Kaspi.kz AO

NASDAQ:KSPI

Earnings Call Transcript 2024-Q1

[Operator]

Hello, everyone, and welcome to Kaspi's First Quarter 2024 Financial Results. My name is Harry, and I'll be your operator today. [Operator Instructions]

It is now my pleasure to turn the call over to David Ferguson from Kaspi to begin. David, please go ahead when you're ready.

[David Ferguson, executive]

Thank you, Harry. Hi, everybody. Welcome to our first quarter 2024 financial results conference call. Joining me on the call today, we've got Mikheil Lomtadze, our Co-Founder and CEO; Pavel Mironov, our Chief Operating Officer and Deputy CEO; Tengiz Mosidze, Chief Financial Officer and Deputy CEO; and Yuri Didenko, Head of Capital Markets and Deputy CEO.

As usual, we will go -- Mikheil will take you through the strategic updates. I'll take you through to the financial section, and then we'll open the call up for the regular Q&A.

So on that note, Mikheil, over to you, please.

[Mikheil Lomtadze, executive]

Thank you, David. So let's go straight to the -- to our -- some of the strategic updates for the first Q. So the quarter has been strong. So we're off a good start on 2024. The payments TPV has grown nicely, 35%, tracked by revenue growth of 25% and net income growth of 25%. Marketplace GMV is up 62%. Revenue is up 108% in the Marketplace driven by the nice growth on the bottom line in the Marketplace of 36%. And the revenue in the Marketplace, also driven by some of the new business lines, which we have launched including everything around the cars and the grocery's showing high growth as well. I will talk a bit about it later.

And the Fintechs or TFV growing nicely, 48%, which results in a revenue growth of 26% year-over-year and net income plus 3% growth. And as the interest rates will be going down, there is a significant profitability cushion actually in the Fintech business, but the volumes are nice in the high quality, which is reflected in the revenue growth.

We continue to be extremely relevant for our consumers. So 71 monthly transactions per active consumer, which is the world-class standard. Again, 71 transactions per month, not per year. And then the revenue growth is 40% and 28% net income growth year-over-year.

So we are -- we have started the year with a very strong quarter. Next slide. As you see, we have been on this journey of building the Payments, Marketplace and Fintech platforms. And as the Payments and Marketplace are the fastest growing, we are really happy now in the first Q, pretty much having them contributing roughly the same share to our bottom line.

And if the investors have been following us since initially becoming public on the Stock Exchange in 2020, this mix has dramatically changed, right? I mean, before that, it was actually pretty much opposite with the fintech actually dominating. And at the moment, we have 68% coming from the fastest-growing Payments and the Marketplace platforms.

We have been also putting together and working on what we call value-added services. I mean those are the services which basically deliver additional value to our merchants and our -- specifically our Marketplace platform. So here, you can actually see that our added value services have grown extremely nicely. They now contribute 1.6% out of 9.5% of total take rate on the total Marketplace GMV.

The classifieds is the businesses which we entered and acquired last year. So they contribute very nicely to the value-added services around the cars and real estate and so on and so forth. Ads, we're scaling very quickly, they also contribute on -- at the moment on our e-Commerce platform, but we are launching the suite of the services, we'll be launching some new services during the year.

So they together are now in our advertising and then delivery which we started to monetize sort of last year, you can see that have grown dramatically and now they also contribute meaningfully to our take rate. In general, we are over 4x up compared to the last year's first Q in value-added services. And each of those is growing nicely and fast.

And what is, again, extremely important to keep in mind that when we call them value added, they actually do add value to our merchants and our consumers. And if you launch an advertising, your sales grow up and so on and so forth. So really excited about this, and you can expect from us some other additional services, which we'll be launching and scaling through the year.

E-grocery is really exciting business, which we pretty much sort of started to scale last year. Now we're grown 125% year-over-year. It's almost 600 consumers, which shop on grocery through our grocery business in our mobile app and then almost more than 2 million purchases have been completed during the first Q, which is also double the number of purchases of last year.

And if you remember, we're going around the larger purchases, which is weekly purchased sort of significantly larger average ticket, and that also grew nicely to KZT 14,000 quarter-over-quarter. So we are firing on all cylinders and launching another major city in Kazakhstan as we speak. And this year, we'll be focusing on 3 larger cities which represents the majority of retail trade in the grocery business, and that is Almaty, Astana and Shymkent and that would be our priority for the year.

Another innovation which came from us last year was Tours, which is basically family vacations. We have been growing that business nicely, 350% up on the GMV. It's now a meaningful number of 7% of our Kaspi Travel GMV. But importantly, it's also significantly take rate positive. That business has a take rate of around 8.7%. And please remember that we have started that last year, and we're working now through the seasons this year. So really excited about that business and our consumers love it.

