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

Ladies and gentlemen, good evening, and welcome to the Q3 Investor 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 activity 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 security and does not take into account your particular investment objectives, financial situation or needs. This information is given in the summary form and does not purport to be complete. I now hand the conference over to Mr. N. Srikrishna, CEO and Whole Time Director; and Mr. Dipesh Dharod, Chief Financial Officer. Thank you, and over to you, sir.

Yes. Thank you. Good evening. This is Srikrishna here along with my colleague, Dipesh.

Good evening, all.

And it's a pleasure to connect once again after quite some time to present our financials for the Q3 and the 9 months ended 31st December 2021. As always, we start with a small presentation of the company, update -- give a latest update on what's happening in the company, the direction -- strategic direction in which we are progressing along with an update on the digital initiatives besides the results which we'll be talking about. We have already uploaded the presentation on the company's website as well as the BSE website. Now over to the presentation, a brief introduction about Wall Street. So we concentrate more on the last 3, 4 years where the company has been progressing in the ForEx space post the sale of its MTSS business. So Wall Street is an AD Category 2 license holder from Reserve Bank of India, listed in BSE. And today, we are an ISO 27001 certified company. Last 3, 4 months back, we were selected for the RBI sandbox for cross-border remittances, and we were able to test our product in the sandbox. So we can say with this, we have established ourself as a ForEx fintech with a cross-border remittance product. So what exactly we have been doing? What is the journey we have taken in the last 4 years? One is after post sale of MTSS business, moving from a traditional money-changing, wholesale-centric business to a retail ForEx business with stress on students and millennials. This has been a key focus, and this strategy had helped us over the 4 years, last 2 years was struck by pandemic. And this focus of moving from wholesale to remittances had really helped the company because during this pandemic period, only remittance was the business available, and we were able to generate some revenue from this activity. We have a network of 15 branches pan India, and we also have digital platforms for all our segments. Today, business -- more than 50% of our business in the corporate side comes from the corporate platform. We have an agent platform for our agent partners. And we also have our consumer offering in the form of an app besides managing the Smart Currency Card, which was a bench-sponsored card which we launched a couple of years back. Coming back to the RBI sandbox testing, we were able to showcase our product called WSFx SecuSmart REMIT, which is a fully digital product for outward remittances unrealized. I will be discussing in detail later in this presentation on this product. We have a good base of customers. We have strong partners like HDFC Credila, Incred, Landmark. We also have large corporates like E&Y, Hexaware, Siemens, Mphasis, Persistent Systems, who use our services. Obviously, being in the travel space where we are dependent on international travel, last 7 quarters, we've been affected by the COVID pandemic. Going to the next slide. This just gives an overall view of what we have done in the digital side, focus on creating platforms in the last 3 years, we have built platforms for all our businesses. And today, we are happy to say we have customers -- a healthy number of customers onboarded, and we are transacting. Last 2 years, as I said, pandemic has impacted us in a very severe manner. Now coming to the highlights of Q3. So I'll talk a little bit of Q2 also. So Q3, in a sense, we can feel happy that for the first time we saw some growth in corporate and leisure segment. Over the last 6 quarters, it was more or less not there because of pandemic. But since there was a slight opening up, we saw a surge but not enough because still there are pandemic periods in the later part of the quarter, we had this Omicron effect also. But what is positive is now this segment is also picking up with people started traveling. But since borders were not open, we couldn't see the level of business we are expecting did not happen. Q3 signifies a kind of a holiday season. If you look at it in foreign exchange, Q3 is kind of a lean season where people come to India. So as student season gets over by September. So between Q2 and Q3, we saw a dip in our students' business because students' business is a seasonal business, where the peak is for 4 to 5 months in a year. So naturally, we had a dip in the students' business in October and November. Earlier and all during this period, we will have engagement support with NRIs coming back to India and people coming to India tourist location. But because of pandemic, that business is not available to us. From a financial perspective, we were at a net revenue of INR 3.51 crores in Q3 from INR 4.46 crores in Q2. So there was a degrowth of 21% quarter-on-quarter. But as I explained to you, students, which is the main thing and the only business available, tapers down in Q3. When it comes to expenses, we were at INR 5.32 crores. We had a loss of around INR 2.05 crores for the quarter as against INR 14 lakhs on Q2. An important update on digital is this RBI regulatory sandbox. We were selected for our product, and we did our testing in Q3. In fact, we completed in -- our testing in February 7th, it was the entire Q3 plus 1 month we did the testing. This is a fully integrated solution where we have showcased our digital onboarding process, including video KYC, Aadhaar eSign. We have also done integration with Visa Direct to transfer funds to international -- to the beneficiary's international debit card. This is the first time this has happened, and we have been able to successfully showcase this also. Now the testing is complete, we will be waiting for the next set of steps we will take on this. Next slide, we talk of a comparison between the various quarters and the same period last year. If you look at it from an overall perspective, our income has grown. So between Q3 of current year and the Q3 of previous year, we have shown a 59% growth. Our gross revenues were at around INR 7.72 crores as against INR 4.86 crores. Net revenue was also at a 45% growth, INR 3.51 crores against previous year's INR 2.42 crores for the same period. But at the PBT level, we remain the same because our expenses had picked up because we had to -- now with market opening up, we had to come to -- go back to the current levels of service because last year, we had done a lot of COVID-related measures. When we compare Q3 to Q2, you can see there is a degrowth of 19% because from INR 9.55 crores, we went to INR 7.72 crores. As I explained, even though other segments picked up, student has been the largest segment with 80% of our revenues. Student business comes down in Q3. Again, it picks up in December and January. So we had a dip. From a net revenue perspective, we degrew from INR 4.45 crores to INR 3.51 crores, which is a 21% drop. At the PBT level, we were at INR 2.04 crores loss against INR 14 lakhs for the previous quarter. On a 9-month comparison, that is from April to December, we saw from a revenue perspective, gross revenue, the growth has been 60%. Net revenue was 40%. But at a PBT level, we are at INR 3.9 crores loss against last year's INR 4.8 crores. Now I will hand over this call to Dipesh, who will give you a flavor of the quarter-on-quarter comparison, et cetera.

