WSFx Global Pay Limited (511147) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and a very warm welcome to the Q2 and H1 of FY 2021 Investor Conference Call of Wall Street Finance Limited. [Operator Instructions] Please note that this conference is being recorded. Please note that the materials and information in this conference call is general background about the company's activities as at the date of this presentation. Information in this presentation should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities. It does not take into account your particular investment objectives, financial situation or needs. This information is given in summary form and does not purport to be complete. I'm now glad to hand the conference over to Mr. N. Srikrishna, Executive Director and CEO; and Mr. Dipesh Dharod, Chief Financial Officer. Thank you, and over to you, sir.

Thank you. Good evening, dear investors. This is Srikrishna here, along with the company's CFO, Mr. Dipesh. It's indeed a pleasure to connect once again and present results for our Q2 and also the half H1 results for this financial year. I will start with a small presentation about the company and also go through the results, the digital initiatives the company has undertaken. We uploaded this presentation on the company's website as well as the BSE website. Now over to the presentation, a brief introduction about the company. The company has been in existence from 1986. It's been a journey where we had multiple businesses, products. So we were predominantly in MTSS operations and ForEx business. Post our sale of MTSS business, for the last 2.5 years, we have been focused on the stand-alone ForEx business. So what do we do in our ForEx business, we are [ RBI authorized category II players ]. So essentially we sell foreign currencies, prepaid cards and also provide outward remittance facilities under LRS. We are tied up with major banks for doing our remittances. And also, we partner with Yes Bank and Thomas Cook for the prepaid cards. We have our own bank-sponsored card with Yes Bank, which is called the Wall Street Smart Currency Card. We have a network of 18 branches, and we have key corporates like E&Y Group, Mphasis, Novartis, L&T, Siemens and HDFC Credila as our clients. Now we talk on the highlights for Q2. As you are all aware, travel, travel and also the ancillaries through travel, ForEx, has been majorly affected due to the COVID pandemic. So Q1 was really affected with total lockdown, with the partial lifting of lockdowns and slowly the social distancing, opening up of branches and offices and with bubble flights and 1-day [ borrowed ] flights, there was some business opportunity available. And the company was able to take advantage of that and was able to post better results in Q2 In comparison with Q1. So where did the growth come from? It came from the students remittance business because there was -- there is hope that student travel will happen. Corporate and leisure travel remained affected because the international flights had not come back with routine, only sporadic flights were there. So what we did was, besides improve the business, we also were able to reduce our costs and keep our costs constant over this period despite the growth in business. So a brief look at Q2 financials. Our GTO was around INR 497 crores, major increase from the previous quarter. We recorded NR -- net revenue of INR 3.48 crores. Our expenditure was INR 3.93 crores. From the PBT level, we were at negative of INR 85 lakhs compared to previous quarter of around INR 188 lakhs. At the PAT level, we were at a loss of INR 50 lakhs, in comparison with around INR 1.31 lakhs from the previous quarter. So you can see that we were able to take advantage of the opportunities, what other opportunities are presented. And we are able to grow the business on Q2. We feel obviously the path to normalcy is a graded process because the talk of second wave, Europe is closed. So it's a rational improvement, but we are confident now the road to recovery is in sight. There is a vaccination -- vaccine, which is being talked about. So we are confident that from Q1 to Q2, we have improved, and we hope this [ recovery faster for us ] to come back on track. As far as digital transformation is concerned, despite the total lockdown, we are able to launch our B2C app, the WSFx Smart ForEx app. And also, we were able to do some marketing activities. We are happy to say that as of today, we had 300 -- 3,000-plus downloads of the app. And once travel resumes, we are hoping that these downloads will result in business for us. So now I will hand this call to Dipesh, who will take you through the financials of the company.

