right now. So that's one thing. The second thing is, we have built all of these products, including supply chain finance on a single micro services architecture. What does micro-services mean for the uninitiated. Micro service means a line of code where the input is very clearly defined. And for that particular input, you will always get the same output. So they are like -- think of it like visually a piece of puzzle, in which -- they're like LEGO blocks. You have the input and output very clearly defined. You can make whatever changes to the LEGO blocks within that. That's the way we have developed our entire system. So the ability to reuse these components across all the products simultaneously helps us develop the products faster, deploy the products faster, leading to lower cost for the banks who are our clients, lower cost, not just when it comes to developing, but across the entire life cycle with the client. That's what we have done with all of these products.

That's great. Thank you, Raja, for those -- that broad overview on products. Let's move on to my next question, I'll ask Mr. Sorabh Dhawan to take it. Sorabh ji, you're heading the PSBXchange, which has emerged as one of the most important growth drivers for Veefin. Can you talk us a little bit about this platform and the need for it? And what role will it play in the company's long-term growth strategy?

Thank you, Anuj, and good evening, everyone, and thank you for joining this call. So Anuj, we all know that MSMEs form about 30% of the country's GDP. However, 75% of them still lack formal credit. Thus, the requirement here to fund the MSMEs is tens of trillions. PSBXchange is exactly one such initiative which targets to address this issue. It is an initiative taken by the 12 largest public sector balance sheets of the country, including SBI, Bank of Baroda, Canara Bank, PNB, et cetera. and also going to house the large private sector banks, small finance banks and NBFCs putting a full spectrum of ROI from 7% to 18%, 20%, becoming a one-stop financing solution. So in brief, it is a multi-lender embedded financing platform wherein corporates of any size can come and avail credit limits. As a first step here, what we are solving is the most complex problem that is of working capital finance for the corporates. And we will be offering products like dealer financing, vendor financing, factoring, reverse factoring, sales invoice finance and purchase invoice finance. Thus, off-balance sheet solutions from multiple financing partners in one go on a single platform. We all know that all large corporates, majority listed look at improving efficiency ratios and want to reduce their receivables and move to cash and carry, avail benefit, discount their suppliers. Thus, this becomes a one-stop solution for all these. Similarly, the vendors, dealers, distributors also get access to financing in one go. Now very important here is, how are we sourcing these corporates? These corporates are being sourced through various fintechs, B2B platforms, AR/AP platforms, and more for maximum reach. And these guys are sourcing for us, a, because it improves their stickiness because they are solving the biggest problem of financing; and b, we are sharing a major part of revenues with them. Thus, enough and more reasons for them to bring their corporates onto the platform. Thus, we expect to add hundreds of sourcing partners, bringing their hundreds of corporate relationships, which further will bring hundreds of their vendors, dealers, distributors on the said platform to access public sector and private sector balance sheets of the country and get access to low cost of capital. Thus, it is one of its kind in the country, which can scale heights and solve a major problem that is financing the MSMEs, Anuj.

Great, Sorabh ji. And so just to clarify, this is only an initiative for the PSBs. What about the private banks? What's -- and why only the public sector?

So Anuj, it will house 12 public sector banks and also house private sector banks, small finance banks, NBFCs. Only restriction is for the first year, that we cannot have the six large banks, including ICICI, Axis, HDFC, Kotak, Stanchart and HSBC. And they can also come on board after 1 year. The restriction is only for 1 year. So this is going to house, and full spectrum, ranging from public sector, private sector, large NBFCs, small NBFCs so that it becomes a one-stop solution for financing needs.

Fair enough. Thank you, Sorabh ji. And I'm sure we'll have a lot of questions for you by the participants, so we'll come back to you. Next let me ask Payal a question. Payal, can you talk to us about the financial performance of the company in the first half? Just briefly highlight some of the most important elements. And also, we've had an exceptional growth. So can you explain what were the drivers for this growth? Also, if you could discuss about the capital investments that are being done in the R&D of the new products and how are we funding the same?