And for us, it's the most important reward from our consumers is really the feedback and excitement they are sharing with us. So we're really excited about that business, and we'll continue scaling through the year.

As we've entered the business of cars last year through the acquisition of Kolesa, which is the leading car classified alongside with the real estate, but the leading car classified specifically for our innovation. We have basically told you that we're excited about that business not only because it's a leading classified platform, but actually for the fact that now probably acquiring car is the second largest important decision of the family household and not only acquiring car but actually owning the car and serving the car and so on. So there is really a wide suit of the services around the car.

So as a result, now we are really happy to present you some of the strategy around the cars, which we are scaling -- we'll be scaling through the year. So the number of cars in the country in 2023, the registered cars was roughly around 5 million cars. And then -- that owned in the country. The cars which change ownership during the year, there were about 1.9 million cars. A number of cars, which are actually listed on the Kolesa car marketplace is about 2.4 million. So that just tells you that cars -- Kolesa is really the place to go if you want to buy a car.

And the value of cars listed on Kolesa is around $37 billion. And the average price of a car listed in Kolesa is about $15,000. So that basically is a huge market and we are in the middle of the -- of -- at the beginning of our journey to actually revolutionize not only car purchasing experience but actually everything around the car ownership.

So the idea is that we are putting together and working as we're really focused on not just beginning of a consumer's journey with the car. So actually, in most of the -- in the whole journey, it includes -- you would buy a car, you would actually own the car, you need to serve the car and then at some point, you still sell the car and then you buy another car.

So this business for us -- and this is probably also -- not just buying the car is important. A significant part of the family's household budget is actually going to everything around ownership, around serving the car, and we believe it's a huge market. And if we leverage the data, we leverage technology, we leverage our products, we can really create a remarkable consumer experience.

Some of the examples of the different type of services we have in mind, if you look at the car ownership, it's -- you buy a car, you need car financing in order to acquire it, and then you register ownership of the car. You need to insure the car. There is a car and state-related taxes you have to pay. You issue the driving license or renew the driving license. You clean the car, you service the car, you fuel it with a petrol, you buy the tires, you buy the auto parts and then you sell the car and the whole cycle starts again.

So there are so many different multiple touch points around owning and serving the car that we believe that technology to pulling everything together and create first-class consumer experience, I think it's a really exciting opportunity. We really know that we can make our consumers' lives better and easier and we just need to -- we need to leverage the data and we need to leverage the technology in order to enable the seamless experience around -- everything around the car.

Surprisingly or not surprisingly, some of the services already have been built by us for the last several years. So if you actually take a view of some of the services, which we're now pulling together and some of the touch points that we have, they already can give you an indication that this is something which we have been thinking about in launching services historically around different touch points. And now this comes together into a bigger picture, right?

So we have e-cars, which is -- which basically is Kolesa enabling to sell and to connect buyers and sellers around the car purchase. We have online Car Finance, which is one of our fastest-growing fintech products right now, it's pretty much fully online, seamless car finance experience. On our e-Commerce platform, we actually have car parts business. David, can you please move -- yes, thank you. We have auto parts business where you have actually quite a wide arrangement -- a wide range of assortment already from spare parts to auto parts, and that's something which now we are also organizing around owning your car.

And then we also just launched this quarter, sold around 1200 cars when we actually buy and sell cars ourselves, considering that we can build this incredible online experience for our consumers.

And then there are value-added services through the GovTech platform, which I think Kazakhstan can be extremely proud of being launched together with the government agencies that you can register a car fully online over a coffee in the evening, you can actually pay taxes and there have been around 2 million car tax payments only in the first Q, you can drive a license -- you can issue the driving license, almost 70,000 driving licenses have been issued.

So there is a lot of -- there are different touch points, which we currently have. And by leveraging the technology, we are just pulling this together to take the consumer experience even on a more seamless level than before. So really excited about this business opportunity.

So if you look at the e-car GMV now, we combine different businesses. So that gives you a bit understanding of everything, what we do around the cars. So if you look at the car 3P, that's when the car is being sold through the Kolesa. And the buyers, we connect them on the Marketplace, car parts or auto parts is actually everything from tires to the parts, which we also sell through our Marketplace already.

And then GMV of 1P, it's 7% of GMV now, but it's actually about 1200 cars, which we have just sold in the first Q. So average ticket is high. Therefore, even though it's a 7% of the e-car GMV, it's just 1200 cars, really. So we're just beginning to scale that business.