Thank you, Mr. Srikrishna. Good afternoon, everyone. With regards to our performance quarter-on-quarter, of course, sorry to say that there is a small change in the table. We have just edited the tables and the headings between the two for Slide #4. Sorry for the inconvenience. With regards to the quarter-on-quarter performance, with regard to the previous quarter, there has been growth in revenue to the extent of 108%. From INR 312 lakhs, we have moved to INR 648 lakhs in the current quarter. Other income remains almost constant of about INR 25 lakhs averaging. The profit before tax, we had a loss of about INR 188 lakhs in quarter 1, which has moved to about INR 85 lakhs in quarter 2. And profit after tax, which was INR 131 lakhs in quarter 1, has moved to INR 50 lakh loss in quarter 2. So you see an improvement. Those -- the figures [ that are in deck ] represented drastic improvement in the overall numbers. If you talk about the same part of previous year, the basic difference or the major difference is the COVID. '19/'20 was a non-COVID year, and 2021 we are facing the COVID era. And there you can see majorly, our revenues had dropped about 34%. We were INR 988 lakhs in quarter 2 in '19/'20, which we are right now at around INR 648 lakhs in quarter 2 '20/'21. Accordingly, the profit, we had a profit of about INR 68 lakhs in '19/'20 quarter 2, which is about INR 85 lakhs loss right now, against a PAT of INR 33.58 lakhs and a loss of INR 49.84 lakhs for the current quarter. When you compare the half year results, half year '19/'20 to '20/'21, again, you see a dip in most major things because '20/'21, the entire 6 months are affected due to COVID. But still we have managed to do some business. Against revenue from operations for '19/'20 of about INR 1,800 lakhs, we have done the revenue of INR 960 lakhs during the current half year. Against income of INR 630 lakhs other income, we have done INR 445.87 lakhs. Profit before tax, we had [indiscernible] profit in the last half year, which is to -- which is negative right now, INR 2.73 crores. With regard to profit after tax, INR 57 lakhs was the profit in H1 '19/'20, which is INR 181 lakhs in H1 '20/'21. When we come to the next slide, this is just a quarter-on-quarter representation that will give you an insight to it. I won't rush through the figures. But if you see a [indiscernible] increase in the revenue from quarter on quarter and the current one, our selling and administrative expenses have almost remained constant from INR 364 laves to INR 388 lakhs, which shows that we have grown on the revenue portion, but not to commensurate our expenses to that extent. So hope this trend continues, and we have a better outcome from the next quarter. Moving to the next slide, we talk about a comparison of revenue and expenses. Where you see in the quarter 1, it was basically majorly under the lockdown era. And you see the growth now from INR 312 lakhs of gross revenue being moved to INR 648 lakhs, and net revenue from INR 184 lakhs to INR 330 lakhs, whereas my expenses have almost remained constant from INR 365 lakhs to INR 388 lakhs. A graphical representation of this has been given to you. Again, with regard to our priority segments, the [ clamp ] was there. The prepaid card still has grown marginally because the travel has been restricted. As Srikrishna did mention, the outbound travel or the international travel is still a restricted activity where you have only few bubble flights going across and not majorly. Hope these international borders open, and you see people moving across much higher and faster. With regard to outward remittance, you see a definite growth there. We were -- quarter-on-quarter, we were negative there. And the last quarter, we have improved our position, whereby student remittances, which is one of the major products that we do, considering the outward remittance is part of it. I will now hand over the call to Mr. Srikrishna, who will talk about the digital plan. Thank you. Over to you, sir.

Thank you. So a brief on the digital transformation the company is undertaking. We have now a platform or a map for all the major segments of our customer segments. We have a Smart Corporate platform. Today, we are happy to say that whatever business we are trying to do through the -- for the corporates, we are doing it through the digital platform. As of now, our digital GTO is 40% in this segment, which has been a steady growth for us. And going forward, we expect to onboard all the customers in this platform. This is an automated platform, which can -- which has multiple workflows and can also integrate with the corporate ERP. Now coming to the Smart Agent platform. Obviously, this was a platform which we had designed for travel agents. Last 6 months, the business has not been great from the travel side, but still we have those 250-plus agents onboarded. This is a seamless platform, which acts both as a lead management and an order processing system. And we find that there is a generally good acceptance to it. And we expect that once things change, once travel resumes, we will see good traction in this. The most important projects we had was to launch the customer proposition, our Smart ForEx app. Now that we launched in the back end of Q1, for the last 3 months, we have been marketing this product. And we can definitely say there is good awareness, and we have got around 3,000 downloads now. We expect this to translate to business over the next quarters when travel resumes. One other major, you can say, launch which we did last year was our Smart Currency Card and app, which is also integrated with our Smart ForEx platform. We are seeing again slowly business picking up, and we have started selling the product again. This is a seamless product which gives the control of the card through an app, which ensures that the customer can seamlessly transact and manage the card. So this is what the company is moving towards, a ForEx tech company, that's what we talk at Wall Street. And we feel that this -- in fact, COVID-19, this COVID pandemic has also proved that the need for going digital is paramount, and I think Wall Street is on track when it comes to that part of it. We look forward to things improving in the next couple of quarters, and we are definitely geared up to take advantage of it. Our one key segment is still -- because we have been more focused on outward remittance, we are happy to say that the study abroad segment has been still vibrant. We hope that the next 2, 3 months that travel happens, so that we can see better results over the next couple of quarters. We hope the recovery will happen faster. But then again, this is again where we have to wait and watch based on how events, [ how they happen ]. With this, I would like to end my presentation, and I will hand over the conference to the moderator. Thank you.

