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Infibeam Avenues Ltd
Earnings Call Analysis
Q3-2024 Analysis
Infibeam Avenues Ltd
Infibeam Avenues presented an impressive third-quarter performance for the fiscal year 2024, marking a historic moment as gross revenue surpasses $100 million in a quarter, achieving around $111 million. This represents a staggering growth of 120% year-over-year, driven predominantly by the Payments sector in India, which alone saw a 147% increase. The company's focus on credit payment options paid off, now constituting over half of their transactions, up from less than 50% last year, boosting their market share in credit card spends from 9% to over 10%. Strong financial fundamentals were reflected in a 75% increase in Total Payment Volume (TPV), a 33% rise in net revenue, and a rather notable 64% jump in Profit After Tax (PAT). This trend continued over the 9-month timeframe with TPV increasing by 61%. This performance indicates that Infibeam is experiencing its best year since its listing, attributing its success to a strategic emphasis on profitable revenue over unchecked growth.
Looking forward, management indicates that while Q3 is generally a more seasonal period, Q4 is starting strong. The company typically provides yearly guidance in Q1, but early trends suggest a continuation of prolific performance. Executives articulated three growth catalysts for the forthcoming year: expanding merchant partnerships in India, deploying TapPay solutions shown to be promising, and capitalizing on international markets—especially in UAE, where the business has only just begun tapping its potential. The target for UAE is growing their current $1 billion in monthly processing to contribute 25-30% of overall revenue in two years. For India, the goal is to increase the current take rate from 8.5 basis points (bps) to double digits. These insights forecast an optimistic outlook for FY 2024, with more detailed guidance to be provided in the first quarter of the coming fiscal year.
The UAE market seems ripe for growth, with current revenue coming in strong at AED 1 billion a month and an ambitious plan to increase merchants tenfold, from 7,000 to 70,000 in the next 12 to 24 months. Management has highlighted that the current net take rate is in the double-digit basis points and is processing in the teens. With the addition of two new clients in the Government e-Marketplace (GeM), there is an expected boost in platform revenue shortly, contributing to the overall financial health of the business.
Infibeam is leveraging artificial intelligence (AI) in two pivotal ways: optimizing internal productivity and tackling high-impact opportunities. The company is incorporating AI into its product offerings, expecting transformational results, and hints at disclosing more information on its Phronetic platform in upcoming weeks. This approach reflects Infibeam's forward-thinking mentality and its drive to stay ahead in technology implementation, potentially paving the way for new revenue streams and operational efficiencies.
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Ladies and gentlemen, good day, and welcome to Infibeam Avenues Limited Q3 FY '24 Earnings Conference Call hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rajat Gupta from Go India Advisors. Thank you, and over to you, sir.
Good afternoon, everyone, and welcome to Infibeam Avenues Limited earnings call to discuss the Q3 FY '24 results. We have on the call with us today, Mr. Vishal Mehta, Chairman and Managing Director; Mr. Vishwas Patel, Joint Managing Director; Mr. Sunil Bhagat, Chief Financial Officer; and Mr. Purvesh Parekh, Head Investor Relations. Also joining us on the call today is Mr. B. Ravi, who is advising Infibeam on corporate and financial strategy as an independent consultant.
We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction the risk that the company faces. I now request Mr. Vishal Mehta to take us through the company's business outlook and financial highlights, subsequent to which, we'll open the floor for Q&A. Thank you, and over to you, sir.
Thank you, Rajat. Good evening, everyone, and a very warm welcome to our third quarter FY '24 earnings call. I'm very proud of the performance of Infibeam Avenues in the third quarter, achieving several historical highs. We added an impressive INR 1.2 billion or INR 120 crores quarter-over-quarter in gross revenue, which is a historic feat by the company as we focus on scaling our business to newer heights with each passing quarter.
Our digital payments business through CCAvenue led the way for the increase in revenue. Operating or EBITDA margins and profit margins continue to remain strong as we take advantage of steadily improving leverage as we scale up. Especially if you look at the stand-alone financials, the stand-alone business, which now constitutes almost 94% of our consolidated gross revenue, compared to 92% a few quarters earlier, comprises of India Payments in our platform business, which has an operating margin of 67% and a profit after tax margin of 42.4%, which is the highest historically, excluding the mark-to-market impact of our investments.