Just to give you a little bit heads up on the economics of actual -- and the take rate is quite healthy, 4.6%. And as we continue getting the scale, the take rate will be expanding. So if you look at the sum of the economics of actually selling the car. So it's 1P. So we have been -- we have managed to sell 1200 cars. Value of cars that we sold is around 7% of e-car GMV.

What is, I think, remarkable, there are things which you really focus on in this business, and that means how many days it takes you to sell a car because that's probably one of the most important KPIs. So it takes us around 30 days. So within the month, we basically buy and sell a car. And already on 1200 cars, that business is profitable, which I think by itself is a remarkable achievement. Now as you gain scale, as you gain size, efficiencies kick in. So we would expect that net income margin and gross margin continue expanding. And again, this is just 1200 cars. You can even call it almost a pilot and we are very profitable.

On the screens, we're just showing -- this is not just a usual spins, basically, this is probably one of the most important advantages that we have. So data-driven approach is already in this business. So as you can see, we are evaluating the car based on proprietary technology but also our ability to understand the defects and understand the quality of the car before we actually buy the car. So that's something which we have been developing basically starting from the last year, and now we are fully operational.

And from now on, you can only see the business picking up and the efficiencies being -- going through the revenue to the bottom line. So really excited about our business in general, huge opportunity. And other wave of innovations coming from us.

Back to you, David.

[David Ferguson, executive]

All right. Thank you, Mikheil. So I'll run you through the 3 respective platforms and the consolidated financial numbers. So starting with the Payments platform. Message on this slide, very simple and clear. User and financial trends remain very strong and predictable. So you've got consumers up to 13 million, that's up around 11% year-on-year. We've talked previously about the focus on transactions. You can see transactions volumes up 42% year-on-year. And then that translates into TPV, up 35% year-on-year.

Just the one thing to keep in mind, when you're looking at the year-on-year growth trends is that inflation has moderated dramatically over the last 12 months. So when we came into 2023, inflation was running north of 20%. Today, it's running north of 9%. So that does mute the growth trend. And that's a theme also in Marketplace as well.

All products are contributing, but B2B payments, no surprise, remains the fastest growing component of our TPV, up 78% year-on-year, now equivalent to 4% of overall volumes.

Robust consumer and merchant trends combined with stable take rate translate into strong financials. So revenue growth is up 25% year-on-year. That is lower than the TPV growth, and that reflects the partial offset of slower growth in interest revenue on the wallet balances. The bottom line, as always, with Payment platform, top line drops through to the bottom line, operate tight cost control and operational gearing very much intact. Bottom line up 25%. And usually, you see that, that operational gearing is more pronounced in the larger quarters.

The guidance of Payments platforms were reiterated. So we continue to expect revenue to increase around 20% year-on-year, reflecting the robust consumer and merchant trends, albeit offset by moderating inflation. Favorable payment take rate dynamics should be positive for revenue growth but need to be balanced against moderating interest rate revenue on current account balances, but considering Payment platform's operational gearing, we still continue to expect bottom line growth of 25% year-over-year.

So moving on to Marketplace. Marketplace is our fastest-growing platform. Again, here, strong trends across the board. Strong consumer growth, up 15% year-on-year to 7.4 million, fast growth in transactions, up 33% year-on-year and that translates into even faster growth in GMV. GMV up 62% year-on-year, And that GMV momentum accelerating materially versus 2023.

Here, all platforms make a contribution, but in particular, e-Commerce stands out as being the star performer. Take rate moves up to 9.5%, and that reflects the points that Mikheil talked about. The range of value-added services that we have is expanding and growing very fast. So that includes advertising, initially advertising for e-Commerce. Merchants now advertising for FMCG manufacturers as well, delivery and now classifieds listing revenue. All of those things are still in the early stages and will remain positive for Marketplace take rate going forward.

So I said earlier that e-Commerce is the standout performer. Here, very clearly, you see accelerating momentum, purchases of 101% year-on-year GMV up 114% year-on-year. Again, all platforms making a contribution, but particularly, we will focus on e-cars, as Mikheil talked about, and that comes with often higher ticket sizes, which is positive for GMV growth. Again, take rate moves up to 11.1%, reflecting ongoing strong trends in advertising and delivery revenue.

Kaspi Travel. I think here, message also very clear, very strong growth at the top line, no slowdown coming through. But what you are seeing is the take rate is going up, thanks to package holidays. And that will drive revenue growth in excess of what is already fast GMV growth.

M-Commerce, very strong performance from m-Commerce. GMV of 34% ahead of transactions of 10%, boosted by promotional events at the first quarter. At the time of the Q4 results, there were questions from some investors around slower growth in m-Commerce in the fourth quarter of last year. And this just illustrates the danger of reading too much into any one particular quarter. Across marketplace, quarterly trends can be impacted by the timing of promotional events, where you see very much m-Commerce performing in line with long-run trends, and those successful promotional events also feeding into take rate, 8.9% up from 8% year-on-year.