Thanks, Anuj for the questions, I'll take one by one. Starting with our H1 performance. Since we recently had a detailed earnings call, I'll not repeat all the numbers. But I do want to highlight a few key parameters of our performances, what they signal and the direction at which Veefin is heading. Our stand-alone revenues have increased at 108% Y-o-Y with both our EBITDA and PAT that grew steadily. It is important to note that a large part of this growth has come from our existing clients. Our percentage of recurring revenue has increased from 33% in FY '23 to currently 75% in FY '25. This is -- this shift of entire recurring revenue is intentional, and it is now showing in our P&L account with a lock-in period of 5 to 7 years and with an increase in maturity of our platform, and the brand that Veefin is carrying, we are now able to claim and command the pricing modules and also have a predictable revenue stream for our future projections. Another important takeaway from our H1 result is the improvement in our DSO. Our annualized stand-alone DSO stands at 130 days for H1 FY '26. This is directly resulting in the improvement in our operating cash flow, which is also seen in our results. On our consolidated financials, the revenue for H1 is around INR 110 crores. And this is the first time you are seeing a full consolidation of all our subsidiaries and the acquired entities. Our consolidated EBITDA and PAT margins for H1 were lower because -- mainly because the stand-alone EBITDA and PAT margins for Veefin have always been at a higher range and is maintained and steady. However, it's a mix of -- which includes products that are still in the development phase, service business, which is comparatively at a lower margin. So like I mentioned, stand-alone Veefin, we are doing at a very strong financial performance. Further, as our new products, the PSBXchange, the cash management, trade finance, all of these go live, and by generating higher margin revenues, we also expect a consolidated margins to improve steadily. That's on our H1 performance with respect to our investments, IP investments. So in Veefin, R&D is not a separate department. It's our core business. It's a core of our business. All our R&D spend goes into building a long-term IP, including new product, modules like supply chain finance, cash management, trade, LOS, LMS, fraud and risk enhancement to Veefin SCF 4.0, microservices architecture, building the PSBXchange platform. We are not a service company. We are an IP-led product company. So these investments directly build reusable software platforms that will generate revenue for many years. Importantly, as our major platform are now largely built and only incremental enhancements are underway, we expect this R&D cost gradually to come down year-on-year. Also, this R&D cost in our books is a part of our intangible assets that are amortized over a period of 10 years at a revenue-weighted basis. So the expenses match the revenue. That's it.

Great. Thanks, Payal. Before we move on to questions from the participants, I already see quite a few there. One last question for you, Raja, before I take other questions. So can you just talk a little bit about our deal pipeline of our platforms and what is the future growth potential of the company in the coming years? Where do you see it? How big is the opportunity? Where do you see Veefin be in the next 2 to 5 years or 3 to 5, whatever deals?

Our deal pipeline as we speak is we are actively focusing on 85 deals right now. Out of these 85 deals, we have 35 deals which are under commercial negotiation. So these deals of 35 have a total contract value of $45 million, okay? And when I say total contract value, it means because these are all usually 5-year deals, I'm talking of what's the deal size that we expect over the next 5 years from these 35 deals, and I think 17 of them are $2 million plus. So we are seeing a gradual shift. What we're also seeing is out of this deal pipeline, 40% is India, 60% is outside India. So we are seeing a lot more deals outside India. And these are all dollar-denominated deals. So in that sense, with what we are seeing with the dollar happening, it's a favorable thing for us in that way. This is on the deal pipeline side. And many of these deals -- so around 30%, I would say -- 30%, 40% of these deals are in SCF, rest are on the new segments. We are seeing new products, new product deals coming up in the pipeline. In terms of opportunity, I've given you -- let me give you an idea of what kind of the sizes of deals that we talk about. A midsized bank in India will have a contract value of -- on a SaaS basis also of close to $1 million, okay? That will be the total contract value. And this keeps going up. We just signed a deal in one of the ASEAN countries where the total contract value is going to be between $3.5 million to $4.5 million, okay? So these are the sizes that one needs to think of. So you can understand now that if you're talking of these number of deals, what the potential out there will be. And this is like a snowballing effect. In the last 20 years, there has been no new company globally in the trade finance or cash management space. So get this right. In the last 20 years, globally, there has been no new company in trade finance or cash management. They're the same companies, that you can count them on one hand, with fingers of one hand. So it's a very, very large opportunity. We are talking of hundreds of banks, thousands of banks across the world who all use these products. They are all coming up either for replacement at different points in time or there will be banks which are getting in, new digital banks are coming in, banks are progressing up the chain, they will require these products. The TAM, as we speak, we're talking of TAM of close to between $40 billion to $60 billion annually. So that's the space that we are playing in. So you can just imagine what the size will be. And we are just at the inflection point. And whatever we are seeing as the market, we are seeing only supply chain finance, but that was not the biggest. The big daddies in this space are the trade finance, your cash management, corporate, retail Internet banking. That's where the big money is, and that's where we are entering. With all our clients that we already have on board, these clients will also be coming up for either replacing their existing solutions or adding those products on a first-time basis. Because they have already taken supply chain finance from us, we are in a far better position than to cross-sell to them. And because we are the newest kids on the block in that sense with these large products, we have the latest tech stack. Remember this, everybody else that we are competing with is on legacy technology. Banks are all asking for new tech stacks, and that's where, because we are new, everything is light, everything is brand new, fresh. They get fresh products at a lower pricing and still we make very high margins. So you can just imagine, I will not tell you what number, you cannot take a guess in terms of what the number and the future is for us.

