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

Ladies and gentlemen, good day, and welcome to the Wall Street Finance Limited earnings conference call. [Operator Instructions] Please note that this conference is being recorded. Materials and information in this conference call is general background about the company's activities as on date of this presentation. Information in this presentation should not be considered as advice or a recommendation to investors or potential investors in relations to holding, purchasing or selling securities and does not take into account your particular investment objectives, financial situations or needs. This information is given in summary form and does not purport to be complete. I now 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.

Thank you. Good evening, gentlemen. This is Srikrishna here along with my colleague, Dipesh. It's a pleasure to once more connect with our investors, stakeholders and present our financials for the Q3 and the 9 months ended 31 December 2020. I'll start with a small presentation on the company, the Q3 results and update on our digital initiatives. We already uploaded the presentation on the company website as well as on the BSE website. Now over to the presentation. A brief about Wall Street. So I'm going to discuss about the last 3 years of the company, which is where we have been a stand-alone ForEx company. The last 3 years, we have built our ForEx business, and we have pivoted towards a tech-based ForEx solutions company. As such, we are a licensed entity, licensed by RBI. We belong to 82 categories. We provide ForEx and outward remittance solutions. And we concentrate on key segments, like student segment, corporate business, leisure business and wholesale. We also facilitate travel insurance. We have a network of around 17 branches spanning India through which we provide our services. The services which we offer, like ForEx cards is through tie-ups with banks like Yes Bank and also with Thomas Cook. We have our own solution, which is called a Smart Currency Card, which is in sponsored arrangement with Yes Bank. We also provide outward remittance solutions. And we are tied up with banks like IndusInd Bank, Yes Bank, Axis. We have multiple arrangements in our outward remittances, where we provide services to multiple -- for multiple categories under the Liberalized Remittance Scheme. We have a large association with corporates, like E&Y, Mphasis, Novartis, L&T, Happiest Minds. We also are one of the key partners for HDFC Credila. So now moving to our Q3 results. The Q3 as such was a mixed bag with October and November majorly affected because of the second wave, which is the pandemic effect, which we can say is the second wave. Our business primarily is not only based on domestic sentiments. It's also about how things move in the international front because travel is key for the business. But the fears of -- again, we have also, in some places, there are again lockdowns, which ensued effectively travel -- international travel was not back in place. As of today, even today, full-fledged international travel -- flight movement is not happening. So we had multiple things. One was the impact. Then there was an implementation of a guideline called TCS, which talks of tax collection at source, wherein tax is collected upfront for 5% for LRS remittances, which was implemented in October, which was also something a regulatory change which had happened. So this all had an impact on our business because Q3, as such, in general, is a period where our remittances do slump because students do not remit during October, November to that extent. Parallelly, because of this negligible international travel, all our other segments did not take off. So what went down? Q2, we did start very well. Because after the total lockdown from Q1, Q2, we did have a good period where we did show a good spurt in remittance. In Q3, October, November, because of this TCS impact, because of seasonality, our outward remittances did come down a little bit. But one major impact which we had was our wholesale business. Because in Q2, we took an opportunity, there was a lot of currencies in the market because of people coming back to India, the currency movements are quite high. So we started our exports of foreign currencies, which came to a standstill by Q3 because one is travel is not there and people coming in are also reduced. So currency availability became minimal. So export of foreign currencies, which was an activity, which gave us good revenues in Q2, was not there in Q3. So what remained for us was only the student remittance business. There's not much travel happening, but people paying their fees. That is what we did predominantly in Q3. Yet we did take some cost reduction measures. We shifted our head office. We closed a couple of branches and obviously waiting for the market to change. Luckily, the sentiment had improved by the time we hit December. We had an uptick in the student business. And going forward to Q4, we feel that, that will persist. And we are also optimistic about regularization of international flights, wherein besides the students business of just remitting the fees, we expect the students to now travel, take ForEx cards, currencies, parallelly leisure travel opening up and corporate business, opening up to some extent in a gradual manner, which we feel the sentiments are positive, we are seeing an uptick and we hope that it persists. When it comes to the financials, our GTO was around INR 350 crores. Net revenue was around INR 2.40 crores. Expenses was INR 4.27 crores. So at a PBT level, we are at a loss of INR 2.06 crores and at a PAT level, it was INR 1.39 crores. Parallelly, during the same period, we were working on our digital solutions, and we were able to implement our Video-KYC solution. Today, our Smart ForEx app has a VCIP process embedded in it, which ensures a remote onboarding of customers. That is something we were able to launch in December. Parallelly, because since we are getting into tech-related areas with multiple platforms, the need to ensure that the customer trusts us in terms of our capabilities in terms of our systems, we have gone in for an ISO 27001 certification. In fact, we completed the process in December. And in January, we were gunning for a Level 1 and Level 2 audits also from the agency. And shortly, we are hopeful to get the ISO 27001 certification, which will give a comfort to people who deal with us and with our tech solutions. Now we talk of key highlights. I will hand over the call to Dipesh, who will update you on our financial comparison, okay? Thank you.

