Earnings Call Transcript Analysis Report #
DiGiSPICE Technologies Q3 & 9M FY25 Earnings Call Analysis #
Financial Performance #
Key Financial Metrics:
- Customer Gross Transaction Value (GTV): ₹31,951 crores (Q3 FY25)
- Revenue: Grew 7% QoQ and 2% YoY.
- Gross Margin: ₹44 crores (Q3 FY25), up 3% QoQ and 5% YoY.
- EBITDA: Improved from ₹(3.2) crores in the previous quarter to ₹(1.9) crores in Q3 FY25.
- EBIT: Improved from ₹40 lakhs in the previous quarter to ₹2.8 crores in Q3 FY25.
- PAT (Continued Business): ₹1 crore (Q3 FY25) vs. ₹(1.5) crores in the previous quarter.
- PAT (Discontinued Business): ₹90 lakhs (Q3 FY25).
- Overall PAT: ₹10 lakhs positive (Q3 FY25) vs. ₹(1.6) crores negative in the previous quarter.
- Float Income balance of 130 Crores
- Notional Gain/Loss on Investments: ₹(26.6) crores (9M FY25) vs. ₹(25.7) crores (9M FY24).
- EBITDA loss for new intitiatives (Spice Pay and credit Distribution): 3.3 Crores in Q3, 8.1 Crores for the nine months
Comparison:
- GTV grew 16% QoQ.
- Year-over-year PAT for continued and discontinued business improved significantly: from ₹(25.7) crores (9M FY24) to ₹(1) crore (9M FY25).
- Collections GTV now contributes 46-47% of total GTV, similar to AePS and Micro ATM business.
Areas of Growth/Decline:
- Growth: Collections (80% YoY GTV growth), Banking (triple-digit YoY growth in accounts opened), Subscription Packs (80% YoY growth).
- Decline/Flat: BBPS (flat this quarter due to seasonality), AePS and Micro ATM GMs (flat trend).
Strategic Initiatives & Business Updates #
Major Strategic Announcements:
- Launch of Spice Pay (UPI offering).
- Focus on NBFC acquisition.
- Amalgamation of Spice Money into DiGiSPICE Technologies.
New Products/Services/Markets:
- Spice Pay: A UPI-based digital payment instrument using a prepaid wallet.
- Focus on secured loan distribution.
Operational Changes:
- Increased focus on larger CMS counters/SMAs.
- Focus shifting to include the South and West of India for Geographic expansion.
Ongoing/Completed Projects:
- Beta launch of Spice Pay in select districts of Bihar and Madhya Pradesh.
- Applications have been filed for regulatory approval regarding the NBFC acquisition.
- Spice money merger is in progress.
Market & Competitive Landscape #
Industry Trends:
- Growth in digital payments, particularly UPI.
- Increasing demand for digital financial inclusion in rural India.
- Need for formal credit access for small merchants.
- Consolidation in the AePS space.
Competitive Positioning:
- Market leader in AePS with a 17%+ market share.
- One of the largest collections networks in small-town India.
- National player in AePS, unlike many regional players.
Market Challenges/Opportunities:
- Opportunity: Onboarding the next 300 million UPI users from Bharat.
- Challenge: Competition in the UPI space.
Market Share/Positioning:
- AePS market share above 17%, aiming for 20%+.
- Strong presence in North, Central, and East India, expanding in West and South.
Risk Factors & Challenges #
Concerns/Challenges:
- Managing fraud in a financially vulnerable market.
- Competition in the digital payments space.
Regulatory Issues:
- Ongoing process for NBFC acquisition approval.
- Impact of the 2FA on remittance, though stated to be receding.
- Mention of a GST order of ₹4.3 crores, which the company is contesting.
Market Uncertainties: Impact of transaction limits set by banks on AePS volumes.
Forward-Looking Statements #
Outlook/Projections:
- Continued growth in AePS market share.
- Significant growth in collections business.
- Expansion of UPI user base through Spice Pay.
- Growth in credit business.
Commitments/Targets:
- Become a full-stack financial services platform (neo-banking).
- Increase AePS market share to 20%+.
Planned Investments/Strategic Priorities:
- Investment in Spice Pay and credit distribution.
- NBFC acquisition.
- Leveraging AI for cost reduction and innovation.
Sentiment: Overall positive, with a focus on long-term growth and impact.
Q&A Insights #
- Most Pressing Questions:
- Strategies to strengthen AePS market share.
- Impact of UPI adoption and zero balance accounts on revenue.
- Plans for expansion into adjacent fintech verticals.
- Impact of 2FA on remittance volumes.
- Details about the GST order.
- Strategies to differentiate in the competitive UPI landscape.
- What are the efforts in place to retain Adhikaris?
Management Tone & Sentiment #
Overall Tone: Confident and optimistic.
Areas of Confidence:
- AePS market leadership.
- Growth potential of collections and banking businesses.
- Spice Pay’s potential to expand UPI adoption.
Areas of Concern:
- Acknowledged the need to manage fraud risk.
- Awareness of competition in the digital payments space.
Key Takeaways #
Focused Fintech Strategy: DiGiSPICE is firmly positioning itself as a focused fintech company, leveraging its Spice Money brand and extensive merchant network in rural India.
Diversification of Revenue Streams: While AePS remains a core business, the company is actively diversifying its revenue through collections, banking services (CASA), subscription packs, and the new Spice Pay (UPI) offering. Collections, in particular, has shown substantial growth.
UPI Expansion Plans: The launch of Spice Pay, a UPI-interoperable wallet, is a significant strategic move aimed at onboarding the next wave of UPI users from rural India. This differentiates DiGiSPICE from existing UPI players by targeting cash-first consumers.
Credit Business Focus: The company is prioritizing secured loan distribution and is exploring opportunities in unsecured lending using alternate data. The potential NBFC acquisition is a key part of this strategy.
Commitment of Financial Well-being of Rural India: DiGispice is making moves to provide more services, with the help of AI, to make financial services more accesible to those who need them most.
Positive Financial Outlook: While there are challenges, the overall financial performance shows improvement, with growth in GTV, gross margin, and a positive PAT in Q3 FY25. The company is making strategic investments for future growth.
Regulatory Compliance: The company mentions navigating a GST matter, demonstrating a need to keep up to date with, and complient of, all regulations.