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

Ladies and gentlemen, good evening, and welcome to the investor conference call of WSFx Global Pay Limited, formerly known as 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 recommendation to investors or potential investors in relation to holding, purchasing or selling securities and 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 now hand the conference over to Mr. N. Srikrishna, CEO and Whole-Time Director; and Ms. Pooja Mishra, Chief Financial Officer. Thank you, and over to you all.

Yes. Thank you. Good evening to everyone. It's a pleasure to connect once again with our shareholders and investors. This is Srikrishna here, the CEO and Whole-Time Director, along with the company's CFO, Pooja Mishra.

Good evening, all.

Yes. And we would -- would like to take you through this small presentation and give you an update on WSFx Global Pay's quarter 2 performance and where we are headed strategically. So now we will go to the presentation, which is already uploaded on the company's website as well as the BSE website. So going to the presentation, we give a brief introduction about the company. For people who have joined newly for this call. WSFx Global Pay is RBI authorized dealer, Category II with around 30-plus years experience, vintage. Listed in BSE and is a ISO-27001 certified company. From a product perspective, we deal in foreign currency, prepaid cards and cross-border remittances. This we do through a omnichannel network of branches and through digital platforms. We have a pan-India network of 19 branches and we have a 290-plus strong team. We are in partnership with multiple banks, banks like Yes Bank, IndusInd Bank, HDFC Bank, IDFC Bank, RBL Bank, ICICI Bank, Thomas Cook, et cetera. Through this tie-ups, we reprocess our cross-border remittance payments and also issue our ForEx cards. We also like to talk about our flagship product, WSFx Smart Currency Card, which is a co-branded Visa prepaid forex card, which is multicurrency and INR wallet, and it has a Smart companion app. From a digital solutions perspective, we have multiple products and solutions catering to every segment, be it the corporate, agent partner or the retail customer. The company has around 1,000-plus customers, and both in terms of B2B agent network and also corporate relationships for the business travel that include companies like E&Y, Tech Mahindra, Siemens, L&T Infotech, Titan, HDFC Credila, et cetera. Now we quickly covered the digital platform and solutions, which we have. This has been a strategic focus of the company for the last 5 years. And during COVID, we were able to roll out most of the solutions. So as I already talked about our flagship product, WSFx Smart Currency Card, which was launched in 2019. Today, we have seen very good growth, and we have around 25,000 plus users of the Smart Currency Card. Then we talk about our WSFx Smart Corporate Platform, which is advanced solution which helps the corporate in terms of their forex ordering. It has multiple hierarchies, multiple workflows. And we have lot of large corporates, which use this solution. Today, around 40% of our corporate business is processed through this platform. We have a specialized B2B solutions, WSFx Smart Agent platform, which provides kind of, multiple sort of a way in which we can connect to the customers. It is a powerful lead management and order processing solution through which we can handle the forex or the cross-border remittances of our referral partners, be it travel agent, be it education consultant or loan provider. Along with our agent platform, we have WSX Global Pay FPAAS platform, which has been launched quarter back. This platform allows an online aggregator to provide forex as a service through his online proposition, wherein he can plug-and-play forex, which will be handled by WSFx Global Pay. He can also send forex link like a payment link. And we have integrated a seamless customer onboarding through Video-KYC and transaction processing through digital A2 form submission along with the integrated payment gateway through which the customer can make the payment. This integration of customer onboarding and transaction processing with complete digital KYC and digital A2 form ensures a seamless contactless solution, both from a B2B agent perspective who wants to offer forex and for the customer also, this gives a seamless experience with high visibility. We talked about our Global Pay app, which is our retail app and portal for the customer. This provides not only the card management for our Smart Currency Card, but also allows the customer to process his cross-border remittances. We have found good acceptance for all our platforms. In fact, we feel our growth will be through these platforms. Few things which are very important for us is trust, transparency, compliance, convenience and I feel these platforms allow us to bring forth those values and create -- and ensure that we get a good customer experience. Now coming back to our Q2. Because we have talked about the company's product, services about the company. We talk of the highlights for our Q2. So it has been a very positive quarter for us. The market outlook has been pretty positive. We have seen phenomenal growth in students study abroad segment. Leisure has picked up with Indian's traveling. Corporate business has also started picking up substantially getting over the COVID blues. So overall, you can say the market has been positive. It's international travel and forex is looking up. So about Wall Street, we have been able to sustain our growth. We have been profitable for the last 6 quarters. Our GTO has surpassed pre-COVID with a GTO of INR 1,730 crores. For Q2 and for the half year, it's around INR 2,457 crores. If you look at last year, we had done INR 2,960 crores for the whole year. So 80% of last year's business has been achieved by first 6 months itself in this current financial year, which shows the company has grown. And what I would like to point out is, today, we are focused more on retail, corporate. Earlier, pre-COVID we were a company where at least 30% of our revenues used to come from wholesale. Now we have moved away from wholesale 2 years back and purely as a retail forex and cross-border remittance with the digital solutions. We have been able to surpass our pre-COVID numbers. So from a PBT, we were at INR 2.45 crores profit. We have grown significantly from Q1, where we could only book a profit of INR 11.34 lakhs. And if you -- in comparison to Q2, we were at INR 93.36 lakhs in Q2 of last year. So Q2 of this year, the company has grown substantially. In this quarter, we also applied for opening new branches to Reserve Bank of India, and we got the approval and we opened branches in Surat, Anand and Baroda, taking our network from 16 to 19 branches. All these branches are operational and are profitable. Overall, from a business perspective, we saw fantastic growth in the students. They had onboarded a lot of agent partners. We have been able to onboard large corporates and we've seen phenomenal growth in both corporate and our students business. So this is a quarter where we also saw all-time high in terms of the business volumes for prepaid cards and also for university fee payments for students. So from a digital perspective, as of today, we have around 21,000 plus customers who use our app, and we also have good penetration in the corporate and agent platform. We have also been able to automate a lot of processes. And as I said, Wall Street is a truly omnichannel tech platform for our customers. So going to the next slide. This gives you a comparison, which I already mentioned. You could see when we compare Q2 to Q1, we have grown 86% in terms of revenue. In terms of PAT, from INR 11 lakhs, we have grown to INR 2.44 crores, which is significant. Obviously, Q2 is always a peak season, but we have done exceeding well in Q2. When we compare Q2 of current year, with Q2 of last year, you can see we have grown 63% in terms of revenue. And from INR 1 crores of profit -- INR 1.03 crores of PAT in 2022, '23 for this Q2, now we are at INR 2.44 crores, so -- which is around 136% growth. From a half year perspective, we have processed -- we have done revenue from operations of INR 34.72 crores compared to last year, which it was INR 22.17 crores, same period, 57% growth. At a PAT level, we have shown 479% growth, which is -- last year, we were at INR 44.11 lakhs. Today, we are at INR 2.55 crores. So it's been an overall positive quarter. Next slide talks about the overall number, which gives you an idea on the revenue, cost, direct cost, selling, general -- we want to give you a flavor of how quarter-on-quarter the moment has been. So what I would like to highlight in this slide is you can see last 6 quarters, we are profitable and our profits are growing. So -- which is good because we feel now the business has stabilized. And Wall Street also has been able to create a niche for itself in the students and corporate segment. Going to the next slide. Next slide gives you, again, a graphical interpretation of what I talked about. You can see the growth. And if you can see, the growth has been nearly 3 years... [Technical Difficulty]

