WSFx Global Pay Limited (WSFX.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon, and welcome to investors conference call of WSFx Global Pay Limited. [Operator Instructions] Please note, this conference is being recorded. Material and information in this conference call is general background about the company's activities as the date of this presentation. Information in this presentation should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities 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. Srikrishna Narasimhan, CEO and Whole-Time Director; and Ms. Pooja Mishra, Chief Financial Officer. Thank you, and over to you, sir and ma'am.

Yes. Thank you. Good evening, everyone. This is Srikrishna here. Thank you for joining the Q2 FY '25-'26 Earnings Call of WSFx Global Pay Limited. A brief word about the quarter. The quarter reflected a strong operational and financial performance for us, driven by improved segmental traction, disciplined cost management and continued digital expansion. We are happy to say that despite market headwinds in certain corridors, we have delivered broad-based growth across key business lines and achieved steady improvement in profitability and margins. I would like to give a small presentation on the company's performance. We have uploaded the presentation on the company's website as well as the BSE website. Now we'll go to the presentation. Let me begin with a quick look at the business landscape. So it's a highly regulated industry, high on competition, low on margins. We have competition from banks. We have competition from fintechs. We have competition from other AD2s, FMCs. We are also having competition from credit cards. It's a very dynamic market, high competition. But obviously, it's an area of growth where with a market size of around $30 billion. So you can say foreign exchange and cross-border payment landscape currently continues to evolve despite mixed macroeconomic signals. When we look at it overall, global travel and corporate mobility remains healthy, whereas we have seen a lot of ups and downs in the student segment, which forms a large part of our outward flows. We have seen caps on visa. We have seen country-specific restrictions. We have seen regulatory tightening. Particularly, we have seen impact on U.S. and Canada markets. Despite this degrowth in student segment, we have maintained a growth momentum by diversifying across new corridors like U.K., Germany, European destinations. And we have got some strong partnership with NBFC partners and education consultants, which has seen us through in this quarter. The corporate business has remained stable. And in fact, we have seen year-on-year growth. Within this dynamic backdrop, Global Pay is strategically positioned as a omnichannel payments fintech, combining the reach and reliability of a regulated AD2 with innovation and speed of a digital-first enterprise. So we have 21 branch physical network, which provides customer assurance and operational depth. While our digital stack, we are one of -- the only player who has multiple platforms catering to every ecosystem, which includes our global payment app, corporate platform, B2B agent platform and card issuance platform. We deliver automation, transparency and scalability. So in the next couple of slides, we talk about the company. As you know, we are regulated, we are AD2. We are also RBI licensed AD2. We are a listed company. We have got our ISO 27001 and PCI DSS certification. We have a strong network of branches and strong partnership with banks. We have multiple tech solutions, which I've already mentioned. I quickly come to the most important thing for us for the last 9 months. That is our Global Pay Cards. You can see 3 cards. One in the middle is a black card, which is a multicurrency card supporting 12 currencies, which we launched in July. We are happy to say that we are doing wonderfully in this card program. We have seen a lot of adoption. Then we have launched 2 more cards. One is a metal card, which we call the Xplorer Metal card, which is an on-invite basis card, which we launched in the Global Fintech Fest. We also launched a new card called a Smart Switch Card, which will go live in another month's time. That is where you move seamlessly from a single currency card to a multicurrency card. That is something we will go live hopefully by December. One more partnership, which we announced -- in the Global Fintech Fair was our co-branded partnership with Zaggle, where we have launched our Zaggle Global Pay card with a deep integration with the Zaggle's expense management platform. We expect this to be a big product for us in the next financial year. Besides card, we also wanted -- since we have now looked at the D2C ecosystem, we have tried to add multiple solutions to our app, which includes international SIM card, travel insurance, lounge access, et cetera. We have collaborated with DreamFolks, and we have launched a global transit app, which will go live very shortly where anyone can download our app and access services like airport transfers, meet and greet, run on services, et cetera, because today, many of the services, club access, many of these services are attached to some tiers or memberships. What we are saying is we are freeing our customers from these tiers and memberships and say you can pay for the service and take it up. And that is something we expect to go live very shortly. We also launched our co-branded Global Lounge Pass with DreamFolks and which is packaged with our Xplorer Metal card where our customers will get 4 complementary international overseas international lounge access. So the next slide talks about the visibility we gained in the Global Fintech Fair. So quickly, we get into the quarterly performance snapshot. So we did a turnover of INR 2,063 crores for Q2, which is a 89% quarter-on- quarter growth. Our revenue rose sharply to INR 34.96 crores, which is a 90% quarter-on- quarter growth. Obviously, the growth is very high because we have a seasonality in our business and second quarter is always a high season for us. Our revenue we showed good revenue growth. Our PBT was INR 4.86 crores. Of course, there's a huge growth from Q1 because Q1 we were at INR 16 lakhs. So on the EBITDA margins improved to 18%, reflecting better realization and cost control. Our PAT was at INR 3.67 crores. So overall, digital contribution stood at 59%. We have 900-plus corporate partnerships [indiscernible] and B2B partnership of 700 plus. We showed on a quarter-on-quarter student segment growth of 127% and corporate at 9%. So we go