So to wrap with the Marketplace financials, strong GMV growth, faster revenue growth due to, one, higher take rate; and two, contribution from 1P translates into revenue growth ahead of GMV growth, up 108% year-on-year versus GMV growth up 62% year-on-year. Net income, up 76% year-on-year, that reflects lower net income growth, net income growth below revenue growth reflects the contribution from 1P e-Grocery and 1P Cars. It is very much in line with our planning and with net income up 76% year-on-year. We think that, that is a very good result.

For the full year, we continue to expect Marketplace revenue to increase 70% year-on-year with especially strong trends in e-Commerce, e-Grocery -- e-Commerce including e-Grocery and e-Cars, we anticipate net income for the year to be up 40% year-on-year, impacted by 1P revenue growth. But again, as we believe, still a very strong bottom line outlook.

So moving on finally to the Fintech platform. So we've talked over the last 2 years about the focus on growing the consumer deposit base. You see that, that continues to play out, albeit to a slightly lesser extent, Consumers up 24% year-on-year to 5 million. But it's worth keeping in mind, when we started that sort of -- we went into that interest rate raising cycle, and this focus on attracting deposit consumers, the deposit consumer base was around 3 million. So we've seen a substantial increase over the last 2 years.

Fintech consumer growth up 10% year-on-year to 6.3 million, and that growth rate is very consistent with trends over the last year.

TFV origination remains at healthy levels, up 48% year-on-year in the past quarter, consistent with trends throughout 2023. And reflective of a healthy consumer and merchant backdrop. Here, too, all platforms contribute, but particularly, Merchant Finance is our fastest-growing lending product and now at 17% of origination is meaningful in size if it keeps growing at that rapid rate, it really makes a difference to overall TFV growth. Book merchant microfinancing, car financing and buy now pay later, all our integrated group marketplace, Fintech products will continue to grow fast and increase the share of total origination over this year and over the medium term.

Looking at the loan portfolio and savings portfolio, what you do see here for the first time is that the loan portfolio of 37% year-on-year is growing faster than the savings portfolio, up 32% year-on-year. So what this tells you is the loan-to-deposit ratio moves up. It moved up to 86% from 79% year-on-year. And assuming the interest rates continue to move down, this is what will drive higher profitability in the fintech business as we move into the end of this year and into 2025.

This chart are consistent with what you've seen really over the last 3 years. So over the last quarter, consumer trends -- consumer unmatching trends robust. But actually, that's consistent with what you've seen really now over a much longer period of trying, credit risk metrics low and stable. And that is actually just consistent again with what you see across the entire business, whether it be payment trends, whether it be savings trends, loan repayment trends, we see a very healthy end customer environment.

That manifesto translates into stable cost of risk year-on-year, 0.5% consistent with full year guidance -- sorry, consistent with our full year expectations. And an NPL ratio that's stable to improving slightly.

The one point I just would make to preempt the question is on the flooding situation in Kazakhstan, this is something a lot of investors have asked us about over the last 2 weeks or so. The situation is an evolving situation but as of today, no notable impact on our financials.

Wrapping up on Fintech revenue and profitability, so healthy origination, stable yield trends year-on-year translate into decent and robust revenue growth. Net income growth is below revenue growth. And again, that reflects an enlarged deposit base and a higher cost of funding. Funding costs up 36% year-on-year or to the point I made earlier.

This is consistent with our guidance and what you'd expect the combination of loan-to-deposit ratio moving up, funding costs coming down will over time, feed into faster net income growth towards the end of this year and into 2025. Keep in mind, when rates come down, it takes around 12 months for the deposit base to reprice.

So to look at Fintech guidance, again, we reiterate the message from the full year results at the end of March, namely top line growth of 20%, but bottom line growth of 15% for the reasons talked about, but with the provisor that growth -- bottom line growth expected to be materially higher in the final part of the year, and that will be a run rate into 2025.

Consolidated numbers here. I think I've outlined in detail the dynamics and nothing really to reiterate here. Dividend declared of KZT 850/ADS for the first quarter period.

So again, moving on to guidance here, too. I've already talked you through at a platform level. So just to wrap up at a sort of consolidated level, I'd say that the second quarter of 2024 has gotten off to a strong start. We are very much on track to deliver another year of strong top and bottom line growth. And we expect 2024 consolidated Kaspi.kz net income to be up around 25% year-on-year, and that is unchanged versus our expectation at the end of February when we last updated the market.