Great. Thank you so much for that, Raja. Now let's move on to taking questions from the participants. [Operator Instructions]. All right. First question coming from [ Rajat Agarwal ] is, what did it take for you to build PSBXchange? How much time and money did it take? And why can't any of the other established software players develop anything similar?

So this journey started 2.5 years back. In that journey, the Public Sector Bank Alliance company, they ran an RFP, 22 different vendors participated in it. It means every single vendor in the country participated in this. We obviously won it, and we won it on the backing of the fact that we had a very robust supply chain finance platform. So we were the best in supply chain financing. Second, as bankers, our understanding of what was needed for this to be successful was head and shoulders above everybody else. So we have -- and this PSBXchange should not be looked at from an India lens. Nowhere in the world is there such a platform where we have one single platform in which you're connecting the entire banking world with the entire corporate world, it's just not there. So we have spent the last 2.5 years in building this platform. Would we have built this platform if we did not have PSB Alliance as a client? No, because you cannot build something like this and then hope for a customer. We were in the right place, had the right skill set, we had the right technology in place and understanding to win the deal. Because we won the deal, we build the platform. So that's the first thing to remember. Can somebody else build this? Yes, anything in the world is possible. You can build a rocket? Yes, you can build a rocket. But the question is, if you're going to spend that kind of money, you need to have visibility of some kind of customer. Today, it becomes very difficult for somebody else to build this because, one, the only customer in the world today is India, public sector bank alliance with whom we have a 7-year lock in. So they can't go anywhere. That's the only customer. We have got the customer. Globally now, there are six different countries who have come to us, asking us for the same platform. Anybody wants to buy this platform, we want to see show me a ready product. We are the only ones globally with a ready product. Anybody else wants to start, they will have to spend 3 years in building that. So that answers as to why somebody else does not get in or why somebody else will not be able to get in, okay? We have learned a lot over the last 2.5, 3 years ourselves. So what understanding we started with and where we are, there's a big difference between what we did. Now that we're integrating with banks, we are learning things ourselves. So at every point, we are moving and the gap between us and anybody else is expanding to something which people will not be able to capture at all. So in terms of the kind of money which has gone into spending -- into building this, it's upwards of INR 35 crores, INR 40 crores, which has already gone in and a lot more will go in here. Because till now, we've built only the tech platform. Please remember, this is not just a technology game. PSBXchange is a game in which not only do you have to build the technology then you have to have a team in place on the ground and that's where Sorabh comes in because he brings in the expertise of actually running supply chain finance businesses, helping banks fill their balance sheets because here is a platform where once a customer comes on to this platform, they are able to get their entire working capital requirement across supply chain, across trade finance, across any form of financing all from one single platform across all the banks. So if you can't get a deal here, you can't get a deal anywhere else in the country. That's the idea.

Fair enough. His follow-up question is, what is the total market opportunity for PSBXchange? How much is the annual disbursement volume in supply chain finance across all PSBs combined and how much of the pie can be captured by PSBXchange?

Breaking it down. In terms of the -- the public sector banks have between 50% to 60% of the entire banking asset of India. So that's the first thing to remember. PSU banks are not the number one supply chain finance. State Bank of India is. State Bank of India is the biggest in supply can finance amongst all banks, even bigger than the top private banks and MNC banks. But after that, the public sector banks are not that big in supply chain finance though that is where they want to grow. So they have stated goals of they wanting to have -- many banks have said that between 20% to 25% of the entire SME book has to be supply chain finance for them. That's the stated goal. So we are talking about lakhs of crores which the banks want to issue out. This is not just for public sector banks, public sector bank exchange, it's also for the private sector bank. Today, if you total the entire supply chain finance market, that will see disbursement of around INR 10 lakh crores annually. That's where the numbers are, okay? But that is a fraction of what the number can be, okay? This we, according to us, is just maybe 5% to 8% of what the market should be. If you look at any government body, if you look at any government body -- the government is the largest corporate in that sense. We are all sitting in Bombay. BMC as a body will have a purchasing budget of between INR 6 lakh crores to INR 7 lakh crores, BMC alone. Now think of the different governments which are there. So in terms of size, we are talking of multi lakh crores, which are possible to get on the platform, if you were able to get the banks and the NBFCs all on one single platform. This was not done ever. That is the reason we were not able to channelize this. But now that with PSBXchange, we are getting all these banks and NBFCs on one single platform. I think you can just understand what size we're talking about here.