to the next slide. In this slide, we have already given you the Q2 numbers from a half year and also the Q1 numbers to get a perspective. On a half yearly basis, we closed with a gross turnover of INR 3,157 crores and our PBT was at INR 5.03 crores. PAT stood at INR 3.83 crores. So overall, I can sum it up by saying that there was a strong performance despite student segment showing a degrowth of close to 22% and U.S. market showing a dip of close to 40%. Our student performance -- strong performance in the student segment and corporate segment saw us through, and we were able to report a better year-on-year growth. Also, what is significant is we have remained focused on our digital and our card product, and we have come out with a lot of launches here, which are going to be the strategic pivot for the company. So one other thing I would like to mention here is that we have also signed up with Samsung Wallet and Google Pay -- Samsung Pay and Google Pay, where Global Pay card will be tokenized. So maybe in another 30 to 45 days or 60 days, you can add your Global Pay card to a Google Pay wallet or a Samsung Pay wallet. And when you travel overseas, you can tap your phone in the merchant establishment and make your payment. That is – that will make our product truly contactless. So we quickly go to the next slide, which again gives you a comparison between Q2 and Q1. We grew by 89%. PBT was at INR 4.86 crores against INR 16 lakhs on Q1. When we compare it with last year’s, last year, our gross turnover, we registered a 2% growth. But at a PBT level, we were at INR 4.86 crores against last year's same quarter PBT of INR 3.14 crores, which again showed that despite market going down, we have been able to maintain and we also improved our margins. From a half yearly performance, you can see this year, we closed at INR 5.03 crores PBT against last year's INR 4.18 crores, registering a 20% growth. Next slide gives you a total quarter-on-quarter trend for the last 10 months. That's more to understand the trend. We have seen steady growth. We go to the next slide, which -- where we have given quarter-on-quarter, the revenue and expenses. We the -- Q2 CAGR for gross revenue was 41.15%. You can see quarter-on-quarter when we compare with previous year, we have shown growth in Q2. And the expense, we have kept it under control. The CAGR for expense is 23.22%. So coming to the student segment. Student segment, we have been able to maintain our business, which means we have increased our market share because simply put the segment has grown -- degrown by 20%, 22%. So student, this remains our strongest vertical. While the U.S. and Canada saw a slowdown due to visa delays and intake restrictions, we recorded robust growth in U.K., Germany and other European destinations, which more than offset the decline. But obviously, U.S. is a very important market for us, and we look forward to things improving, maybe some improvement in the visas and acceptance, et cetera. But that's something we have to wait and watch and see what happens. Our strategic partnerships with NBFCs have really helped us, and we have also been able to improve our margins, which has ensured that we remained strong in this segment. Quickly go to the corporate segment. This has been a segment where we have grown quarter-on-quarter, year-on-year. There have been a steady performance in corporate segment. We are getting into multiple tie-ups. Zaggle collaboration is one big opportunity, which we are looking forward to for future. So this is something where our digital platforms have gained adoption, and this is a growth story for us. Go to the leisure and personal remittance. This was an area which we have started to focus on in the last 6 months. Earlier, we are more focused on student and corporate, but this is the growth story. Of course, high competition is there. So this is something is an evolving story for Global Pay. We are investing in building the Global Pay brand. You must have seen a lot of brand building efforts happening, digital campaigns, social media engagements, influence collaboration. In the last six to nine months, we have done a lot here. And as I said, it takes a little time to build this, but we are confident that over the next 12 to 24 months, we will also register a strong presence in the retail segment. So coming back to product growth. Obviously, cards were a little down because this time, U.S. travel was less. So student segment [make] cards intake was less, but more than offset by a strong growth in remittance, which you can see in the outward remittance side. Overall, card growth at a CAGR level over the last 5 years has been 86.70%, remittance is at around 40.57%. So overall, if you really look at it in the last slide, we give you the financial results, which is already displayed. Overall, to sum it up, our financial performance this quarter reflected a disciplined execution, operational efficiency and margin improvements. Treasury and hedging strategies have been optimized, leading to better realization and reducing volatility. Cost ratios have been rationalized. Digital penetration has improved per transaction efficiency. So overall, how is the market outlook when you look at it is, our priorities are accelerating digital, improving our D2C penetration, expand co-brand and distribution partnerships, which is very important for us when we go big on the cards, enhance profitability through automation and cost discipline. So in the last slide, we always talk about the way forward. As of today, D2C focus, we are working on it. Distribution is something which will go live maybe by Q4. We are also working on multiple platforms. We are building in more and more deep integrations. Payment platforms is work in progress. Forex card issuance, we have started it's nine months. We have registered good volumes and now we are getting into the distribution side of it. So one by one, the areas which we are focused on, we are getting into it in a systematic manner. So to summarize, Q2 FY '25, '26, I would say, reflects a strong operational performance and steady financial growth for the company despite external headwinds. So we are confident that our omnichannel model, expanding partners and digital first strategy have consolidated -- helped us consolidate our position as one of the leading regulated cross-border payments fintech. With a strong start, we are confident about our H2 also, and we thank you for your support. With this, I'll come to the end of my presentation. Now I would like to hand over the conference to the moderator. Thank you so much.

