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

Ladies and gentlemen, good evening, and welcome to Q4 Investors Conference Call of Wall Street Finance Limited. [Operator Instructions] Please note that this conference is being recorded. Material and information in this conference call is general background about the company's activities 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 holdings, purchasing or selling securities and does not take into account your particular investment objectives, financial situation only. The 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 all.

Thank you. Good evening. This is Srikrishna here, along with Dipesh, and it's a pleasure to connect once again with our investors and present our financials for Q4 and the year ended 31st March 2021. We'll start with a small presentation of the company and the strategic direction, what has happened in the last 1 year, also the update on our digital journey and also a detailed update on our results, both in Q4 and for the whole year. We have already uploaded the presentation on the company's website as well as the BSE website. Now I will go over to the presentation. So we'll start as usual with a brief about the company. So Wall Street Finance Limited, you're all aware, is a listed company. It's RBI-authorized Category 2 money changer, which means we can deal in foreign exchange, foreign currencies, prepaid cards and also do outward remittance under LRS under certain categories, allowed by the Reserve Bank of India. Now in the last 2 years, the company has embarked on a digital journey, and today, we can say that we are a ForEx fintech. We have got all propositions now in place for our various segments. We have a platform for our corporate segment. We have a platform for our agent partners. Also, we have got an app for our retail customers. So today, we can say we are a ForEx fintech. We conduct our business both through our physical branches, we have a 17-branch network, and also through our digital platforms. One of the key initiatives which was taken up because being a digital company, we need customers' trust in the information which they provide us. So we have got our ISO certification. Today, we are at ISO 27001 certified companies. Now we are partnered with multiple banks. We deal with HDFC Bank, IndusInd Bank, Yes Bank, RBL, Axis, multiple banks for our card proposition and also for our outward remittance product. We also partnered with Thomas Cook and distribute their cards. One of the key initiatives, which was our Wall Street Smart Currency Card, which is a co-branded card with Yes Bank, which is the only card with a foreign currency and an INR wallet, along with this dedicated app. We launched it 2 years back, and it saw good success. As I updated you earlier, we have got our platforms for corporate and agent segments. We also deal with key corporates like E&Y, Mphasis, Novartis, L&T and also one of the ForEx vendors for HDFC Credila, who -- these people trust us, and many of these people use our platforms for their ForEx requirements. So the next slide is about the key milestones. So what I would like to highlight is a 30-plus year old company, listed company. In the -- 2017, we sold our MTSS business. In the last 3 years, it has been a journey of the ForEx space, a stand-alone ForEx company. And the last 2 years, we have been able to get into the digital side of ForEx, where we have been able to launch various digital propositions. One of the key launches last year was smart ForEx app for retail customers. So quickly getting into the highlights for Q4 and also for the financial year. So as everyone is aware, we started last financial year amidst global lockdown. Other industry was directly impacted. International travel is totally impacted. Even today, it has not recovered, thanks to the second wave of COVID. So as a company, what we did was multiple things. One is, we concentrated on where we could do some business. We did quite a bit of remittance business. We also did a lot of cost optimization in terms of salary revisions, optimization of our branch network, shifting of premises, multiple things wherein we can reduce the cost because the pandemic -- no one could gauge the extent of the impact of the pandemic. So whatever we could do based on the situation, we did quarter-on-quarter. So that is what we did -- 2 steps which we did, one is adapt ourself to work in the pandemic through work from home; and also through effective cost reduction measures, whatever was possible. So in terms of Q4, I'll just first talk to you on the Q4 numbers. Our GTO was around INR 505 crores from Q3 number of INR 350 crores. So we did grow by 44%. NR, net revenue, from operations was INR 3.21 crores. I'm talking of net revenue. Dipesh will later cover on the gross revenue part. From INR 2.43 crores in Q3, we grew by 32% in net revenues. Expense, there was a slight increase by 14% because we had to bring our salaries back to normal and also certain legal costs were involved. At PBT, we were at a loss of INR 2.16 crores for the quarter 4. We had to do a provisioning of INR 1.1 crores for a penalty pertaining to some old case. So at a PAT level, we were at INR 1.9 crores loss. So if you say, what was the major contributor during this period was our remittances, primarily students business. When we take up the whole year of financial year 2021, if you look at it, our GTO was around INR 1,559 crores, in fact -- which was a drop of 56% over the previous year. The previous year was a noncorona year except for the last month because corona, the effect started from February of 2020. So we had a substantial impact, but as -- we had 4 legs of business, corporate, retail, remittances and wholesale, but in the last 1 year, it was only 1 leg of business which we are earning because the others have been completely impacted. Net revenue was around INR 10.78 crores, down from INR 22.05 crores, which is a 51% drop. Our cost reduction measures brought in a 24% drop in expenses, which is around INR 16.71 crores from INR 21.46 crores. So at PBT loss, we were at INR 6.96 crores, which includes the provision of INR 1.1 crores we had done in the last quarter. PAT was INR 5.11 crores (sic) [ loss of INR 5.11 crores ]. So last year, the major contribution was only from our outward remittances segment and with 80% of the business coming from the student segment. Wholesale, we had a brief period where we were able to do some exports. There was an opportunity during Q2. But subsequently, it remains impacted because flights are not moving. Only, there were some bubble flights, which had impacted us. And business travel and leisure travel had nearly 85% to 90% impact last year. Now we come back to the digital side. Of course, I will update once we go through the results. I will also give you a bigger update on digital. But to quickly talk about it, we launched our Smart ForEx platform. We also are able to get permission for video KYC and also inbuilt the video KYC module into our software. Now this is one software which has got both the card management -- card ordering and management. We've integrated our Smart Currency Card Management inside the Smart ForEx app, and also where a person can do his outward remittances. We also got our ISO 27001 certification in the last quarter. So now I will ask Mr. Dipesh to update you on the detailed financials. Over to you, Dipesh.