Thank you, Mr. Srikrishna. Good evening, everyone. With regards to financials, when we compare quarter-on-quarter, the current quarter 3 vis-à-vis the previous quarter, our revenue from operations during the current quarter, we have closed INR 486 lakhs against INR 647 lakhs, showing a decrease of 25%. And other income is INR 22.32 lakhs against INR 25.90 lakhs, a decrease of 14%. On the PBT level, our loss for the quarter is INR 2.07 crores against INR 85 lakhs of the previous quarter. And profit after tax is INR 1.39 crores against INR 50 lakhs in the previous quarter. When we compare quarter-on-quarter with the previous year of the same quarter, of course, the major difference is one was the pre-COVID era. And the second one is the current one is the post-COVID era. So revenues have dropped about 44% from INR 873 lakhs in quarter 3 '19/'20 to INR 486 lakhs in quarter 3 2021. Other income have come down from INR 50 lakhs to INR 22 lakhs. Profit before tax was INR 10.86 lakhs positive, which has come down to INR 2.07 crores for the current quarter. And profit after tax was a marginal INR 1 lakh positive in the year in quarter 3 '19/'20, which has come to INR 1.4 crores negative during the current quarter. When we have a look at the 9 months results of '19/'20 versus 2021, of course, pre-COVID and post-COVID era. So '19/'20, we had done revenue from operations of INR 26.82 crores against which we have done INR 14.46 crores during the current 9 months. Other income of INR 150 lakhs during the first 9 months of '19/'20, vis-à-vis INR 73 lakhs of 2021. Our profit before tax during the last 9 months '19/'20 was INR 1.1 crore against a loss of INR 4.8 crores in the current 9 months. And profit after tax was INR 58 lakhs against a loss of INR 3.20 crores during the current 9 months. The next slide, it talks on quarter-on-quarter, it gives you a flavor of last 11 quarters. It's just a representation. Most of the figures are covered in the earlier slide. So on a quarter-on-quarter basis, these are the results that you can see. When I move to the next slide, which is about revenue from operations, both gross and net revenue, how they have moved from every quarter. And with regard to the other slide that I have or the other position that I have is on selling and general administrative expenses, which has slightly gone up by about INR 39 lakhs from INR 388 lakhs to INR 428 lakhs, majorly due to some factors of rent reversals, few on salaries and loan backs and some on the legal fees. As Mr. Srikrishna mentioned, our priority segments were prepaid cards and outward remittances. Predominantly, since the travel was not there, cards were not sold -- or people in travel to cards were not sold much. But still, we have recovered partially from the quarter 2 to the quarter 3 period, both of those numbers. But with regards to the outward remittances, there was a larger percentage of things that have improved, so we could see the effect there. And now over to digital initiatives, I'll now hand over the thing to Mr. Srikrishna, who will take it from here. Over to you, sir.