Fair enough. And another follow-up from him is how many fintechs have you already partnered with till now for PSBXchange? And how will it work? Why will fintechs and corporates come to the platform?

Sorabh, do you want to take this question?

Yes, yes. So we got -- in pipeline, we got about 75 to 80 fintechs. We've already partnered, onboarded about 20 fintechs. Why would they come? A, it increases their stickiness with their corporate relationship because financing is a major problem, which is being solved. B, we have a revenue share arrangement wherein about almost about a major portion of our revenues, we are giving to the sourcing partner, and that's the reason they will bring their relationships, corporates on board for us.

Fair enough. Next question, I will -- there have been a few questions on PSB. So I'm kind of finishing those all first. So the next question by Uday Chandak is regarding deep tier SCF enablement on the PSB exchange underwriting. How ready and effective is your AI-powered underwriting to quantifiably reduce the risk and cost of financing Tier 3, 4 MSMEs using alternative data?

Okay. These are two distinct questions. I will handle them separately. First is, Uday, you spoke about deep tier financing. Now what does deep tier financing mean? It means financing the Tier 2, Tier 3, Tier 4 suppliers of a large corporate. Remember, it's on the supplier side. It is not on the dealer side. Many people confuse it, but it is always on the supplier side. A supplier supplying to a large corporate is called Tier 1 supplier. A supplier supplying to a Tier 1 supplier is called a Tier 2 supplier, okay? That is the logic. So deep tier financing means how do you take the approved invoice of the large corporate. And if the Tier 1 has not discounted the entire invoice, you allow a portion of that to be discounted by the Tier 2 against its approved invoice from Tier 1. It's a mouthful. But just remember, it's a Tier 2 approved invoice from a Tier 1, which is getting discounted only if there is an option of the Tier 1 pushing their approved invoice, which is not discounted by them below in the chain. That's the logic. So Veefin has the technology for doing this, which is called deep tier financing. So the question is, can you do this on PSBXchange? Yes, obviously. You can do this for PSBXchange also. So are we ready for this? Yes, the technology is ready. But will we be doing this immediately? I don't think so. This will happen subsequent, I would say, another 6 months later is when you will see this because first, you have to get the Tier 1. As Sorabh mentioned, there's a huge untapped opportunity already available at the Tier 1 level. So as bankers, they will first go after the low-hanging fruit, which is going after the business which they understand very well, which is the Tier 1 financing business. Once they have done that, then we will start seeing some POCs, some pilots on deep tier on the PSBXchange platform, which will then move ahead.

Got it. His follow-up question is organizational readiness. Beyond the technology, what structural and incentive changes have you mandated or enabled within partner banks to ensure they actually prioritize and service these high-volume, high-friction deep tier customers?

As I just mentioned, deep tier, as you rightly said, it is a high friction. So when there's high friction, you don't try to go and try to do that right upfront. It will happen when 1 or 2 banks do it, and then there's a FOMO when the banks will do it. Globally, if you think of deep tier, the only place where deep tier has worked is in China. Because China has a very large manufacturing base. So you require manufacturing-based led countries to run deep tier. So does India make sense? Yes, India makes a lot of sense. Has deep tier happened in India till now? No. Deep tier has not happened in India because banks have been reticent in going after deep tier, but they are just trying to first grapple with catering to the huge untapped potential on the Tier 1 itself. So deep tier is some way off. Let's go after the Tier 1. And as I spoke to you, you have lakhs and lakhs of crores of Tier 1 volume itself, which is available here. So banks will do that first.

Sure. Next question is from [ Sourav Singh ] of saying, if not the PSBXchange, what is the number two alternative for anyone? Is there one?

Okay. Sorabh, do you want to handle this?