So I'll pause there on the pre-prepared slides. We'll ask Harry to open the call up to Q&A. But just while people are registering their questions, Mikheil will make a few comments around National Payment System, which is something a lot of you have been asking about over the last couple of weeks. So I'll pass back to Mikheil on that subject.

[Mikheil Lomtadze, executive]

Thank you, David. So basically, in terms of the -- for the last couple of weeks, some of the investors have been sort of contacting us to discuss the National Payment System and the Bloomberg article, which also was describing some of the aspects of it. What we feel that National Payment System project is not well understood by investors and we would like to take a couple of minutes just to explain its key aspects. And I also think it's good for the country, for its investment climate to avoid speculations and really focus on the facts.

So as you know, when we develop the products, we always go through sort of frequently asked questions, what consumers really care about. So I would like to use this simple approach in this case as well. So I would say that there are 3 frequently questions, which I would like to basically explain and answer it straight away.

So the first question is, what is the National Payment System project. So I would say the basic main idea behind the National Payment System project was to sort of process transactions within the country and also aiming to allow consumers to transact and move money more seamlessly between accounts and different banks.

The project has been under discussion for probably around 10 years, 5 years, we -- there have been more of a practical discussions, and now also the technical test and sort of the pilot testing is now postponed to the next year. And then the results need to be assessed. I mean it's understandable, right, because that's a quite technically challenging sort of demanding project, which really requires a lot of resources and input from a lot of parties.

So second question is, what principle is behind the Payment System project being currently discussed. So I would say that, first of all, the -- I would refer to the press conference, which the National Bank Governor did, I think, on April 12, and that was very useful. He went into quite the details about the Payment System project and really reinforcing several important points. I mean, first of all, that the Payment System is not really replacing the successful payment networks, which have been developing in the country and is actually planning more of an add functionality to allow more transactions between the banks and not planning to interfere in any way.

Secondly, that the National Bank is not going to basically interfere with the fees or set the fees and the players can actually set their own prices, and there was a discussion about the committee which would involve the banks as well, so they can be part of the decision-making.

And then thirdly, that is nobody is really forced into the project. So it's a free market initiative which is good for pretty much everyone. I mean if you really think in terms of the flow of the transactions and the flexibility of both consumers and different players, I mean, that's really is an opportunity which can enlarge the market rather than reduce it.

The third question is, I would say, is what is sort of Kaspi's take on the Payment System project and our views. I would say that we are always supportive to any free market idea, and freely moving money is really one of them. So we have -- actually, our entire business was about moving money freely and cheaply and conveniently and fully online and digitalizing. So it's really within our DNA.

So projects like this, we would sort of welcome and would be happy to participate. The less barriers for consumers to transact and move money also means that they move money into the services and the players which develop high-quality products and services. And therefore, this means it will stimulate pretty much everyone to develop high-quality services in order to stay relevant for its consumers and users.

So it's great for -- if done right, it's good for a consumer, less barriers and we're always for every free market idea. And in terms of the -- from our experience, obviously, execution of the idea then the pilot and actually functioning service will require a lot of hard work. And I mean it will take time and resources. And from our point of view, we're basically just stand ready to offer our support and expertise and we're engaged and involved.

So those are the things which I wanted really to clarify again. We basically always focus on the facts. And I think those are probably the most important points, really, I wanted to make. Thanks.

[David Ferguson, executive]

Okay. So thanks, Mikheil. On that note, Harry, over to you for the Q&A session, please.

[Operator]

Thank you, David. [Operator Instructions] Our first question is from the line of Darrin Peller of Wolfe Research.

[Darrin Peller, analyst]

Great execution and results. If we could just start with a bit on guidance. But you're obviously showing some really good traction in the 1P car marketplaces, which you talked about as a potential source of upside for the year. And we are seeing some other trends outperform.

So despite that, we saw guidance reiterated. Just a little bit more color on your philosophy around the guide framework would be great and maybe conservatism embedded in or how you're thinking about the puts and takes in terms of upside potential?

[David Ferguson, executive]

Okay. So maybe I'll take the guidance question, Darrin. So I mean the guidance is the guidance, 25% growth for the year, bottom line. And just what I would keep in mind is that we're 1 quarter into the year. Yes, it started well, but there's a long way to go. And the first quarter is the smallest of the 4 quarters.

So over the course of the year, momentum is good, and things can evolve in different ways. But it's still relatively early days and visibility for the full year outcome will be a lot better as we go into the summer period.

[Mikheil Lomtadze, executive]

David, can I add?

[Darrin Peller, analyst]

Okay. That makes sense. So it's just early.