[Operator Instructions] First question is from the line of Prateek Chaudhary from Saamarthya Investment Advisors.

Sir, first a few bookkeeping questions. If I -- if we look at our balance sheet, our trade receivables have gone up from what used to be around INR 20 crore earlier, they have gone up to almost INR 76 crores. Can you please throw some light on this? Why such a major increase? And this means that we haven't received money for roughly more than 6 months sales that we did till September.

Yes. I will explain this. So basically, our debtor cycle is just maximum 15 days. It is not 6 months, okay? And if you see September is a seasonal time for us. So per day, we do transactions worth around INR 50 crores or so, okay? If debtors is more, you can see that advances is more, creditors is more. So basically, we receive money from the customer, we do the transactions. So we have advances also which are more. Also you'll – also you -- we have issued -- now we're the card issuer, okay? So there it is on a -- little bit different model in which we receive customers' money, but we have to pay to the -- we have to pay to the network only when the customer spends. ‘ So basically, the model has little bit changed and that is why you will see sharp increase if you go on advances also. Advances have increased how many times? It is so many times – which it has increased. And if you are saying 6 months, you are comparing the net revenue. You should see the gross revenue, the transaction amount. We did transaction worth INR 3,000 crores, right, in 6 months.

But the -- your receivables are for the revenues that you record, which is INR 35-odd crores in Q2 and roughly INR 18 crores in Q1…

Yes. So if you will see trade receivable is INR 75 crores, right, on 30th September, okay? And you are comparing this with the gross revenue. You compare with the transaction value, which you will see in the note, which is more than INR 3,000 crore worth of transactions which was done. So basically, this 6-month calculation you are doing straight away by calculating the gross revenue, right?

Gross receivable is not the receivable. It is a – our margins are -- gross margin is around 1, 1.25%. Our net margins are around 60, 70 basis points. So receivable, we should look at it from a turnover perspective.

And in debtors, we basically say suppose for walk-in customers if we have received a check and check gets credited, so it will take 1 day -- 1 or 2 days and even the 1 day transaction value is around INR 50 crores. So I think you must have got the answer.