Thank you very much, sir, and good afternoon, everyone. With regards to the quarter 4 and the financial year 2021 results, when we compare quarter-on-quarter, that is, the third quarter versus the fourth quarter, you may look at -- sorry, when you compare quarter-on-quarter with last quarter, that is, pre-COVID era to the current quarter, which is post-COVID, so we have a reduction from INR 9.49 crores of revenue to INR 6.65 crores of revenue, which is a drop of 30%. Other income increased by from INR 107% from INR 0.49 crore to INR 1.01 crore. Basically, it's a reversal of the provision that was made in the last year for a receivable. The overall profit before tax is INR 2.15 crores loss against INR 1.85 crores (sic) [ negative INR 1.85 crores ] after taking a provision of INR 1.1 crore against an ED order. And the profit after tax is -- for the current quarter is INR 1.91 crores (sic) [ negative INR 1.91 crores ] against INR 1.16 crores (sic) [ negative INR 1.16 crores ] in quarter 4 of '19/'20. When I compare the previous quarter to this quarter, we grew from INR 486 lakhs to INR 665 lakhs. That is an increase of 37%. Other income grew from INR 22 lakhs to INR 1.01 crore. The profit for quarter 3 -- or the loss rather was -- in the quarter 3 was about INR 2.07 crores, which in the current quarter is INR 2.15 crores, which includes the provision of 1.1 crore. And the profit after tax was INR 1.39 crores (sic) [ negative INR 1.39 crores ] in quarter 3, which is right now at INR 1.91 crores (sic) [ negative INR 1.91 crores ] during the quarter 4. When we compare the year-on-year results, as Mr. Srikrishna mentioned, for financial year '19/'20, which was a pre-COVID era and 2021 was completely under COVID. Our revenue from operations dropped 42% from INR 36 crores to INR 21 crores. Other income was from INR 199 lakhs to INR 175 lakhs. Profit before tax was INR 73 lakhs loss again for the last financial year to INR 6.96 crores (sic) [ negative INR 6.96 crores ] during the current financial year. And profit after tax was INR 58 lakhs (sic) [ negative INR 58 lakhs ] in the year '19/'20, vis-a-vis INR 5.11 crores (sic) [ negative INR 5.11 crores ] during the current financial year. Moving on to the slide, you can see these are the quarter-on-quarter results at one shot for the last 2 years, that is, 8 quarters. Briefly I won't go through the entire numbers, but just to highlight a few, during the last year, you can see the quarter-on-quarter, quarter 1 was extremely down because that was the first effect of the COVID. In quarter 2, we grew back to INR 329 lakhs for -- in terms of revenue. Again, quarter 3, there was a dip. Quarter 4, we again grew back to INR 320 crores. We could have done a little better, but the second wave impacted every one of us. With regard to general and selling expenses, current year, for the full year, we have done INR 1,671 lakhs against INR 2,163 lakhs in the last year. Of course, last year, we had done some capitalization. So this is post-capitalization expenses. And with regard to the interest, there has been a considerable drop by about 67%. Overall turnover or the revenue has come down by 42%. With regard to depreciation, there is an increase because the assets -- the intangible assets or the portals and the apps that we had made were capitalized during the last year and this year first quarter, and amortization has been charged to the P&L. Other comprehensive income and taxes are just effects of the PBT figures. And we move on to the next slide. This is giving you a result of the things which we have already discussed across. These are the published results, which has been uploaded after the Board meeting. Again, on the next slide, you can see we have given a graphical representation of the revenue from operations, both gross and net, and also our selling and administrative expenses. So last year, as you see the graphical representation, there was a quarter 2 and quarter 4, which shows the growth to us. The quarter 1 was extremely down and the quarter 3, we survived and we moved ahead. With regard to expenses, there was a marginal increase in the expenses as there were certain salary rollbacks, certain legal costs and also change in the branch setups. With regard to our priority segments, on the next slide, as you are all aware, the travel is still under bubble flights and has not completely grown up. So the travel card sale has been affected and, therefore, the figures are not there. But on the other side, if you see remittances, student remittances, in particular, has shown a very good growth. And we have -- from the base year, we have grown about 107%. And from the last year also -- from the last quarter also, we have grown, showing a substantial growth there. With regard to the digital products, I would like Mr. Srikrishna to again take it over from here. Over to you, sir.