So essentially, a brief about our digital initiatives. So it has been Wall Street's endeavor to be a digital ForEx tech company. So in the last 3 years, we have been able to bring in additional platforms for every customer segment. We have not tried to go on a branch-based approach and we have gone on a technology-based approach, transforming into a digital ForEx tech company. Our Smart Corporate platform is live and active. Of course, corporate travel is at a 10% to 15% level when it compares to pre-COVID era. But the effort has been to majorly shift all corporates to the digital platform. We can say around 40% of our business is to the digital platform. As far as Smart Agent platform is concerned, we have been -- we have onboarded around 300 agents there. Obviously, tour remittances has not been there because of COVID. But we expect throughput happening there. During the 9 months, we were able to process around 1,000 transactions for Smart Agent platform also and tie up with travel agents, et cetera. When it comes to Smart Currency Card, the card is very much active and doing well. We are migrating the card Smart Currency app to Smart ForEx app this quarter so that, that will be a single app, which will manage both the ForEx currency card and remittance card. As far as Smart ForEx app is concerned, which was launched around 6 months back, we have got around 3,000 downloads. We have also embedded the VCIP solution, which is something which every digital company is now getting into so that we can onboard the customers digitally. So that is something which we have done in December. And when things open up, we do feel that there will be customer adoption for this seamless app, which we have brought to the market. So with this, I would like to close my presentation. I would again thank everyone for the support. I would now like to hand over the conference to the moderator. Thank you.

[Operator Instructions] First question is from the line of [ Pankaj Kumar ] from [ Rare Limited ].

We have seen a lot of changes in the segment basically in the -- so I just wanted to learn that you've done a partnership with the U.S. bank in Thomas Cook as per your presentation and this IndusInd Bank. So how this story will convert into the numbers? That is the first thing. Because from the last 6 quarters, you are not able to generate great numbers. That was in a pre-COVID time also. If you can compare the numbers that time and today also, the numbers are -- I mean, right now, international travel is not happening. But once it's opened up, I mean, how the story will convert into the numbers. Can you explain that? And secondly, there is a lot of liquidity problem in the stock, even if somebody wants to sell 10,000 shares and somebody wants -- so why don't the company come to the buyback offer or something? Or what are the management thoughts about making this particular stock more liquid, so that big HNI investors can participate?

Sure. So firstly, I'll talk from the business perspective. If we look at it over a 3-year horizon, Wall Street's predominant business was -- MTSS was the predominant business 3 years back. We sold the MTSS business exactly 3, 3.5 years back in 2017, October. So after that, ForEx, as a standalone, was concentrated upon. And there was a strategic direction, which was given to ForEx, where we wanted to transform the company from a physical infrastructure-based company to a digital company. Obviously, revenues were not that great in ForEx when this happened and costs were much higher than the revenues. And literally, if you look at it, each of the segments has grown. It cannot be said that the business did not grow. Remittance segment has grown substantially. Even in the COVID era, the numbers which we have shown has -- is more than what we started the journey with, which shows very clearly the kind of tie-ups and strategic direction the company has taken. Because 2 things that -- see, from a predominantly MTSS operation and a wholesale operation, whilst still was more concentrated on wholesale operation, we moved to something called corporate retail student focus, which was a strategic shift from the customer segment perspective. And also on the digital side where, as a company, we took a conscious call of getting into the technology front. So where as a company, the company did not have a technology background at that point of time, but in the last 3 years, 3 -- 2 strategic directions was taken. Listen, we moved from wholesale to retail. So when we moved from wholesale to retail, this doesn't happen overnight because wholesale is a complete different ball game. Retail operations, we were able to have some big relationships in place. One of the biggest tie-ups we have had is with a company called HDFC Credila, which is contributing substantial revenues to us. Parallelly, we have got some very good corporate tie-ups, which has started happening. So over the last 2 years before this COVID thing impacted in February, the company has started embarking a broad path with revenues also going to around INR 2.3 crores on a net revenue basis. So essentially, an investment of time and effort was put in, in terms of developing newer customer segments, which will be relevant for the future growth of the company and also to get into the technology side, which was also something which we brought in with development of platforms for every segment. Unfortunately, for us, when we felt that things are expected to take shape, we had the impact of COVID. So in the last 9 to 12 months, if you look at it right from the end of February, international travel is completely out. So how much ever we may say, our business was directly impacted because of the pandemic with no flights there. Literally, initially, there were [ one-way flights ] coming in, we did some encashment, we did exports. The only area, which we were able to concentrate or do some business was in terms of outward remittance for the student segment, which we were able to handle throughout this 9 to 10 months period. In fact, it had also shown growth. If you look at it, we had a very good Q2. But Q3, when there's panic, when no one could anticipate how the next month is going to be, we were also in a no situation to do anything because October, November was such a slump that things did not go as planned because we thought the sentiments will improve, gradual opening will happen. So we were struck with again outward remittance only. Now we feel that things are improving because it's vaccine [indiscernible] news and all. The company has -- of course, we went with a lot of cost control measures in the first 2 quarters. Now slowly, things are improving. We have a good team in place. We have digital platforms in place. We are optimistic that whatever we could not scale up because of the pandemic, once things come back, we should be definitely able to scale up because as a company, we feel we have now got the technology edge also. And parallelly, we have done a lot of ground work, during the pandemic phase also, we are onboarding customers to our platform. Once travel starts, once international flight starts, we see this translating into results. That is from a business perspective. Dipesh, you can talk about...