[Operator Instructions] We have the first question from the line of [ Vikram Damani ] from [ Damani Securities ].

I wanted to know what's your business split between retail and corporate travel. Do you have a breakup that you all tabulate?

So if you look at overall, so in the last 6 months, if you look at it, corporate travel is very much down, you are aware, since international flights are not there. So we see foreign exchange may -- we track something like customer segments. Like students is one segment we track because study abroad as a segment is a very lucrative segment for us, which is the student community. Then we talk of leisure business. So we don't literally call it because some people call all things as retail and wholesale. We track it in a slightly different manner. We call it one particular business. We call it as the student -- study abroad business, student business, which is a very niche segment, which we are -- 60%, 65% of our business comes from that segment. Second is the leisure segment. Leisure segment is nothing but people who travel overseas for their tourism purpose. That is where we sell cards and currencies that we map it as leisure. Third is we talk of something called other remittances, which is nothing but nonstudent remittances, which we track. Then the corporate segment is where we do business for corporate sector for their business travel. And the last one is the wholesale segment, which where we deal with authorized dealers. So if you look at it, remittances or the student segment account for nearly 60% to 65% of our business.

Okay. 60% to 65%, okay. Now going to...

Which is more of a seasonal business. So in 6 months in a year, in a normal non-COVID year, you can say that December, January, July, August, September are the peak months. 5 months, it will peak. Rest assured, it will be still there because there will be repeat payments [ for the next round of ] university fees, et cetera.

Right. Right, right, right. With the launch of the app, are you expecting to see greater traction amongst corporates? I would imagine that, that would do well with them.

[ We are ] -- [ this app be smart ]. So essentially, we have a corporate platform and an app, which were launched 2.5, 2 years back. But corporate platform is all about a different set of marketing where we engage with the corporate houses and make them transact through the app. Also, we have -- we can integrate -- see, one is they can use it as a stand-alone solution. We can also integrate it with their core ERP or legacy system. We can also do an API integration where their order from the travel management system can come to our ForEx system. So all these facilities we provide including multiple workflows. So corporate is not an individual adoption. It's like we go to a corporate and propose the solutions, they adopt it. We have some -- a few large corporates who have taken our apps, our platform for processing their ForEx. Smart ForEx app is towards the retail segment. That is the leisure traveler and also the student segment. A portion of the Smart ForEx app, which is the card management, will be used by the corporate customer also.

Okay. Okay, so then your fall in [ SGM ] expense, taking that into consideration. First question on that would be is this fall sustainable even with the growth in business? Or is that variable?

So essentially, when -- in quarter 1, we did a lot of exercise. One was we did some rightsizing of the team based on the business. Second is we also, you can say, closed down 1 or 2 branches. We also reduced the rental costs. So there were certain things which are long term in nature. Like even the head office, we have shifted as of October 1 at 50% of the cost. So we are trying do certain things, which will have a long-term cost impact because Wall Street has taken a conscious call to go digital in the last 2 years. So in one sense, our platforms also, as we ensure that we are able to reach the customer and not have -- not expand the physical way, digital way. So it has been our overall strategy also to reduce costs wherever possible in terms of processing costs, et cetera. But [ thankfully ], based on the impact in the first quarter, we took certain measures which will result in certain permanent reduction in costs. But obviously, when business increases, variable costs will go up like [ conveyance ], et cetera, that is purely dependent on how the GTO increases.