Ladies and gentlemen, we seem to have lost the audio from the management's line. Ladies and gentlemen, thank you for patiently holding. We now have the line of the management reconnected. Over to you, sir.

Thank you. I think we suddenly got disconnected. Thanks for being -- thanks for waiting. So we come back to the comparative chart Q-on-Q for revenue and expense. You can see we have grown 3x in terms of gross revenues and nearly 4x in terms of net revenues. This is a graphical interpretation and of course, selling and general expenses have also gone up because now we have expanded our network, and we have to invest on manpower and also on marketing. Going to the next slide. So this is a comparison. This is a kind of a chart we gave -- from the year, we totally -- focus totally on forex. You can now see, from the base here, we are at nearly 1,000% growth. So which is -- which shows that we started in a very small way in 2018 where we hardly had $1 million of cards and a couple of million dollars of remittance. Today, we have grown substantially and that's -- this clearly shows the growth we have shown both in terms of the prepaid cards and outward remittance, which are the priority products for us and also the customer segments like students and corporates which are priority customer segments for us. So this [indiscernible] feel of it. Coming back to the last slide, this again is the financial results, which we have declared, where we have declared a PBT of around INR 2.44 crores. And for the half year, a PBT of INR 2.55 crores. So coming to the last slide, this is what we had told in our AGM also. We are now in the growth stage. From a survival to growth, we -- it has -- we have moved to growth to profitability. So we remain committed to our vision of being forex tech company. We want to be asset light. We want to also ensure scalability and be efficient. And we feel the company's digital proposition will ensure that besides the branch network, which we have, we think we have a right mix of branches and digital solutions where we can be asset-light and improve our profitability substantially. So as you can see, we have a Corporate platform which is doing well, has been well accepted in the market. Our Agent platform and FPAAS solution is also getting accepted well in the market. As far as cards are concerned, we are doing very well in Smart Currency Card. We are working on multiple solutions for students, which we'll keep the investors updated as and whenever we have anything significant to report. Parallelly, last but not the least, we are also working on our prepaid card issuance project, where we want to issue forex cards directly. That is something which we are working on, and we'll be updating you as and whenever there is a major development. With this, we would like to come to the conclusion of the presentation. I would like to thank everyone who have been patiently with us. I would now like to hand over the conference to the moderator. Thank you.