Yes, yes. So Anuj and [ Sourav ], PSBXchange will be one-stop solution wherein you'll have, I think in the next 6 to 8 months, we should have about 40 to 50 financers on one single platform. Are there other options? There are, but none of them would have a number of financiers closer to this. Even a [ TReDS ] platform, as on date has only 38 financers onboard. And b, we are focusing more on the dealer side, and all the other exchange platforms today are focusing on the vendor financing side. So that is a differentiator. So -- but yes, there are smaller platforms, which would have -- which would be connected with 2, 3, 4. We are also engaging with all these platforms to come and connect with us and give access to these 30, 40 financiers in one single go. So we are making it a marketplace for all these -- the smaller fintechs not to restrict their business to 2, 3, 4 financiers, actually to come on board and connect with 40, 50 financiers in one go.

And just to add some more color to it. These platforms do not have connection to the public sector banks. It is very, very difficult for platforms to get connection to all the public sector banks because just to get yourself onboarded could take 1 year or 2 years. And that is the reason why despite platforms existing, so this platform that you may have seen, most of these platforms will have connected to the second tier private sector banks and NBFCs. Nobody has connections to 12 public sector banks or even 5 public sector banks or even 3 public sector banks, okay? That's the scenario. None of these platforms will have all products, which is all forms of SME financing, trade finance and supply chain finance on the same platform, that's point number two. Point number three, most of these platforms are still part digital. That means it's a broken journey. You do not have embedded journeys where you have the entire journey happening on the customer's platform and seamlessly digitally moving at the same point in time to multiple banks simultaneously. There are no such platforms in the market.

Got it. A follow-up question, and I think the most important question is how do we make money on this?

There are three forms in which we make money. First is on the sourcing. So these are pricing models, which the entire market knows so I'll share it with you. We charge banks 30 basis points on the AUM, which is generated on the platform for the sourcing, which they take from the platform. So they don't take anything as a bank, just take sourcing of business, they pay 30 basis points. If they use the technology, they pay 20 basis points. If they use us for onboarding of their dealers and suppliers and want our help in calling them up, getting the documentation done, they pay another 15 basis points. So this is the entire pricing model.

Got it. And his follow-up on that is, what about regulation governing our business. If we are the only ones of our kind, who from a regulatory perspective can turn to us or disrupt our model?

Nobody. We don't touch the money. Because we don't touch the money, we do not come under regulation. And we have been very sure about doing that in such a manner that we don't have to be regulated. So we form as per digital lending guidelines, we -- the PSBXchange becomes an LSP. It's a loan service provider to the bank and follow the same DLG guidelines, which any loan service provider in the market follows.

Next question is from [ Keshav Kejriwal ]. His question is that being a listed company -- recently listed company, investors expect us to grow but not at the cost of repeated equity dilution. So we have raised equity, a couple of times IPO and then after, which naturally leads to a question, where do our financials stand today in terms of liquidity, working capital requirement and whether we are going to do any further fund raise in the near-term future.

So I'll take the last question, then Payal, maybe you can comment. So we are a product company. We have to remember that. We are not a services company. We will be a product company. A product company, which is investing in IP. So from that point of view, yes, there will be times when we will go back to the market and raise capital. Because remember, we raised capital for supply chain finance, then we have raised capital for the other products. Each one of these products on a stand-alone basis are large -- very, very large products. If you look at globally, the companies that we are competing with, they're like an FIS, a Fiserv, Finastra. These are all $50 billion, $60 billion, $70 billion companies. So they're very, very large. They have all grown through the same process in terms of building products and then selling it globally. And that's the same path that we are going after. So in that path, yes, we will raise capital, but every time we raise capital, that capital is going in enhancing the IPs of new products, which then come in and add to our bottom line. That is the way to look at it. Every time we raise capital, we go out, invest in IPs, invest in products, which then go out and give us additional revenue.

Payal, do you want to add?

Yes, what exactly Raja said that we've raised two rounds of funding post our IPO, one in March and the current ongoing round, after which we have a good run rate for the next 12 to 18 months. We will continue to invest in our IPs. However, these IPs are actually that is going to generate revenue. And the dilution is the small part. The bigger pie or the entire -- the valuation that is getting created on a long-term basis, once all the products are live and generating is going to be much higher. So that's my comment.

Sure. His follow-up question is, the market has seen several companies attempt to build tech stacks for banks. With that context, how do you see private sector banks in India adopting Veefin Solutions at scale. For instance, is there a realistic path to onboarding a large institution like HDFC Bank over the next 5 years?

Yes, the short answer to that is yes. There are players who have tried building these kind of tech stacks. But we have not only built the tech stack, but we have shown our ability of selling to top-tier banks, not just in India but outside India. The key in this is not just what -- how good your product is, but also what kind of architecture you have because the world is moving beyond buying point solutions and moving to buying architecture. That's one of the core reasons why banks are moving to us. And we have a couple of large banks, some names that you mentioned, a couple of large banks who are talking with us. We are in commercial negotiation with them to replace their existing well-running systems because they know that the tech that they have, the architecture that they have is not future proof.