Yes. With regard to share prices, it's a pure market thing that is there. We, as the management, don't control the prices nor the liquidity in the market.

I'm not requesting you to control the prices like Spice Money. But I'm requesting you to just improve the liquidity, either you can split the share or you come out with a bonus issue. Because the numbers -- the results are not so great right now. The only option is to split the share to INR 1 so that anybody -- just like there are 2 big investors that are holding around 8%. Now out of that, if 90% of the liquidity is there with the 3 people, 1 with the promoter and 2 with the HNI, then the rest is just -- has nothing to do with the stock market. I don't know why you are a listed entity and why with a INR 17 crore market share, only the -- or INR 1.7 crores share there to buy or sell, out of that, only 500,000 trades. So there is no use of doing a con call also, wasting time and money on these things. That is my personal view. I may be wrong, but... Second, because of [indiscernible], even if like INR 2 or INR 1, just to increase the volume so that anybody who wants to -- even this HNI who wants to sell, he can sell it at INR 10. But he will not -- he wants to sell it at INR 10, but he's not getting a buyer because the volumes are not so much. And nobody will pay a premium for the next 1 year or 1.5 years until all the things to go in the right direction from an international trade point of view. And sir, whatsoever PPT you have put, there is no difference whatsoever you've said -- if you see the last transcript of your call, there is no value addition whatsoever is given in the PPT. I mean it's all about the same, it's just that you've launched the Smart Fx B2C app. There is no progress in the last 4, 5 months within the company.

So essentially, what I'd like to say is, see, 2, 3 things. One is your suggestions related to split of shares and all, we will discuss with the Board. Second is, as far as the last 9 months is concerned, obviously you have to understand that it was a period where nothing much was happening. But in one leg, we were doing business. There is something from a technology side, we have tried to embed a VCIP solution. But from an overall perspective, our business was affected. So essentially, there cannot be some major additions in the presentation. Because whatever we see, from a cost perspective, it is not -- it's like we want to present what is the company's performance in terms of transparency and have a discussion and tell us where things are moving. But essentially, if you look at from April onwards, April to December, our business was directly affected. So there's not much action in the business. Whatever action is that we are trying to do, we are trying to scale up at a background level, at a business level. But from a results perspective, it will be visible only when things start, when flights resume and all. So that is what -- you can see, there's nothing much we can show because obviously nothing much has happened in the last 9 months.

Yes. How much is the debt in the books right now? It was INR 13 crores last we spoke, I think.

Sorry?

How much is the debt in the books, sir?

Debt in the books. Yes, debt in the books is around the same, INR 12 crores to INR 13 crores right now.

INR 12 crores to INR 13 crores. Okay. And sir, just to reiterate, I mean, who are our core competitors domestically? And now you've launched the app, there are a few other apps which are available on Play Store and Apple Store. So who are the main guys who are doing the retail thing? Is Amex or other big players are also there into this business?