The movement, of course, in terms of mark-to-market is notional, which does not impact company's cash flow. And hence, we find it prudent to be excluding it from our operating performance for a like-to-like comparison. Consolidated EBITDA margins were at 61.2% and profit margins at 37.3% on a consolidated business basis, respectively. The reason for the lower margin in consolidated business is on account of our focus to scale our subsidiary businesses internationally, where we are currently focused on gaining market segment share. Yet the consolidated operating and profitable margins are among the best in the industry and better than some of the top international players.
I want to focus on India Payments. Our India Payments business continues to show strength as we added almost INR 1 billion in gross revenue in a single quarter. In CCAvenue, we added 200,000 -- more than 200,000 merchants. On an average, we added 2,500 merchants on a daily basis during the quarter, keeping the merchant addition base consistent. We were able to incrementally add INR 50 billion to our India transaction processing volume in this quarter. Total India Payments transaction processing volume rose to INR 663 billion, growing at 34% year-over-year, while the TPV of our payments business as a whole, including India, International Go Payments were INR 709 billion for the quarter, growing at 32% year-over-year.
In the third quarter, India Payments business net revenue has grown 34% (sic) [ 24% ] year-over-year, crossing INR 500 million mark for the first time. Net take rate for the India Payments business remains stable at 8.5 basis points sequentially. As you would notice, we are not compromising growth or optimizing one metric while compensating on the other. And yet, we are able to grow profitably, registering the highest ever PAT in a single quarter.
On our International business, while India Payments business remains strong, we'll continue to grow in Amrit Kaal. We are also focusing on growing our International Payments business and working towards scaling the business from here onwards. You will hear more from us about our plans to scale the international business in the coming few weeks to months.
I'd now like to give you an update on our contract with GeM, which is the Government e-Marketplace. GeM continues to use our marketplace platform for all the buying and selling happening on the platform. To give you a brief idea, December 14 was the last day of our contract as per the old RFP, and we have recorded revenues and taken a conservative view so far, and recorded revenues only up to the 14th of December. The intellectual property of the e-Marketplace platform belongs to Infibeam Avenues. And we are in discussions with GeM on the scope, on the protection of the intellectual property, along with the commercials associated with the same, as the new MSP has taken over. The resolution of the same is expected within this quarter, and we will provide the right accounting treatment to record the revenues accordingly. We will update everyone about the sale once we hear back.
As far as our recent announcements on artificial intelligence in the third quarter, including the month of January, we took multiple strides to build artificial intelligence business in Infibeam to bolster both our payments and the platform business, both from inside out as well as outside in. We believe that AI will take the center stage not just in the world, but also across all businesses, as well as with its infinite use in various facets of our business, India tends to gain hugely through implementations across multiple areas.
Our central focus will be on the retailers and how we can grow sales for the retailers and improve the experience. We have made investments to create an AI hub. We launched India's first AI-Hub at GIFT City, Gandhinagar, and christened it as Phronetic.AI. We've signed an MOU with the Gujarat Government for INR 20 billion at the Vibrant Gujarat Summit held earlier this month in January for building and developing a state-of-the-art AI-Hub, and we've also appointed Rajesh Kumar as the CEO of Phronetic.AI.
Rajesh comes with a wealth of experience, more than a decade of experience in building out his own company called Streamoid as well as being the chief architect in some of the products at Yahoo. We think, apart from the payments business, where we've established a growing customer base, including our expansion in international markets, it becomes crucial for us to build futuristic capabilities, this time through artificial intelligence for the rapidly expanding Indian sector to achieve several objectives: enhance operational efficiencies, improve security measures, improve customer experience with retailers, and also to advocate for policy development tailored to meet the needs for small and medium retailers.
Additionally, the company anticipates that through the gig economy and full-time employment, AI can add a lot of employment opportunities across. I will now hand over the call to Sunil Bhagat, who is our CFO, to quickly give you a synopsis of our financial and operational performance for the third quarter. Sunil, over to you.