Okay. And sir, what is our growth outlook for the next 1 or 2 years? We are at roughly -- we're almost reaching INR 100 crores run rate. Where do you see us in next 1 to 2 years?

So as I said, I cannot do too much of a forward-looking thing. We have always -- in the last 3 years, we have delivered consistent growth. Obviously, market has been dynamic. If you really look at it, we had last year, we had a huge drop in the Canadian business. But still, we delivered year-on-year growth. This year, besides Canada, U.S. dip, but we were able to look at other growth areas and still grow over previous year. So everything is not consistent in this market. Today, also, we are looking at how the U.S. market will go through because earlier, U.S. intake was highest at the student side of things. But what is important for you to note is the company has always been diversifying. We initially started with 2 segments, then we diversified into digital. We have done our card launch. And we are now looking at cards as a strategic pivot where lines of income will come from the card based on the distribution model. So we are optimistic about growth because we are not dependent on only one segment. We are broad-based. We have brought in product lines. And as you can say, we are looking at registering year-on-year growth in a very positive manner. And we have -- this year, you must have seen we have stood our GTO despite an adverse market condition, which shows that we are growing despite market [indiscernible]

[Operator Instructions] The next question is from the line of Aniket Gadda, an individual investor.

Congratulations on a good set of numbers. I just have a few questions. I'll start off with, see -- could you just let me know what kind of industry outlook would be for the next half of the current year -- of the current financial fiscal year, what would be the industry outlook according to you?

So as of -- see, if you really look at it, it has degrown, right? So we -- 22% is the students degrowth as per the numbers we have, LRS numbers we have. Corporate is stable. It's not exactly growing, but it's in a more stable mode. Leisure is also ups and down, obviously, but leisure is again seasonal. So overall, we are looking at a very muted year only, but we are confident to deliver our numbers. But overall, I see this year being a little muted. A lot depends on how things move from a U.S. market perspective because that holds the key for the key student segment thing because normally in year 3 lakh to 4 lakh students travel there, around roughly 3.2 lakh students travel. So that is something which is a question mark where we may see a 40% --40%, 45% drop. So that is a concern. But overall, you can see a muted year where we may see a degrowth from previous year, especially in the student segment. That's how I look at it.

Just a follow-up on that. As you said, U.S. is a big market. As we have seen right now with tariffs and all going on and currently, people are not very keen on migration population. What kind of market would be in 2 to 3 years? Maybe there might be some diversification from U.S. to other countries or something like that? Anything you like to comment on.

It's already started, right? This time, there has been a huge movement to Europe. Even Russia, people have started traveling to Russia. We are seeing movement to Europe, huge uptick in U.K., Germany. So already, people have started moving because the idea is that thing is that steady overseas, that motivation is there, right? So obviously, maybe the destinations change. But as I said, none, on a long term, it will be a recalibration. Short term, there will be an impact.

Have you focused on the UAE market as its one of the top 5 markets for...

Absolutely. Absolutely. All markets are important. But if you really look at it as a percentage-wise, U.S. was very large till last year. Now when the sudden shift happens, obviously, we are growing in all the other sectors. That's why we are showing growth. But as I said, within a 12-month period, there will always be an impact on the overall market level, right? On a 24 months or 36 months, it will recalibrate. So this year, if you look at NRS numbers, there's already a degrowth in the first 5 months, which has been published by RBI. You can see the student remittance. It has degrown by 22%. But over a period, will it be degrowing next year is a [indiscernible] question because there will be other markets will take the demand

That's absolutely correct. I just wanted to ask one more thing. On the TCS front, there has been some grace given by the government. Are you expecting something more on that part?

Which one?

In the TCS, in the LRS...

TCS is already 10 lakhs. Its moved from INR 7 lakhs to INR 10 lakhs. So that more or less covers the retail segment. And the next year, student [indiscernible] becomes 0. So that will be a big relief, especially they also removed that same condition that any person who takes a loan, I think it's 0 now from March. So that will be, again, a boost for the student segment.

And on the Forex card that the business that we are going on like what kind of outlook we look for the next 2, 3 years, considering the new launches you have done, the smart card that we’ll launch in December?