Thank you, Srikrishna sir. Good evening to shareholders and investors. In continuation to the PPT that we have uploaded, when we talk about comparative charts quarter-on-quarter, here at 11 quarters -- the last 11 quarters that we have shared with you with a graphical representation of the same. The first chart contains the growth in the net revenues, and the second one contains the expenses. When you look at it from quarter 1 of '19-'20, which was pre-COVID, to quarter 3 of 2021 and quarter 3 of '19-'20 to quarter 3 of '21-'22, we are almost back at the same level. With regard to our gross revenues, where we have INR 989 lakhs in Q2 of '19-'20, we have come back to INR 956 lakhs in Q2 of '21-'22. So the pre-COVID levels are coming in, things are opening up, and we see this happening, and we see better revenues hereafter. Further, with regards to expenses, they have marginally increased. As Mr. Krishna did mention, that some countries that could be restored some rollbacks of concessions which were given earlier had to be again brought back to the original levels. Now I move to the next slide to talk about our priority segments, which is majorly our card, prepaid response cards and outward remittances. When we talk about Q3, in particular, from '19-'20 to '20-'21 to '21-'22, we see a very big growth. From quarter 3 of '19-'20, where we were 31% above the rate, now we are 42% above the base. So that shows that the amount or the figures grown to pre-COVID levels. That remains consistent for even outward remittances, where earlier also we had 109% of the growth today also at 909% (sic) [ 109% ] of the growth. So this looks like we are out of the pandemic or the pre-pandemic and pre-pandemic levels have again flown back. Moving on to the next page. This is aligned by capital display of all the figures for the last 11 quarters, giving you each line item and each figure in a particular quarter-on-quarter theme, where you can see the revenues for the current quarter. The total revenue from the operation is INR 772 lakhs against an expenditure of INR 530 lakhs and, overall, a PBT loss of INR 204.62 lakhs and PAT of INR 143.09 lakhs. I won't run through all the figures. It's just a comparison where we can have a look at it. Next slide, we talk about our results, which is already published, where you have a quarter-on-quarter comparison and a 9-month comparison between the numbers. Next, to give the digital journey, I will hand over to Mr. Krishna, who will talk about the digital journey for Wall Street Finance. Thank you.