[Operator Instructions] The first question is from the line of Lalit Agrawal, an individual investor.

Hello, can you hear me sir?

Yes, yes, please.

Sir, congratulations for a very good set of numbers. Sir, my question is, you are growing substantially. So how much you are planning GTV growth for the current financial year and for the next 3 years?

See -- so if you look at it from a growth perspective, we have -- see, our business is seasonal, right? So on a quarter-on-quarter, there is always up and down. So second and fourth quarter are peak for us. First and third quarters, we have relatively our performance will be little down when we compare with Q2 and Q4. So from overall perspective, this year is positive. Obviously, we would like to -- if you look at LRS segment as a whole, it is growing by around 20% to 25%. That's what has been the overall growth in LRS, but we would like to grow over and above that. If you see our growth year-on-year, in the last 2 years has been over the market growth rate because since we have started from a smaller base, we feel our growth rate will be higher, and that is what we are working on. In fact, if you -- last year, LRS overall business volumes was around $27 billion. This year is expected to be closing at $33 billion. So when you look at the market, which is growing, obviously, we are poised in the right position because as we are a regulated player, we are coming at a regulated fintech. So definitely, we feel we will show more growth in the coming 2, 3 years. But today, I don't want to put a number to that at this juncture. But definitely, with our solutions, et cetera, we expect to grow in line with the market rate or higher than that.

Okay. So we can expect at least 50% growth? Like...

I don't want to put any number to that, we will try to exceed your expectations if possible.

And then my next question is -- sir, in your last con call, you said that you are planning to raise a fund. So have you decided on that?

So essentially, as I said, there is a project that -- since we are doing multiple things, like prepaid card is one solution which we are working on. We anticipate requirements for more capital. So we have started looking at it. That's why we announced it so that we will be looking around for investment coming into the company. We are working on it. As of today, there's nothing definite in hand, but definitely, we are working on it. In case of anything concrete, we will let you know. In parallel, we are also working with our banking channels for additional line of credit, which takes care of our working capital requirements.

Okay. And one more thing, sir. Can I ask sir?

Yes, yes.

Sir, in your total GTV, you have that 1 channel. 1 is your this franchisee model and 1 is your this digital platform. So how much is franchisee model, this branch model is contributing in your GTV and your digital platform is contributing, can you bifurcate?

If you look at it, today, we have -- see, predominantly, if you look at our business, it has been a traditional business, correct? So traditional business, which is influenced by what you call it, direct and B2B. You're in a traditional level, there are B2B channels, correct? So we have got our branch network, which caters to our traditional customers, and digital platforms, where we are migrating the customers to their digital platform. And obviously, we want a B2C offering also. So if you look at it at some form or other, digital is touching them in terms of process automation or through platforms. . So if you look at current statistics, it differs for each platform. So in corporate platform, we have around 40% to 50% penetration. In Asian platform, we have around 20% penetration because the market is large, and we are also coming out with more and more solutions because only from last quarter, if you look at it, even though we have worked on various solutions, only from last quarter, we can automate the A2 Form solution. Because earlier -- before that, we cannot digitally take a A2 Form because only last quarter, RBI allowed AD-IIs to accept digital A2 Forms. So from last quarter, we are seeing much more traction coming through our digital platform. So today, if you look at it, anywhere between 20% to 50% is adoption rate across platforms. But with these things happening in terms of their form A2 which I talked about online submission of Form A2. And already with our Video-KYC solution in place, we look at it moving towards -- leaning towards more than 50% over the next couple of quarters.