Thank you, Vishal bhai. Good evening, everyone. I'm pleased to state that gross revenue for the first time crossed USD 100 million in the quarter, reaching at INR 920 million, that is approximately USD 111 million in third quarter of FY '24, which is growing at 120% year-over-year. The robust increase is on account of strong growth in India Payments gross revenue, which is growing at 147% year-over-year. This is largely due to rising contribution from credit payment options, which is now reaching at 53% to 55% levels across 9 months of FY '24 compared to under 50% levels in FY '23.
Our market share in only credit card spends has increased from 9% in FY '23 to over 10% in the span of 9 months of FY '24. Not only has the TPV increased, but the gross and net tickets have also increased, leading to such high performance. Even the take rate has remained stable at 8.5 basis points, which is due to our deep relationship with banks and many large merchants over the last 25 years. We get pay for superior quality of our service and for our robust and secure payment options.
Now on the financial performance of the quarter 3 of FY '24 against quarter 3 of FY '23. Our TPV has reported 75% increase year-over-year. Our gross revenue is increased by 120% to INR 912 crores. Our net revenue increased by 33% to INR 113 crores. Our EBITDA for the quarter increased by 45% to INR 69 crores. Our PAT increased by 64% to INR 42 crores in this quarter. If we consider the financial performance of 9 months ending on December 31, on consolidated basis, our TPV, again, increased by 61% year-over-year basis. Our gross revenue increased by 87% to INR 2,400 crores plus. Our net revenue increased by 36% to INR 322 crores. Our EBITDA increased by 48% to INR 193 crores. Our PAT increased by 82% to INR 112 crores.
Just to apprise you, we have almost achieved the same net revenue in the span of 9 months of FY '24 as that of the entire FY '23, while we have already surpassed the entire FY '23 EBITDA and PAT in the first 9 months of FY '24. It gives me immense pleasure to state that this year has been the best year of Infibeam on a comparable basis since we have been listed, and we are bearing the fruits of a sustained philosophy of going after profitable revenue and not chasing growth at any cost.
I'll now request the moderator to open the floor for Q&A. Thank you.
[Operator Instructions] The first question is from the line of Pranay Jain from Dell Wealth Capital (sic) [ DealWealth Capital ].
Congratulations on a robust quarter and 9-month performance. Just wanted to understand how is 2024 year looking based on early trends at the start of this year? What are the milestones we can look forward to in terms of TPV margins and profitability, because we have now resolved to grow profitably instead of just growth at any cost. So wanted to understand, with our stance at present, what milestones are we aiming ahead?
Sure, Pranay. So basically, typically, we generally give out guidance for the next year in the first quarter looking at the trends. Whereas Q3, Q3 being a seasonal quarter, because a lot of holidays and festival seasons happen in Q3, so far, Q4 has been strong for us. So in the first 3 weeks of January, we still continue to see strong performance. So as we actually approach towards the first quarter of next year, we'll have more indications on '24. If you look at our growth year-over-year since last year, we have grown upwards of 60% in terms of revenues, gross revenues. And in terms of overall performance also, we've kept on looking at profitable growth, which is what we mentioned earlier.
So the 3 drivers of growth, we believe, for next year would be, one, our continuous focus on adding merchants. We've added 0.25 million merchants. While adding merchants is not linear with our growth, we bear the fruits of adding merchants over quarters. There's a latency between the processing versus the addition of merchants. So we believe that we should continue adding merchants. Even this quarter, we added 0.25 million merchants. So we'll continue that track in India.
Second is we will offer TapPay solutions. TapPay has shown very good promise. What we have done is we have white-labeled the solution for several providers. Right now, fortunately, the Chalo App, which is used in Bombay and many of the other locations, we white-label it for partners, while the underlying process are all the same. And more than 2.5 million passengers will benefit out of the same. So we believe that such implementations and partnerships will add to our overall transaction volume and growth.
And we also believe, international, we've only scratched the surface. Currently, in UAE, we process AED 1 billion a month now. While in terms of revenue, overall revenue from international is less than 7% of the overall, we believe that it has a potential in the next 2 years to get to 25%, 30%. So while we will be focused very much on India, we believe international can also add significant growth opportunities for us. So we will, of course, tell you a little bit more in terms of the overall guidance in the first quarter of '24.