Fair enough. Next question. I think some of these questions have already been answered. So [ Keshav ], I will skip some of them. But let's move on. The next question is from [ Rajat ]. What is the steady state EBITDA margins in the products business? In earlier con calls, you have talked about 50%, 55% normalized EBITDA margins. How do we plan to maintain such high EBITDA margins with other software players in the industry are only doing 20%, 22% margins?

The point in that is, as I said, most of the other companies have a large chunk of services revenue in that. And we are very cognizant of the fact that we do not want to be in the services business. We want to build only product and product IPs. And that is the reason why our EBITDA margins, what we have given you, those are kind of EBITDA margins that we will be able to maintain. That's one. Second is because of the cross-sell that we are doing. So once we sell to a customer, the second time when we sell, the margins out there are much higher. That -- these are two reasons why we are confident that our EBITDA margin will remain at that high level. Is there competition? Not in all segments. So if you say that if we were only in the business, say, of providing LOS, loan origination system, we can't maintain this kind of EBITDA margin because that's a commodity product. But when we say we are in the supply chain finance world, in the trade finance world, the corporate Internet banking, those places, we can get such high margins because, one, we are only a product company, we will not focus on the services. We are very happy giving our services business to other companies. Let them do it because that's also one reason why we'll be able to grow faster because we will work and we are working with partners across the ecosystem at a global level where we are telling them, you very happily take over the services business because that's their job. System integrators love services business. We are very happy to allow them to take that and give us just the product business. That's a high-margin business.

Got it. Next question from [ Rishi Kapoor ] is as AI continues to advance rapidly, do you see it as a potential threat or an opportunity for Veefin. Given that Veefin is primarily a product company, what direction or strategy do you think would be most beneficial in leveraging AI?

We have been leveraging AI very, very actively. And we are seeing -- for Veefin, it's a great boom. Because if you -- as I say, all technologies which have come till now in the recent past on -- they've all been called the young man's technology. I think Gen AI, the world that we are in Gen AI, that is not a young man's technology, that's an old man's technology. And why do I say that is because with this tech, if you have the experience and you have the know-how, you are able to deliver things at a much bigger scale. AI is not always right. But if you have the experience, you are then able to also understand and tell AI, what is not right. And we are seeing huge productivity gains because of this. And we are seeing this on a day in, day out basis in terms of how we are able to leverage Gen AI specific, not AI. Gen AI specifically in improving our productivities and our time to market. So that's a clear boom for us.

Okay. Next question from [ Vinay Bhaskar ], what are the top three strategic focus areas for the company over the next 12 to 18 months? And can management elaborate on the company's capital allocation principles, especially around investing in technology, people and expansion?

Sorry, the second question, again, Anuj?

Can management elaborate on the company's capital allocation principles, especially around investing in technology, people and expansion.

So over the next -- the three strategy -- three strategy pillars that we have. One is we are setting up offices in the -- subsidiaries in the U.S. and in Saudi Arabia. These are two large markets for us. So we'll have local presence out there, both in terms of development centers and in terms of sales office. So that's one thing which we are doing very clearly investing for the future. The second is we continue scaling up our new products that we spoke about. All the six products that we spoke about, we continue scaling those businesses up. And the third is other than the sales office that we're setting up, we are also hiring sales people across many of the geographies, which we've opened up. Because if you've opened up any geography and we have sold 1 or 2 clients out there, the idea is to put now salespersons out there on the ground to now it's called spread and expand. That's the strategy that we're taking. In terms of capital allocation, put it this way, whatever investing that we are going to be doing, 40%, 50% of that is going to go towards new product build-outs that I spoke about, around 25%, 30% is going to go towards the new offices that we spoke about, and 20% is going to be in terms of adding more people.

Okay. Next question is from [ Sherwin Fernandes ]. What percentage of your revenue concentration comes from top 5 to 10 clients. And if a major client scales down due to the product capabilities performance, how is Veefin cushioned from such scenarios?

If I remember right, we do not have any -- no client contributes more than 6%, 7% of our revenues.

Payal, can you confirm?

Yes. Yes, that's right.

Something more -- some more color Payal, maybe you can give on the client concentrations.