Okay. And sir, one more question. in your balance sheet, '22-'23 balance sheet, the ESOP expenses you're showing is around INR 1 crore. And for this H1 '23-'24, this expense is around INR 35 lakhs, approximately. So these expenses will remain in the balance sheet?

Sorry, these expenses will...

ESOP expenses -- these expenses -- ESOP expenses will remain in the balance sheet in the future also?

No, it will be there for a couple of more months. As per the actuaries valuation, we have to accordingly bifurcate it into the period.

So later on it will be -- it will not be there in the balance sheet.

Yes, because all expenses will be already allocated, then it won't show.

[Operator Instructions] The next question is from the line of Aditya Sen from RoboCapital.

Sir, I'm actually quite new to this company. So I wanted to understand the cost structure. With respect to the EBITDA margins that we aspire to achieve or that would be a stable number, any EBITDA number that would be stable for the company?

So if you look at overall -- see, the cost structure is influenced by your acquisition channel, right? So today, the company's business is predominantly corporate, direct dealing with corporates. And for the retail segment, the major acquisition is through a network of agent partners. Now, obviously, when you have agent partners, you have to pay commissions and incentives for the sourcing of customers. So that forms a major direct expense for us. And that has a direct influence in our EBITDA margins. So based on that acquisition channel, like today, we are B2B model, but slowly, we are now trying to get into a digital B2C model. So over a period, the business mix will determine our EBITDA margin. So if you look at pre-COVID, we were concentrated on all the 3 segments like wholesale, retail -- retail and remittance, corporate. At that time, our EBITDA margin always used to be lesser because of wholesale operations, where the margins were -- currency operation was lesser. Now 2, 3 years back, we moved away from wholesale and became a pure play retail that is remittance and card player with focus on students and corporate segment. So essentially, the business mix will determine how -- which way our EBITDA margin will go. Obviously, mix like today, it is around 80-20. Tomorrow, it may become 60-40. Based on this, our margins may go up or go down. So essentially, it's a derivative of the business mix. So our aim should -- would be always to maintain a particular profitability and a particular yield. [indiscernible] also ensures a different margin altogether.

Okay. And what is the split that we are targeting between B2B and B2C? Have you decided on that?

So today, if you look at it, we are predominantly a B2B company. Obviously, we are foraying into B2C. Of course, B2C has more costs involved. That's why we want to raise funds for our development and marketing. That is something which we have kept on our strategic focus. But today, we are more focused on B2B and corporate business for acquisition of customers. And we are foraying in a gradual manner to B2C because B2C acquisition cost is very high at this juncture, but that is definitely an aspirational thing which we are looking at. But if you look at our digital solutions and platforms, we have built a solution for every customer segment, be it an end customer or an agent partner or a corporate.

The next question is from the line of Priyank Gupta from Guardian Advisors.

My question is that, how do you think that 20% TCS on foreign payments would affect the business?

Yes. So one is, obviously, it has an impact when it comes to high-value LRS transactions. Now if you look at the key segments for us, it is student, and there is no change as far as LRS -- TCS is concerned, it remains still 0.5% for people who have taken loan from educational institutions and 5%. So for us, the key segment, it has no impact. Business travel, which is corporate travel, does not come at LRS, so there is no TCS applicable. So from a WSFx perspective, yes, our 2 major segments are not impacted. Where the impact will be is our tourist travel. Now today, that is a very small segment for us, but which we expect to grow. But even a typical tourist does not require more than INR 7 lakhs. So INR 7 lakhs exemption. See, when you looked at it in July. July, we were worried. We were worried that because the TCS was starting from 0. So today, the government has the [indiscernible] that threshold, which ensures that the -- regular ordinary traveler is not affected. When it comes to high-value remittance transactions, be it family maintenance or investment in the equity and debt or self remittance where HNA send $250,000. Today, that doesn't come under our preview because under AD-II license we are not -- we cannot do these transactions. So as I said, we -- thanks to the threshold coming in of INR 7 lakhs, this has ensured that most of the people do not fall in the 20% bracket. So for me, personally, for WSFx, we don't feel the change in TCS guideline has a impact on the company's growth.