Yes. Thanks, Dipesh. A quick roundup on the digital part of the business. We have multiple platforms. We have a corporate platform where, as of today, we have 200-plus corporates. We have an agent platform where we have nearly around 390-plus agents onboarded. We have our own Smart Currency Card with App. In fact, once the travel has resumed, we have seen a healthy growth in this product. And as Dipesh had shown in his earlier slides, our card business is slowly coming to pre-pandemic levels, and we expect the growth to happen. In fact, we are optimistic that once -- with slowly the global economies opening up, less travel restrictions, we see -- we are hopeful of a very good summer season, where leisure picks up in a big way besides corporate. We also have a Smart Fx portal and app, where you can do both remittances and cards transaction. When it comes to the last slide I talked about, the most important thing for us, which has been our selection in the RBI regulatory sandbox testing. So this has been a kind of a unique opportunity, where we were selected, around 8 people selected to showcase our product. And we have done the testing of the product. What is unique is we are able to demonstrate very clearly this actual user testing, how a complete digital process of onboarding. Besides, we were able to also show that we have integrated our product with compliance checks, check span validation, passport validation, et cetera. Wherein, what we could -- we could seamlessly do all the checks also in this and then process the transaction without any need to physically see the customer or take a signature, we could get it validated through Aadhaar eSign and subsequently route the transactions either to the beneficiary's bank account or, first time, we have done into the overseas beneficiary's Visa International, Visa debit card linked to his bank account, which is a kind of a first time which is happening, which is what we have showcased and tested in this thing. And one other thing where we got permission in which we have done transactions to show this is, we have done -- we have allowed permission to do transactions under family maintenance, gift and investment for debt and equity. So these were 3 categories which was not available to [ 82 ]. We were permitted, and we were able to show that we could handle these transactions in this manner. What is so special about these Visa Direct transfers and all this, we can today transfer money all 7 days, like there is no holiday anything. I can transfer money. And wherever it is fast fund enabled, I could transfer the money as fast as 10 minutes. I've seen customers very happy with the way the transfer has happened. So this is something revolutionary which is there. We are hopeful that now the testing is over and post evaluation, we may be allowed approvals for this product. And we look -- we are hopeful that there will be a good reception for this because whatever we got the feedback was very good for this entire product. So with this, I would come to the end of my presentation. We are now with pandemic, with Omicron, we are seeing the pandemic effect coming down, with economies opening up in February, we saw a lot of countries relaxing their testing guidelines. So we are hopeful that besides students, now we will see a good pickup of leisure and corporate segment, which is very important for us because for the last 8 quarters, we have only gone with 1 pillar. That is of student remittances. Now we will have the other segments opening up, and we look forward to a good -- subsequent quarters to be good ones. That's what we are hopeful. And with this I come to the end of my presentation. Now I'd like to hand over the conference to the moderator. Thank you.

[Operator Instructions] The first question is from the line of [ Rishi from H&I Investments ].

So you've said a lot of things about your digital transformation. Now we are seeing your company from last 4 years, I've invested in your company around 7 years ago, with all due respect to your Chairman and to the management team, we are not able to increase the revenue as projected. Some of them may be because of the macro factors. But this digital transformation, do you really feel on the ground it is working? Because if I have to travel to U.S. or London, why I keep the digital currency with me or the money transfer through that. So what is the scope of that digital transformation? What's your internal assessment that how much your business will expand with this technology-based products, but you have given your presentation? If you can just explain us that and guide us in the right fashion and manner, that would be great, sir. .