Like what Raja mentioned, we are a SaaS-based recurring revenue model. So every -- a single client does not contribute more than 5%, 6% to our total revenue. The top 10 customers that contribute to the total revenue, I would say would be 30% to the contribution to our revenue, which includes onetime fees also. So that is something that we need to dip in, right? Rest, it's all diversified in terms of geography also and in terms of domestic export also and in terms of the number of clients, the type of clients all of that and the products.

Sure. Next question, a follow-up from [ Keshav ] is what does a typical supply chain or lending transaction look like on your platform in terms of disbursement, amount, fees, margins? What percentage of these -- those flows does Veefin actually capture as revenue? Without this clarity, it's difficult to understand the model. So maybe if you can help explain our business model. I think where people are a little bit probably confused from this question. I feel like that we just built a platform. People are just coming and using it, and we are getting paid a fee. So maybe if you can help people understand that, first of all, there is a deployment. I understand that there would be a deployment fee that we would put the platform on the client. Maybe if you could explain the entire value chain a little bit in more detail and if we have any subsequent revenues based on that. So the revenue model for Veefin, just for supply chain first and then we can look at other.

Okay. So in supply chain, there are primarily three kinds of models which are there, okay? So one is a onetime license and then a 20% AMC year-on-year. That's the one model. The second model is an annual license, which is there, okay, which we charge annually. The third is a recurring SaaS fee, okay? The second one is also a SaaS because it's recurring in nature. But the third one is where you charge a few basis points of the portfolio, which the bank maintains on your platform, okay? We have three pricing models. As vendors or tech vendors to the banks, we may also charge them an implementation fee right upfront, okay? So a typical cycle would be, you would first sign the client, then we'll spend 3 to 6 months and sometimes it could go to 9 months in terms of configuring the platform for the client. Once you configured the platform for the client, you give it to the client, the client goes live. If the client has its own portfolio, which they were running on some other platforms, they will then migrate that all of that business onto this new platform. Once the migration happens, you then start getting paid on this. That's when the recurring revenue starts kicking in. So you have implementation fees, which you've taken right upfront. Then your recurring fee starts coming in. This is how supply chain finance works. When you move on to the other platform, which is your trade finance, your cash management, corporate Internet banking, the world predominantly operates on a onetime license fee and AMC, but those are being changed rapidly now because people are moving to a -- people are more comfortable in paying a recurring fee out there also, which is based on usage paying on an annual basis. So that's what we are seeing happening. And on PSB, we have explained to you that once you put the platform in, there is no fee that you take upfront. You don't charge anything upfront. All the connections are free of cost for them. They pay only when there's a business which transacts on the platform.

Sure. Next question is from [ Deepak Podar ]. What will be the amortization cost in coming years once new tech is being launched, we will get how much amortized as a percentage of intangibles?

Payal?

Yes. Currently, in current year, depreciation amortization percentage is 12%, that you can expect a percentage of the revenue. So this, you can expect to go to 15% and in the going future years with 16%. Since the amortization is weighted average of the revenue, as the revenue scales, the amortization will also increase accordingly.

And correct me if I'm wrong, Payal, we are capitalizing all the R&D expense as well, right?

Correct.

Okay. Next question from [ Narendra Arora ] is there are reports of consolidation in PSB wherein smaller banks will be merged with top banks. In such a scenario, what would happen to Veefin product deployment at smaller banks, would Veefin lose out their revenue from such consolidation?

No, because as we explained our pricing model. Our pricing model, we do not charge anything to the bank to sign up with us. So there's no sign-up fee. So the number of banks doesn't matter to us. The only thing which matters is the size of the balance sheet. So if the banks get merged together, it's just that the balance sheets are getting merged. So in terms of the numbers, the numbers will not come down. I think what will happen because of those amalgamations between these banks, the banks will become stronger, and a stronger bank with a healthier balance sheet is actually better for us because that allows the bank to take more risk, that allows the bank to increase the level of credit appetite that they have. Therefore, the business will go up and we'll make more money.

Okay. Next question from [ Santosh Singh ] is what is the type of deployment and typical time to onboard a client? I don't know what type of deployment means, but typical time to onboard a client.

Deployments could be on the cloud or on prem, okay? That's something which I can understand from the word deployment. Typically, deals would take 2 years to sign. In enterprise sales world, it takes an average of 2 years to sign deals, okay? That is the reason people do not get into the enterprise business. It's a tough business to go in. But once you go in, it's a brilliant model because then you have an immensely sticky customer that once you sign a deal and for the next 5 to 7 years, you will get paid, and there's a very clear visibility. That's the reason why we are in the enterprise BFSI space.