So within the last quarter, have you all seen like a granular trend within months? Because I'm seeing this across a lot of companies, wherein August starts to get slightly better, and then October is better than October last year or on par with October last year and vis-à-vis same thing for September. Are you seeing a trend like that? Can you throw any light on whether September this year is sort of equal to September last year? How is October doing? Any...

Yes. So I understand what you're asking. See, what happens is ForEx has been directly affected. It's not like any other business. Like a mobile business, mobile comes up in the lockdown. People -- the moment lockdown is out, they'll go and buy a new mobile. ForEx is not like that. Unless otherwise travel resumes properly, we remain affected. But since we have a diversified business, there are 4 segments. And since Wall Street has been focused on student segment, we had a better quarter last quarter because student segment, there was some traction. [indiscernible] thanks to 1-day bubble flights travel, there were some currency movement. We were able to do exports. So this ensured that we had a favorable Q2. Generally, [indiscernible] Q3 is generally a, you can say, out of all the 4 quarters, Q3 definitely is not that great a quarter. But we are hoping because the way COVID has affected, therefore -- see normally, July, August, September is peak season for us. So since COVID has affected July, August, September, a lot of travel gets postponed to December because the students next session mean they will be traveling. We are hopeful that the flight resumes, maybe that things settle down by the time we hit January -- or December, and we will have a decent student season going through. But we feel that the corporate and leisure business, which is other 2 pillars for us, is going to happen gradually only. It may take the fourth quarter or the quarter 1 of next year to really pick up to the old levels or even to 60%, 70% of the old level. Because the -- it is not something -- the nature of how COVID is acting in different places, we cannot predict. Suddenly, Europe has gone into a second lockdown, right? [ And London are now getting closed ]. So we have studied that, in fact, concern because our business is closely related to how travel picks up.

Okay. So then another question I had on the cost front. Now since you have cut down costs sustainably going forward, at what revenue level could we expect to break even, either on the gross or the net revenue side?

So if you look at the numbers, we have to earn after quarter 2, if you look at it, we should have earned around INR 180 lakhs more, right. [ That's what we see ].

Okay. So most of that, the incremental -- I guess my question was the incremental sale and incremental read in top line would translate into a significant growth in [ SGM ] or a significant -- I guess that's what I was getting at. If you're saying that if you just get a, let's say, assume a INR 1 crore growth in top line, that will wipe off our losses. So that's -- I mean, I guess then this expense level is more or less sustainable, I think, is what I'm trying to understand from you.

The expense level has been carefully -- we have see -- Wall Street has been very careful to ensure that we don't cut [ bone activities ] that we cannot recover. We have handled this entire process of last 6 to 7 months in a very, very sustainable manner. So essentially, we are not stuck to such an extent that we cannot recover. We have also ensured that kind of an ideal balance. The real incremental cost increase, we don't see a substantial cost increase going up, except for variable cost, which is nothing but commission expenses because we do deal with a lot of agents, right? Because our business, the leisure business or student business, comes through agents. So that variable costs will only go up. Fixed costs, we don't see any major costs going up because today we have got the right set of branches in place. We have our -- except for concentration in 1 or 2 regions, we have Wall Street branches in major locations. So we don't see fixed costs hurting us in any big manner.

Great, sir. And sir, one last question for me, sir. As of September, I know that you've given the balance sheet. But would you have the number offhand, what is the debt-equity ratio?

Yes. Debt-equity ratio is -- one second, just putting figures. We have a debt about 13 CR and equity about 33 CR. So you can say 1/3 or less than that. About 40%, you can say, of debt and 60% [ of equity ].

[Operator Instructions] As there are no further questions, I now hand the conference over to Mr. N. Srikrishna and Mr. Dipesh Dharod for closing comments.

Thank you.

Thank you. I would like to thank everyone for joining us and being with us, supporting us during this difficult phase of COVID-19. It is really motivating to talk to investors and also explain to them the company's growth. If you have any queries, further queries, you can visit our website or you can reach out to our company secretary. I would -- before I close the call, I would like to wish everyone a very Happy Diwali. I am sure that post-Diwali, things should improve, and we all get back on track in the old ways we are used to. I now request the moderator to conclude this call. Thank you so much.

Thank you. Ladies and gentlemen, on behalf of Wall Street Finance Limited, thank you for joining us. Happy Diwali to all of you, and you may now disconnect your lines.

Thank you.