Sorry for being repetitive, but for the Smart card business, do you think the cards which are being launched by some of the banks at 0% fees costs are our competition?

See, actually, there are 2 products. One is obviously our forex card. Second is what you talk about is fintech, which has launched in INR forex with cross-currency waiver. But if you look at it, each has its plus and minus. One is from an INR card perspective, it's a rupee product. This is a forex product. So there is no apple-to-apple comparison. Our forex product has its advantages because it allows you what you call it -- to lock your rates. Fundamentally, rupee is at INR 82 -- or INR 83 today. The interbank is INR 83. Tomorrow, it is at INR 85. You are essentially locking your costs, right. You know what is your cost structure. But in INR card, it's open to volatility, right? You take a card and the end of what you call it, [indiscernible] with INR 84, when you swipe even though you might be thinking that there is a cross-currency waiver. You end up paying 2% or 3% because you're exposed to exchange rate fluctuations. Second is, if you look at forex card, it is a [ fantasy ] someone says cross-currency waiver, et cetera, because technically, 14 currencies are available in our card product. So when you take the destination currency, for all the 14 currencies, you are locking the rate. So where is the question of any margins. Today, forex margins, the way when we give solutions to a customer, we don't charge 3% or 5% or 10%, which is the they talk in the advertisement. It is all in a very competitive rates we price, you lock in the rate, and when you are planning your travel, when you go to Europe, U.S., you can take multiple currencies in this card. So there is no question of you paying any cross-currency if you plan your trip and take it in respective foreign currencies. And it insulates you. So in my opinion, there is some plus there, there is some plus here. But these are all not same products. In one stroke -- see, if you look at it, banks have debit cards and credit cards. Why are banks and debit -- banks are not waiving off debit cards credit cards of cross currency to 0%, if they find that's a big business model. So my view is, there is a use-case created on an INR card product which is what is merit. But forex card has got its own merits. So in my view, both will exist, both will coexist.

And last question, if you can throw some light on your dividend policy.

Dividend policy.

So see from a -- see we have been always paying dividends. During COVID period, we have stopped paying dividends because -- in fact, we were in loss. So obviously, when you're in loss, you don't pay dividends. But keeping the interest of the shareholders is very important. So as and whenever the company returns to profitability, definitely taken up by the Board had appropriately decided. But if you look at the track record, except for the COVID years, before that -- for 3 years, we did pay dividends.

Sir, the current participant has dropped off. [Operator Instructions] The next question is from the line of Lalit Agrawal, an individual investor.

Sir, can you tell us what is the total debt in your books right now? And what is the total net debt in your books right now?

Actually, we -- if you check the debt position in the company, we have taken a credit facility from the bank against which we have given 100% FD margin. So basically, it is only to manage the working capital well it is being done. So as such the company doesn't have any debt. If you see the current ratio of the company is good.

You're a cash positive company?

Yes, yes.

So how much is the cash balance you can say?

Working capital, we have around INR 14 crores to INR 15 crores you can check in the balance sheet.

And against this working capital, how much is your -- this bank balance or FD here?

See, that keeps varying depending upon our utilization in each period, right? Because if you will check, you will check it on a particular day like last day of the quarter. But it -- it generally, it all depends upon the utilization, which keeps changing.

Okay. Okay. Got it. And one more question. In your balance sheet, this H1 balance sheet there is an item called deferred tax effect and income tax effects, the amount is INR 521 lakhs and INR 331 lakhs. Ma'am, what is this ma'am?

See, income tax is something which is the carryforward tax which we will be utilizing. It is on our profitability like we can carry forward our losses, right? So we will be adjusting those. And deferred tax, that is the difference between the -- it is the timing difference of tax calculation as per the financials and as per income tax. So basically, it is a accounting entry.

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. N. Srikrishna and Ms. Pooja Mishra for closing comments.

Yes. Thank you very much. I would like to thank every investor, shareholder for the support for the company. It was a difficult 2 to 3 years. And now in the last 6 quarters, we are profitable. And I appreciate. And it is -- the motivation we get from the support, which has ensured that now the company is into profits. So thank you once again for everyone for joining this call. For any further queries, you can visit our website, and you can reach out to our company secretary. And before I conclude the call, I would like to wish everyone a very happy Diwali. Thank you so much. I now request the moderator to conclude this call.

Thank you, members of the management team. Ladies and gentlemen, on behalf of WSFx Global Pay Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you.

Thank you.