So I will let you know. So we belong to a category called Authorized Dealer Category II. So if you look at it from a competition perspective, along the same category, you have Thomas Cook, which is the largest player. Then there is a company called EbixCash, which is there, and Wall Street is there. There are 1 or 2 more companies, Travel Money is one company. There are a few smaller companies. Of course, the market was subject to a large consolidation 2 years back because Ebix was formed with the amalgamation of multiple companies. So this is as far as 82 categories is concerned, there are aggregators, unlicensed players who do tie up with money changers [indiscernible] and try to launch their app. That part is also there. They are not licensed entities. There are also a few applications which are there.

So how much is our market share right now? I mean how much market share is there with Amex and Thomas Cook? We are #4 right now, I believe.

So see, it is very subjective. In the segments, we can say we should be -- in remittances, we should be #3. But they have a higher business in terms of wholesale and on. So if you look at it from a remittance perspective, we should be #3. But these numbers are subjective because we are also competing with banks. And we are doing a portion of what the banks do predominantly.

Okay. And now your -- with all due regard, your other company, Spice Money, is doing well. Why don't we take a benefit of that because they have got a good range in the smaller cities? Why don't we do a tie-up with them for -- or earlier, one of the lady who was a director here is a director there also. Why don't we take a benefit of them going to the smaller cities, cities like [indiscernible], Coimbatore and all those -- or in Kerala, where they are already present and you can get a lot of untapped business, sir?

So essentially, we have 6 branches in Punjab. In fact, Punjab is one area where remittance is high. So we have covered extensively Punjab. Kerala, we have a branch, Coimbatore also we have a branch. See, our business entails that we should have a presence with a branch. But what we have done through our digital platform is and also through the digital KYC initiative, like VCIP is, we are also having agents who can generate business for us. So definitely, the requirement is the segment of customers whom we have are a little different, the people who travel, who remit. So sometimes it doesn't exactly match. But wherever possible, we have tried to tie up with agents like educational consultants. We are able to tie up with travel agencies, who are into related businesses, who can generate customers to us. That is not our major tie-up, but we have 300-plus travel agents pan-India, and which is video or KYC onboarding and further relaxations which you asked from [indiscernible]. We are definitely sure that through our agent network, which can be the Spice Money network or any other network also, we should be able to provide our solution pan-India, where our goal is that you should be able to do your remittance transaction completely online. That is what we are working towards instead of trying to come to a physical store or we coming to you and taking a physical application form.

Okay. Sir, can you share your e-mail address so that if any further questions are there, we can send you a mail directly?

Yes, definitely. So we'll share the e-mail later at the end of the call.

[Operator Instructions] The next question is from the line of [ Nimish Set ] from [ JT Advisory ].

It's been a tough year and a tough quarter. We appreciate your digital initiatives and continuous spending on your -- on the same. Can you just give us a brief background on how much we have spent this year on the digital initiatives? How much we intend to spend for the year and the spending for the coming year, that's FY '22, on digital initiatives?

So to give a brief, our major development got over by the first quarter of this financial year. So essentially, earlier, we were amortizing the cost or capitalizing the cost for development. Now we do no longer do that from Q2 because our major work is done. And now we have a team, which enhances, which supports. We have a 12-member team, which is into technology. Because not only do you have a solution, but you have to support the solution and then you have to keep on rolling out updates, enhancements, promotions, et cetera. So as a fintech company, that is an investment which is going to be there if we want to remain in fintech. But obviously, now it is booked as expenses because the development part majorly has got over. Now from a -- so naturally, a 12-member team for digital would cost us around anywhere between at least INR 10 lakhs a month. That is the constant expenses we will have from the technology front. Obviously, with business growing, it can also become higher. There will be associated marketing costs when we move aggressively on the retail space. Dipesh, maybe you want to elaborate on it in terms of figures?

Yes. So with regard to digital costs, basically, as Mr. Srikrishna mentioned, about INR 10 lakhs worth monthly expenditure is there plus we do some promotional cost on the portion also. So those are the 2 major costs at this current level. Besides that, the portion or the software, what we have capitalized, are now getting amortized towards the useful life of 7 years, as we had mentioned in our financials. So the amortization cost is coming in depreciation to us as an expense in the P&L.