Okay. So that's what I've always given a history when we sold the MTSS business, MTSS business was the #1 priority. We sold it and we concentrated on ForEx. At that time, it was decided at a strategic basis that we will expand through our digital proposition. So we started building a couple of platforms. We didn't want to remain in 1 B2C offering because B2C offering sometimes takes a lot of time to take traction. Because from a compliance angle, there are a lot of processes which needed a physicality when we started the journey. Because when we started the digital journey, that was the time we thought we will do Aadhaar OTP-based authentication. But if you remember in 2017, Aadhaar OTP based authentication, we could no longer use because of the ruling -- Supreme Court ruling and all. So we had to focus on B2B initially. So our company's idea was how do we expand without -- because everything was moving digital without geographical expansion, without increasing costs exponentially because money changing was more a physical sort of a business. How do we grow our business from being an asset-light organization where we don't have to expand physically, but how do we expand through the digital proposition was the fundamental discussion at a strategic level we had. And what was the priority segments which we need to focus on because Wall Street heritage was a traditionally wholesale business heritage. So strategically, it was decided to move away from currency business to remittances and cards. That was the first strategic objective. Second was also to ensure we can reach geographically without a physical network, which is very expensive considering the margins were going down in the business. So we set up doing this, and we build platforms for each of the segments. And if today, even whatever corporate business we have, 55% of the transactions come through our platforms only because we have integrated with multiple large corporates. Now this was a fundamental objective in which we grew the business. So from 35, 36-plus branches, we are today at 16 branches. But if you look at it from an NR perspective, we have grown it 3x when we took over in 2017 to where we were pre-corona, we had literally gone to 3x of the net revenue in a single month. So what we said it was working fine for us where each customer was coming in, obviously, initially, there was a lot of resistance because people did not realize the need for digital at that time India's network was [indiscernible]. But the COVID has changed that mindset also in the last 1 to 2 years, you can see people very receptive to look at integrating with our platform, et cetera. So what has happened is, suddenly, we got a route shop 2 years back in February last week where entirely travel came to a standstill. So we have been only talking, talking because we did everything. We launched our Yes Bank card. We had a small challenge in March and April in 2020. We had pandemic coming in, where international travel stopped. Now thanks to at least one part of our strategy. One part of our strategy, we were able to at least get the remittance business. If you look at my remittance business, it is gone to pre-pandemic levels even though my other businesses are not there. So our strategy in a way, digital strategy did not give us result because, simply put, last 2 years, corporate travel, leisure travel has not been there. But our remittance strategy of focusing on students did pay off because whatever revenue we're looking is only from that segment, which has been going on for the last 18 months. Now we feel with us, and there was also some more challenges where, thanks to certain rules and regulations, we cannot -- we were not able to literally give a contactless solution, which we have demonstrated in SecuSmart REMIT. Earlier, if you go through master direction KYC, we were not allowed Aadhaar, we were not allowed Aadhaar OTP and all. Today, for my digital process, last year only, we got permission to do video KYC. Second is, now only we got permission to add DigiLocker, which an Aadhaar OTP-based validation. So there are also some regulatory bottlenecks where we have to wait for the guidelines to change to make it a complete contactless experience. See, we are -- with the SecuSmart REMIT, we were able to validate it through live transactions. And we are confident that whatever we have been talking or trying to do will turn into a profitable proposition in the coming quarters. Because simply put, when I'm doing only one leg of business, there is that much only I can end up doing. But as I said, we have stuck on -- despite all these things, we have struck on to our goals and objectives. And today, we can say, because in a way we have been validated, I mean, selected for a regulatory sandbox project, so we say that our sight is correct. Our vision is correct. Only thing is now the revenues have to come in to validate it, and we appreciate all of you for your patience also and your trust on us.

Okay. So to cut the long story short, can you please explain means how -- means when we will be EBITDA positive, sir, at least?

See, as I said, we -- I told you, if you look at Q2 results, if you see Q2, we were only INR 15 lakhs of loss with only 1 segment. Q2, if you see the results. Q3, we had only students business happening on December. Now Q4, we started well in January. Now at the moment, we have travel resuming in leisure and corporate. We are confident we will be EBITDA positive. Because with only students business, we can only be successful in 5 to 6 months. If we have to be 12 months successful, we need to have the other segments picking up. But with Omicron going off, we are confident that the travel is resuming, and we are expecting the bumpers to summer season also. We are -- unless there is -- if people don't travel, I cannot commit anything. If people start traveling, we definitely are seeing positive results.

Okay. And one more thing, sir. We've requested your Company Secretary to put KMP notice, key managerial person notice. That is not coming on the BSE listing. So can I please have your e-mail ID. I've got some specific queries which I don't want to discuss on this call, sir. Can I have your e-mail ID to send you the mail?

Sure, sir, we will communicate. You may send the e-mail ID to our Company Secretary. She will communicate, and we'll have it done to -- we will send the email ID of the KMP.

No, I requested -- I've already requested earlier also by mail that you should put a KMP notice, key managerial person notice, every quarter on your website and on the BSE notices also where small investors like us should communicate, sir. That is mandatory by now, and your e-mail ID, both the mobile number or the landline direct number should be written in that because you just write down one number because a lot of time in the lockdown is there, we are not able to contact you, sir. Just to understand the business, nothing more, sir.

No problem. We will share it across because this is the first time I -- you've said within this communication, I don't know how it got missed out. We will do the needful.

[Operator Instructions] The next question is from the line of [ Amit Sheikh from GT Advisor ].

This is Nimish Sheikh. Tough environment, so congratulations. We are happy that you're continuing with your digital initiatives because that's what is actually going to help the company going forward. A couple of questions. Are we pretty much done with the investments on the digital front, the bulk of the investments? That's one. Two, along with these investments and the losses we made in the past few quarters, how much cash do we now have? And are we looking to raise any capital, rights issue or anything, any equity?