Okay. Next question, Uday Chandak is what percentage of the total fee income generated by the PSBXchange platform is directly tied to transaction volume benefiting Veefin versus static AUM capacity, the licensing fee?

Repeat the question, once, it's a very...

What percentage of the total fee income generated by the PSBXchange, I guess, the AUM that will be on P&L, how much of that will benefit Veefin? So I understand that the transaction volume, if there is a transaction, that's when we get a certain percentage of the transaction volume. Other than that, there is no other AUM fee, licensing fee, et cetera, right? So it is free to all to get on board. We just get paid based on the transactions.

Absolutely right.

Just to give people an idea, I think we mentioned this before, but maybe not, I'm also forgetting now. What are the total volume of transactions just by the public sector banks. Let's assume that a certain percentage of this flows into the PSBXchange, what could be our revenue potential. Just let's hypothetically give an example.

So if the AUM is INR 1 lakh crore, okay? If the AUM is INR 1 lakh crore, we should be making anywhere between at a bare minimum, INR 350 crores to INR 600 crores. That's the kind of number. The question is, what will that number be? Will it be INR 1 lakh crore or will it be INR 10 lakh crores, will it be INR 20 lakh crore. I therefore give you an idea in terms of what is the size? Just one BMC, if I'm able to get one BMC on to the platform, that will give us a -- because the entire purchasing is around INR 7 lakh crore, if I break it down, it will be an AUM of maybe around INR 2 lakh crores, okay? This way, if you look at India, I keep getting state governments, I keep getting large corporates. We keep doing that. We are talking of multi-multi-lakh crores. The public sector banks, what they are doing today, they don't have to shift their business to the platform. No, that's not the idea. The idea is what is not on the platform, what is not being financed today, we are bringing that onto the platform for the PSU banks. This is a very core thing because many people get it confused. They think what are the public sector banks doing? So how much of that will flow here? No. The question is, what the public sector banks are doing, they will continue doing the way they are doing today. Forget that. What is not there in the public sector banking domain that is what the PSBXchange will get to the public sector bank. And that I gave you an idea of it being in multi lakh crores available in the market, which we have to get to the platform for the public sector banks. But they have the ability -- they are going...

And our revenue is percentage you're sharing is 0.3%.

0.3% to 0.65%. That's the range. Because 0.3%, then 0.2%, then 0.15%. Those are the three depending on the services which they take. At the bare minimum, it's 0.3%, at the high end, it's 0.65%.

Okay. I think we're running out of time -- and sorry, we already crossed time. Maybe I'll take one last question from [ Vinay Bhaskar ], which region, Asia, Africa, MENA, U.S. or Saudi gives Veefin the highest win rate, quickest go-lives and best profitability? And for each of these regions, what structural challenges do you face as regulatory hurdles, client IT maturity, competitive pressure, localization needs or long sales cycles?

That's a one-hour question, Anuj. It's everything. There's no single region which is green in all of these because you spoke of multiple things. You spoke of technical maturity. You spoke of the time. You spoke of profitability. Each one of these are different. Just to give you an example. The Saudi market, the GCC market are always the most profitable market. But they're also the toughest markets, okay? They take the longest time to sell. The IT maturity is the lowest. The deployment cycle will be the longest, but they're most profitable. Similarly, the Indian market, the maturity is the highest, but profitability is the lowest. So each of these markets are different in that sense. So there's no single answer for all of these. Across -- so India, think of it this way. India is a great market for you to perfect your product. Have India as a home base. You will not make too much money in India, but you will make money outside India. So your product has to be very good, tested in India at scale. Then you go outside and then you will make a lot of money in the GCC countries. The second place you make a lot of money is in the U.S. And then the ASEAN countries, then Africa and then India. so think of it. India you will make the lowest money always. But India has volume, India has scale. And therefore, in absolute terms, you'll make a lot of money in India. But from an effort perspective, it's more preferable to work outside India.

Sure. Thank you very much. I still see that there's quite a few questions. Quite a few of these are forward-looking in nature with guidance, et cetera, which, hence, I purposely not asked the management yet. But there is a lot of other questions that people have a lot of interest in. So my suggestion is because we are running out of time, please get in touch with us, and we'll be happy to help you understand the company in more details, and if required, do follow-up meetings with the management. Once again, everybody, thank you for participating, and management, thank you very much for your time today and giving us very good detailed understanding of the business and future growth prospects. So thank you, everybody, and thank you, management.

Thanks. Thanks, everyone.

Thank you.

Thank you.