Yes. Thank you, Dipesh. So when we talk about the digital journey, this is the strategic path the company had taken 2, 3 years back when we started this ForEx journey. We wanted to be a ForEx fintech. So there are a lot of efforts we have put in, and we have now come out with all the platforms smart corporate platform. We have 100-plus corporates in the platform. Obviously, corporate business is down by 90% last year. So we cannot say much about the contributions, but still we can proudly say that we have got a platform for corporates. We have some large corporates in the platform. And also, whatever business we are doing, around 42% of our business is coming through the smart corporate platform. As far as Smart Agent Platform is concerned, this is one platform which is a base for a lot of our activities in terms of automation. We are proud to say that we have some 200-plus agents in this platform. We are trying to integrate this with large partners. And we are very bullish about this platform, bringing in a lot of change in the agent ecosystem. When you talk of smart ForEx app, we launched it last year. Obviously, there was a lot of challenge in terms of KYC things because earlier the clarification was not there on video KYC, et cetera, but subsequently, the video KYC part has got clarified. So we have built it into our system. And we have also integrated the Smart Currency Card into this app. So today, you can say that we have around 3,000-plus downloads and our entire base of smart currency cards moving to this app. So we look forward to this app bringing in that much needed newer revenue stream to us when things open up in a big way. Parallelly, we also have worked on our ISO certification, and we have got our ISO certification for information security management system. One other thing which we are doing is, we are also in the final stage of launching our consumer portal because we first launched the app, but now we are launching the portal also and also we are bringing in a little changes in our app. Redesigned app also will be launched and a new website is also being launched in the first quarter. We also are happy to say that we participated in the RBI regulatory sandbox for cross-border remittances and showcased our outward remittance product, which is kind of an innovation. And we are hopeful that we should be able to -- we will be given a chance to demonstrate the same. With this, I would like to come to the end of my presentation. Thank you, everyone, for being with us. These are tough times, and we need all the support. Now I'd like to hand over the conference to the moderator. Thank you.

[Operator Instructions] The first question is from the line of [ Nimis Sheth ] from GT Advisory.

Your comments were very good. It's been an unusually difficult year, especially for the segment in which we operate, which is the travel segment. But I would say, I'd like to congratulate the management for keeping its focus and working on all the bits and pieces that are required to position the company correctly when the sector finally opens up, so working on the portal, on your smart app, et cetera. I have a couple of questions. These are all actually based on the financials. One is the provision of INR 1.1 crore that you've made in the quarter and for the financial year, what exactly is that? Last second is, there is an old matter relating to service tax. This is an industry matter, and the industry is fighting this case. I just want to know -- I mean we don't know the outcome of the case, but I just want to know what is the liability that the company is contesting? What is that number? And the third is, what is the cash position in the company? I know we have FDs, which are utilized for businesses, et cetera. But now that we are making losses, some of those FDs may have got consumed, some of that cash. So what is the latest position? So these are my only 3 questions. We're hoping that FY '22 will be a much better year for us.