[Mikheil Lomtadze, executive]

Darrin, I just wanted to add a brief comment also about the first Q, right? So what you also see in the first Q, especially there are 2 points I wanted to make. On the Marketplace and e-Commerce and m-Commerce side of things, we have basically -- we're moving from sort of promotional events, which we have done 2 times a year and now to more frequent multiple events, at least 3 times, which is the big shopping events, which we have organized something like Black Friday, but it's basically Kaspi's event, right, Kaspi Juma.

And the reason why we have done this is because merchants and consumers really have been asking us to be more seasonal in our promotions. And we have such a wide diverse range of the services that -- buying the tools for vacation sometimes is not going well together with, I don't know, buying the refrigerators. So from that perspective, we have to become more seasonal, and therefore, we will be following our merchants in order to make the Juma more of a seasonal event. And the first Q was Kaspi Juma, which we have done. So that's one comment. So therefore, we always need to look at the dynamics through the year.

And the second comment is that some of the services, which we're launching, we always have a long-term view even though we would be happy to see the faster traction than expected. But things, when we talk about the cars for example, those are the things -- or some other value-added services, those are the things which really are at the initial stage of our strategy implementation.

And from that perspective, we -- keep in mind, we're always focused on the quality of the service. So we scale services whether we are highly confident they are working like a Swiss watch. They are working perfectly for consumers and merchants. And therefore, that's also might be partially responding to your question. So give us a time through the year and we also have a long-term strategies along the way.

[Darrin Peller, analyst]

That's helpful. Just a quick strategic -- that's really helpful. Very quick strategic follow-up, if I don't -- if you don't mind, is just on an international. Maybe that in capital allocation, just your latest thinking around capital allocation priorities? I know it's early days, but anything on the international front that's worth keeping in mind from our perspective in terms of what you're looking at.

[Mikheil Lomtadze, executive]

Again, actually, we're quite open-minded. As we said before that we believe the business we have been building in Kazakhstan is just a remarkable business model, which we would like to bring to other markets. And I think even our consumers are asking us. And yes, and the country is asking us, can we go outside of Kazakhstan.

So we are open-minded. We are looking for -- and the acquisition targets. But again, the country and the target quality is extremely important for us. So there is nothing immediate that we would report. I think we would communicate it in the due course. But we will put capital at work if we -- yes, if we feel like that's the target will bring long-term value to the shareholders.

[Operator]

Our next question today is from the line of Gabor Kemeny of Autonomous Research.

[Gabor Kemeny, analyst]

A few questions from me. First one is on the National Payment System. Do you have any idea about the economics of how the economics of the payments processed through this system would compare with the payments processed through your own system? I guess it would be helpful to understand how disruptive could this be to the cost repayments platform.

The other question on the e-Cars or the car platform, I mean, impressive numbers. Would you be able to provide any comparables? I mean this 26% of e-Commerce GMV, it's an impressive number, and it would be interesting how this looked a quarter or 2 ago, if that was available, please?

And just a final one on the marketplace take rate, which seems to be on an uptrend. I guess any sense of how much room do you see to monetize the value-added services further?

[Mikheil Lomtadze, executive]

Yes. I will take it. So in terms of the payment systems, again, I mean, the only thing I could do is really just speak of the facts, and the facts have been communicated by the National Bank in terms of the fees not being kind of regulated or interfered and it's a market practice. I mean that's basically the bottom line of the facts.

I could also add in general trends, my personal view in terms of the fee levels. I mean if the fee levels are regulated to the extent that they will go down in general to the minimum threshold, which makes basically, which incentivizes the players to continue innovating and developing the services and competing. Then that actually is counterintuitive in a sense that the bigger guys become bigger, right? Because then nobody else can actually innovate. There is no enough value to compete.

So from that perspective, I really don't like to use this analogy, but if the fee is reduced, then the players like Kaspi just get bigger. So I don't think it's in an interest of innovation around this and just allow basically the enough value in the value chain for others to innovate and on top of whatever is already done and actually just offer the services.

So I think reducing the fees wouldn't be a good idea. And you need to keep in mind that Kaspi's fees are already one of the lowest on the market, right, 0.95%. So that's also important to keep in mind on the payment network side. So that's in terms of the payment network.

In terms of the cars, as I've mentioned, the cars GMV -- the car parts was a part of the e-Commerce GMV, and pretty much everything else is something we have been creating during the last 6 months from the moment when we have started -- when we have acquired Kolesa and we streamlined the processes and things like that.

So this part of the JV has been sort of created recently. And yes, and our inspiration for that business is really just to -- we're just scratching the surface, right? It's really leverage technology to streamline the entire ownership of a car. So we're really focused on that. So hopefully, it will be exciting to do. And it's a big market. It's a huge market.