Next question is from the line of [ Vikram Damani ] from [ Damani Securities ].

I just wanted to know how we are doing this quarter. And can you give any guidance, how you expect the next year to play out and when we can expect to break even?

Sorry, gentlemen, can you be a little louder? It's not audible.

Is this better?

Yes, that's better, sir.

Right. So I just wanted to check with you how you guys are doing this quarter. And if you can give any guidance on how you expect the next year to play out, when we can expect to see hopefully maybe a breakeven of profitability. Without obviously getting into any specifics, any sort of guidance that you can provide for us?

Yes. So as I told you, things did improve in Q2. Q3, we had a bad 2 months. And December, our peak has been there in the student segment. January has been good. We expect a decent quarter compared to Q3 because we feel that the -- slowly things -- if you see, there's a lot of optimism in the domestic market. But the real optimism for us will happen when flights resume. Today, flights are expected to resume from February 28. That's what the last government directions. So we are still pushing the remittance part. Student remittance has been there. U.S. market, which was supposed to be a little uncertain, is now things are working out and we are having students going to U.S., which is generally the largest segment for us, which is very positive for us. But the question is when are we going to travel? That is a fundamental question, which is uncertainty. That can only be answered when the flights start. Because from our perspective, when the flights start, our business actually starts because that is when we sell foreign card or currency, et cetera. That is when the leisure traveler will travel. That's when corporate travel will at least start coming to some semblance. So what we feel is the outlook is positive. There has been a V shape in most of the businesses in the domestic market. International business, the moment flight starts, we will see positivity coming in. Until the flights are not regularized, there will always be an element of uncertainty. Because simply put, then we are stuck with only one leg of our revenue stream. But the moment flight starts, automatically currency also comes in, currency requirement is there, our wholesale picks up, our corporate picks up, our leisure picks up. Our students travel overseas. And when they travel overseas, we have further living expense remittances, further loading in cards. So a lot of things will start happening the moment uncertainties related to international flight travel regularization happens. We are positive with the vaccination happening. The global sentiments will change. And things will start happening with people traveling again. So we expect this quarter to be much better than the earlier quarter. That is our expectation. And we are also positive that by the time we hit Q1, we will have a semblance of normalcy because whatever percentage of domestic flights which have opened, if you must be traveling, you must have seen the flights are running full. So we are also positive that once the international flight regularization happens, we will see a very good uptick in our business.

Okay. Another question is if we -- if and when we do get back to a INR 30 crore, INR 35 crore a year top line, can we expect, given the digital initiative, a lower overhead number or lower total expenses?

Yes. So expenses, some of the -- see, naturally, income has been hit very badly. But if you look at it at the expense level, we did a lot of measures, which has brought in a permanent reduction in expenses. One is, thanks to digital initiatives, we have even shut down a few branches, and we don't expect to open branches. We plan to -- through our digital platforms and through agent onboarding, we plan to reach pan-India, most of the cities with KYC initiatives, et cetera -- digital KYC. Second is we have also reduced cost in terms of taking smaller offices, et cetera, which are permanent in nature. So essentially, through this digital initiative, through digital KYC and the agents on -- the agent model, we expect to have a far better reach than a branch model. So definitely, the expense is not going to go up commensurate to income. That much we can, we are confident.

Yes. Further, with regards to the investor e-mail ID, it is [email protected]. You may contact us on that ID.

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

So thank you. I would like to thank everyone for joining us. As we understand these are difficult times. We thank you for your support during these difficult times. Our investors' backing are very important for us to sail through these times. We are confident the company has come out with a lot of steps, which will ensure that we are able to see better numbers and better times once things resumes to normal. We thank you once more for your support. And in case you have any clarification, you can reach out to our company secretary. I now request the moderator to conclude the call. Thank you so much.

Thank you very much, sir. Ladies and gentlemen, on behalf of Wall Street Finance Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.