So to answer the first question, more -- major investments are done. As far as we have got all the platforms are live, obviously, whatever expenses we are incurring are more recurring in nature towards -- because we need to have a permanent digital team when we have a fintech kind of team, we need a team. So that is all booked as regular expenditure only. Obviously, the fintech revenues have to start picking up now because, as I mentioned earlier also, except for one left, I don't have a leisure or corporate or anything at this juncture to talk of, which is tangibly giving me a huge revenue stream. But we are hoping that in this coming year, there will be a good amount of transition where we can clearly see that digital is bringing in this sort of revenues. That part of it we are confident once things pick up. As far as cash in hand, Dipesh?

Yes. With regards to cash in the business, we still have about INR 13 crores to INR 15 crores in our business. Hope we minimize the losses and go back to the positive so that, that should not be an intent to the business. .

So coming back to requirements of capital, right, that's the fundamental thing. So essentially, we have 3 legs of business, right? We have corporate business. We have wholesale business. We have retail and remittance business. Wholesale business is 1 which is capital intensive. But over the last 4 years, we have slowly moved away from that part of the business because, as I said, currency was something which we had slowly destressed on. And during the pandemic time, since travel was not there, wholesale segment is something which we are not really concentrated on. And going forward also our focus has moved firmly to the other segments of retail and remittances, so 1 area where I will not require capital as much as wholesale. Leisure and remittances are cash and carry business. Except for certain specific customers, it is generally cash and carry. I get your payments first and do the remittances. So primarily, a major part of it I will be able to handle without much capital because this is all retail model. There's 1 other model which I do need capital over a period. We have always been discussing with the banks for increasing the limits, et cetera. So corporate business, when it picks up, we may have a need for capital. But as I said, it's gradually picking up. So that is something which we need to address that concern. But as of now, to run our current business, we are adequate because our primary revenue spend at least even for the next 3 to 6 months we hope is only from the retail and remittance because we want to -- we are hoping for a faster leisure pickup than a corporate pickup. But corporate, when it comes through, we will be discussing with the banks to see whether they can give us a 1:2 limit or something, which they were earlier giving. That is the idea. From a capital perspective and all, obviously, the Board is looking at it, and there has been promoters also looking at it. So appropriately, we will inform as and whenever there is -- something is coming out there.

Okay. And I have some questions. I often ask the same question maybe once or twice a year. We have a lot of old pending matters in service tax related, et cetera, and in Supreme Court and whatever, the litigation. So what exactly is the status? And I mean any idea on -- clarity on when we might see some judgment? And would you -- do you think we have a fair chance of getting a positive...

Actually, if you look at it, now Supreme Court matters are -- I think the case is getting listed. All service tax -- similar matters are getting listed. So that Supreme Court can take a view on that whether it takes. You know that export of services and all matters, pertaining to our old...

2005 to 2009.

2005-2009 service tax issue. Now it is getting listed in Supreme Court. Obviously, last couple of months, it was getting listed, but it's not getting heard. So see, from a company side, we will always be positive. But as I said, when the matter is subjudiced, we cannot comment on that judgment. We feel that we have a strong case. That's what we believe in. And that is why that word has gone up to the Supreme Court also because this is a larger issue of how a certain matter is getting treated. From a company's perspective, we feel we have a strong case. And -- yes. And if you look at it, we had one in the lower courts and all. We have got...

That we are aware. [indiscernible] now it is in Supreme Court.

Yes, so we are confident. But as I said, when it's in court, we cannot decide which way it will go. The court will decide.

Finally, the matter is coming up for hearing soon. So hopefully...

Yes. The last 3 months it has been coming up, but it's getting postponed because of urgent hearing and all. There are a couple of more pending matters like reinsurance or one other matters, which is all getting delayed, nothing because we are -- in fact, one of the arbitration also we have won. But unfortunately, because of this COVID pandemic, courts are not been taking up the matter. Some of the matters we have done all the groundwork. But even today, Mumbai, adjourned matters are only heard for the last couple of months. Now we are trying to push it through so that we can enforce the judgment and get back our money. These are all old matters which you are aware of, which we are now pushing through. And we are hoping that with things opening up and courts resuming and taking up all the matters, we will have things in our favor.

[Operator Instructions] As there are no further questions, I now hand the conference over to the management for the closing comments.

Yes. I would like to thank everyone for joining this call. In case you have any queries, please visit our website or you can reach out to our Company Secretary. Thank you, once again. I now request the moderator to conclude this call.

Thank you. Ladies and gentlemen, on behalf of Wall Street Finance Limited, that concludes this conference call for today. We thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you.

Thank you.