So in terms of the marketplace take rate, I mean there is not much really for me to add to the previous comments, which means don't expect our take rate to skyrocket. I mean we are not in the business of overmonetizing the merchants. So everything we do, we make sure that this delivers the value. So we expand nicely, we expand consistently, we expand through value-added services. So those trends are there.

But don't expect us that we'll be charging merchants 20% or 30% like other marketplaces do because we believe that's counterproductive and that means not creating the value for merchants, but actually taking value from them. So just trends will be stable, will be there. And then the value-added services will be driving the growth. But again, don't expect us to go wild on the take rates for the marketplace.

[Operator]

[Operator Instructions] Our next question is from the line of James Friedman of SIG.

[James Friedman, analyst]

So I wanted to ask about your perspective on the use of the balance sheet as the company evolves its offerings into areas like grocery and 1P and cars. Historically, the company has been somewhat balance sheet light transaction-based. Should we be anticipating that there will be more of a balance sheet commitment as you dig into some of these additional and incremental offerings?

[Mikheil Lomtadze, executive]

James, thank you for the question. I mean, first of all, I would like to take a step back and just -- even though we are much more than a bank and the 1/3 of our bottom line now contributed equally by the businesses, we have been previously in the business of managing the balance sheet, right? We are -- by the balance sheet, we are probably the largest consumer bank in the country. So we already had the balance sheet. So from that, that's number one.

And therefore -- and number two, you also need to keep in mind that the Fintech products are really important for some of our businesses. And I can give -- for example, when I'm mentioning the 30 days to buy a car and sell a car, that car is transformed into the car finance after we sell it because quite significant portion of cars in any country is sold through the car finance. So if you think about managing the balance sheet, I think, and managing the risk and leveraging the technology, is actually where we're coming from.

And this is our competitive advantage. And this is why businesses that we launched, for example, cars, is profitable with the first 1,000 cars that we sold, 1200 cars that we sold. So that's basically just to kind of give you a bit of a heads up.

And from our balance sheet structure point of view, you are not going to see the major increase in our balance sheet really just because we already have balance sheet in terms of the lending products. So this is not going to be a material number, but we are capturing the more value and we are creating more value for consumers and merchants by streamlining the technology, which means converting goods into the lending products, basically, which we know how to do because that's where we started from.

[James Friedman, analyst]

Yes. That's a great point. And then I just wanted to follow up on the Slide 32 since we are probably all on this call, adjusting our models. So when you say at the top that the 2Q is off to a great start, could you unpack that a little? Like what does that mean, a great start? And any particular callout about the second quarter would be good.

[David Ferguson, executive]

Well, Jamie, I'd say a good, nice question, but nice try, but wait until the summer. It's off to a good start. We're talking positively about the trends across all of the businesses. And there is forward-looking comments in some of the statements we've made, but I don't know if we need to start pulling out the Q2 numbers today unless Mikheil wants to.

[Mikheil Lomtadze, executive]

Well, no, I just wanted to share. I really feel your pain, guys. I think you just joined as analyst with our U.S. IPO. And before that, we had other colleagues of yours working with us. I feel your pain because the company is innovating at such a rapid rate that at some point, you really need to, I don't know, to catch up with our new business lines and things like that. So I feel your pain that forecasting our business is a constantly learning curve. But yes, but I agree with what David said. I just feel your pain, guys. But we will be continuously innovating. So don't relax just now. There will be more stuff coming over the years.

[Operator]

Our next question today is from the line of Reggie Smith of JPMorgan.

[Reginald Smith, analyst]

I appreciate all of the color and the numbers you've provided on the auto business. My question is, I think it would be helpful for the U.S. investors to kind of understand what is the, I guess, typical process for someone to buy a car in Kazakhstan? And I guess kind of who are you competing with? And how does your solution or service kind of change their car buying experience for people out there? And then I have a follow-up.

[Mikheil Lomtadze, executive]

It's a good question. So basically, what the car buying experience in Kazakhstan actually is -- what is important point is mostly consumer to consumer. So that's extremely important to keep in mind. So a vast majority of cars are sold between the consumers. And that's just because also the car marketplace, which has been built on the classified side of things really provided a great consumer experience, user experience and a lot of liquidity to the market.

So that's basically -- that's an important point, right? So there is a -- penetration of the dealerships is very low. So that's why there is a market opportunity to organize the process for both sellers of cars, which are actual individuals and buyers the car, which are individuals. So that's number one.

Number two is that the penetration of the cars is actually quite small and vast majority of cars is actually -- not vast, but I mean a significant portion of cars is quite old. I mean in excess of 10, 15 years. So from that perspective, that's an opportunity also to bring the technology, to speed up the process of buying the cars, which basically means us helping the consumers to renew the cars and get the value out of having the newer cars in for their households.