Sure. So what I will do is, I will answer a part of the question. Dipesh will answer the service tax part. The first question is about the provisioning which we have done. So essentially, this pertains to certain transactions for the year 2014, as we have mentioned. And that had -- that was taken up by ED. And this is something -- we cannot talk about others, but it is again an -- quite a few players, these transactions are taken up. But what has happened is -- and then they have come out with a show cause, and we got the order. Exactly, if you look at it, we got the order on 25th of March. And we got the order on 1st of April. So we got this order imposing us a penalty. There was a show cause, and then we had replied, and then it was -- a penalty was imposed. So essentially, it pertains to certain card transactions, which was conducted by the company in 2014. So what we have done is, we have gone in for an appeal with the Appellate Tribunal -- FEMA Appellate Tribunal. We have got time for us to apply. So we have contested the penalty and applied for the -- applied to the FEMA Appellate Tribunal, saying that we have conducted the transaction as per the extant guidelines. So this is the case. I cannot go into the nitty-gritty of the case because since we are contesting on that. So essentially, since it's an ED order, we need to immediately provide for it, even though we may have received it on 1st o April. On 25th was the order dated. So in the last minute, we -- at a prudent -- what is prudent we thought was to provide for it because since it's an order from the DoE. So that is the thing. So case is being contested. We are -- on the merits, we are -- on various grounds, we are contesting this with the Appellate Tribunal, and we are waiting for the outcomes. But provisioning needs to be done. Since the order has come to us, we need to provision for the same. That's why we took this call that let's provision for it being a prudent practice, but parallelly also appeal against the order. That's what we have done. Last year also, if you look at it, for a receivable, we provisioned it because we thought that was appropriate. And this year, we recovered that, and also in the fourth quarter, we got the money back. So that's what is this appeal all about. I cannot go into nitty-gritty on our public forum. So this is how -- what I can provide. As far as service tax is concerned, Dipesh, can you update?

Yes, sir. Definitely. With regard to service tax, the liability that you're mentioning -- of course, it's an industry issue, as you have rightly pointed out. The liability should be about -- close to about INR 15 crores to INR 16 crores that -- what we foresee from here. But of course, it is subject to a lot of provisions, where we are very clear. And of course, what -- the entire industry is clear that it should not be charged. But of course, the matter is subjudice, so it's there in the open forum. And with regard to the cash, sir, would you or should I take up?

Nimis, if you look at the cash position. So essentially, we have had a cash loss of close to around INR 4.8 crores. So if you subtract the depreciation, that's our cash loss. Minus provision, minus depreciation is our cash loss. The company has cash. Even for the next 1 year projections, we will not be short of funds. And we are pretty -- see, the question is, coronavirus effect could not be predicted actually. Initially, we thought we will come out of it by the third quarter. Third quarter, international impact -- impact of second wave happened. So even though we were better off, we thought we have come out of corona. Because our very nature of the business, we got stuck on third quarter very badly. Fourth quarter, January was fantastic. We were close to even, you can say, breakeven. Suddenly, second wave started, and it is really -- the impact of the second wave has been terrible. So we again started having an impact from February onwards. But the good thing which I can tell you is, when I compare last April to this April, last April, our business just went down. This April, we still are able to sustain a substantial amount of remittance because there was a lot of optimism in terms of the students business. Because even if you look at the U.S. directive, they said Indians, don't come, but students, if you have a visa, we will allow you entry. So we're still optimistic about the student season happening. And hopefully, with the vaccine and all coming through, we hope that by the third quarter, the things should be positive. But as I said, COVID second wave impact was something which no one expected the ferocious nature of it. So we always have to now have a word of caution because there is something which is slightly -- which is not in our control. That is how this COVID impact pans out in the next couple of months. But we are optimistic, as the COVID pandemic has proved one thing. Digital is important and which we have already been on the job of being a digital company. The business remains kind of a business which is -- a lot of people are bullish on. Global companies are coming into India for outward remittances, card product. So that also validates that the space we are in is a good space. But then again, we are impacted directly today. So maybe for some time we have to wait it out.

[Operator Instructions] The next question is from the line of [ Vikram Damani ] from Damani Securities.

I have 2 questions. First, in your cash flow, I see that there is some amount set aside for dividend payment, is that right? Are you all paying a dividend this year?

Gentleman, that is the last year dividend, which was actually paid out during the month of October. So the effect comes in the current year of the cash flow. The last year we had declared INR 1.50. So that's that amount, sir.

Okay. Great. And one more question. Now you said that Jan was almost breakeven for us. What was the Jan sales number? How much business did we do in Jan? I just want to get a sense of what -- just to extrapolate and see what our annual breakeven would be.

No, no, no. See, I will be very clear with you. If you look at our -- I have also mentioned the cost per se. If you look at my slide, that's what -- the financials are always expressed in gross. But net expenses also we have now tried to represent to give you a fair idea. Our breakeven, at any point of time, is around INR 1.5 crores a month.

INR 1.5 crores a month. That's what I wanted to know. Okay. Great. That's it from my side.

So we have brought it down from the substantial cost reduction that happened. Earlier it was INR 2 crores, now it's around INR 1.5 crores.

Okay. Awesome. Good to know.

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

Thank you. I would like to thank everyone for joining us for this call. Once again, I would like to thank everyone for their support and their understanding because these times are difficult, both at a personal front and also at -- when the business is really going through a lot of challenges. We need your support. We are confident that together, we will come out in a successful manner. And please reach out to us in case of any queries. You can reach out to our Company Secretary. I will now request the moderator to conclude the call. Thank you so much.

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

Thank you.

Thank you.