And then the third is ownership of the car and bringing a bit more transparency, technology, if you say, between owning the car but also the serving of the car, right, spare parts and auto parts and things like that has been actually quite an experience. If you want to buy spare parts, I think it's a difficult exercise to match the actual auto part with your specific model of the car. And here is also our technology, which we have been developing, which will streamline the process significantly.

If you think in terms of the comparable business models, I don't know, maybe something like CarMax in the U.S., but actually without building this huge dealerships would be a business which we have studied when we have been developing that service. And also maybe Carvana, with its fully online experience but without expensive vending machines for the cars because people don't -- we don't want to waste money on things which are just for a show.

So we are actually just developing the entire online experience of the car. And some of the things which are happening with the car in offline world is actually checking some of the details of the car. We still want to make sure that the car we sell or the car we buy or the car we finance is actually the car which has been verified and checked. And there is an offline part of the process, which involves different counterparts including the -- some of the service stations across the country.

So it's an interesting -- it's a very fragmented market. There are a lot of players in this market. And when you see fragmented market with a lot of players technology can always streamline it. And that's why we're very excited about this opportunity.

[Reginald Smith, analyst]

Got it. And just to clarify on that, are most of the cars like owned and registered in like the big cities or is it rural? And are those sales kind of hyper local? People are like buying from folks that are in the same city. That's one question.

And then my second question, I'm curious about, I guess, your product development, and I know you don't want to maybe disclose products that are on the come. But I'm curious, maybe you could talk a little bit about some of the products that you explored and decided not to pursue, just to kind of help us understand your approach and how you vet and think about new products.

[Mikheil Lomtadze, executive]

In terms of the car bank experience, it's mostly local and really concentrate in the larger cities. And in general, the way we sort of scale our businesses, we actually are focusing on the larger markets. And we have done pretty much in every business that strategy. So we will -- like if you look at the e-Grocery, right, we started from Almaty, which is the biggest city also in terms of the economic and the financial consumer spending numbers. And then we moved into Astana and then now Shymkent.

So we are actually -- when we build the businesses, we are building businesses profitably and therefore, we're moving from one strength to another. That's always have been our strategy, actually scaling any business. We usually say that front troops shouldn't be too far from your support in the back office and you are not stretching your units. And so then it becomes expensive and quality deteriorates. So we always scale pretty much from city to city basically.

In terms of the products which we didn't do -- do you mean around the cars or general example?

[Reginald Smith, analyst]

In general. See, I'm just curious like how you think about product development and as you kind of evaluate stuff like that?

[Mikheil Lomtadze, executive]

Well, for example, the food delivery, right? So food delivery business, we have attempted several times, looked at it, but we have decided not to pursue that vertical, at least at this point. And the reason why we're not pursuing this vertical because it's crowded. There are a lot of players, restaurants.

If you take the restaurant's perspective, they have like 5 service providers. So people that -- there is not much value that we can bring to this market because there is already enough of offers for a consumer and there is enough players. And it's just a limited value from us really both for restaurants and for consumers. And because we don't see the value we thought that there are many more exciting opportunities that we could pursue.

Again, don't get me wrong. If we decide to go to the food delivery, we will be aiming to be #1 or to be the best one in terms of the quality. But when you look at today's market with 5 sort of players, out of them 2 or 3 are global guys, there is no value from us apart from disrupting pretty much the other guys on this market.

And we don't like red ocean type of ideas. We like ideas of the blue ocean when we actually create opportunities for merchants, we create opportunities for consumers and we basically bring the value and not disrupt the value. So that's why, for example, food delivery doesn't fit the profile for us, at least at this stage.

[Reginald Smith, analyst]

That makes sense. I guess the same applies for ride share. Is it safe to assume that the ride share market is probably overly competitive out there as well? Sorry for monopolizing the call but it's what I have here.

[Mikheil Lomtadze, executive]

Yes, ridesharing would fall into the similar category, and there are very few synergies that we see at this stage. Even though ridesharing is something which consumers are asking us to launch because probably they're like the brand Kaspi Taxi sounds cool. So -- but never say never.

[Operator]

I'm afraid we have run out of time for any further questions today. So I'd like to hand back to David for any closing remarks.

[David Ferguson, executive]

All right. So thanks a lot, Harry. Thank you, everyone, for participating in today's call. If you have follow-up questions, you know where we are, so feel free to get in touch. We'll be happy to help. But thank you and speak to you soon. Bye.

[Mikheil Lomtadze, executive]

Thank you. Have a good week.

[Operator]

Ladies and gentlemen, this concludes today's webinar. You may now disconnect from the call.