Okay. So 3 things from what you said. One, not just from a yearly point of view, but say, over the next 2 to 3 years, what is the size that we are aiming to be in UAE, basis the partnerships that we are doing, basis the conversations that we've had, basis the traction and transactions we've had? Since it was earlier mentioned that our profitability rates are already superior compared to some global peers, so how do we see it in UAE? That is number one.
Number two, what is the net take rate we see in terms of trajectory going forward? And three, with regards to the partnerships in India, I mean, GeM has been fantastic for us. But otherwise, what kind of partnerships have we struck and the investments that we are making, for example, So Hum Bharat is one. What kind of investments we are doing in India to increase our opportunity size here?
Sure. I'll answer the second and the third questions first. In terms of our presence in UAE, we've grown significantly, we've crossed AED 1 billion a month. And if you look at the number of clients we have in UAE, it's about close to...
[Operator Instructions]
Yes, thanks. So basically, for UAE, we have double-digit bps, and we process it is in the teens. And we've been able to grow significantly. We have about 7,000-odd clients in UAE, and we've been able to process AED 1 billion. So we believe that -- we'd like to grow the trajectory from 7,000 merchants to 70,000 merchants in the next 12 to 24 months. That is the kind of growth that we would like to see in UAE. As far as India is concerned, we've guided everyone that right now we are at 8.5 bps. We'd like to reach double-digit bps in terms of take rates. So I think that that's the India business.
And I think to answer your question about GeM, we've added 2 clients this quarter. And so we expect that in the next 1 or 2 quarters, even if there is a deficit, we are able to come back overall in terms of our platform revenue. So I think we've mentioned the same earlier as well, but we believe that, going forward, given that the artificial intelligence layer that we've built out, and you'll hear more about it on Phronetic in the next few weeks, including the products that we have built out. We believe they're transformational and they're very interesting. And just to let you know, AI is thought about in 2 ways. One is, how do we increase productivity within the company for everything and every task that we do. And second is, how do we work on high-impact opportunities. And today we're working on both. But we'll have more to share with you in the coming months.
The next question is from the line of Kunnj Lalka from Goldentrunk Capital.
Sir, my question is, could you please share your strategy behind acquiring Pirimid Fintech? And what do we see in future from here?
Sorry, ma'am there is a slight background. Can you just adjust?
Yes, if I heard your question correctly, what was your strategy behind the investment in Pirimid Fintech, like how it benefit us as Infibeam. So Pirimid is a company that focuses on building out capital markets software as well as they deliver a lot of frameworks for lending. And I think they've been able to gain such frameworks not just in India, but international companies. They know how to build out zero latency frameworks. And the 2 opportunities that we think are interesting in that is we think that we can introduce payments as an integral part of whatever we look at doing. I think you must have heard a lot of information in conversations about real-time settlement, not just payments, but settlements. We think there's a role to be played there. So that's one thing that we think we will want to explore with them further on.
The second thing that we'd also explore is how does AI work on transaction volumes. A lot of things that we can actually work on in terms of sifting through all these transactions become interesting. And then the third opportunity that we worked on, which we think is also interesting, is the lending frameworks. Everything about fintech, while there's a lot of discussions, we have been appropriately conservative in terms of how we think through lending. We are building out a thesis, a stronger by the day in terms of what that looks like. And we expect that in the next few weeks, you will hear more from us in terms of what we'd like to do in that space as well.
Sir, my second question is, the number of investments we are making into the international avenues, how do we see this? Like what is the targeted CapEx for the coming years?
See, we'll have more to share with you in the next quarter for FY '24, and we'll give you guidance. But one thing we know is that we will be wanting to grow -- in the earlier question, I'd mentioned that we're trying to grow from 7,000 merchants today using our payments stream up to 70,000. So we're trying to grow 10x. And in terms of CapEx, you see there's a lot of compliances on data localization in every international country. There are a lot of GDPR guidelines in terms of what it needs to comply with.
And every country is also coming up with the payment aggregation license. Just like India, RBI has given payment aggregation license, every country is going through the same. And one needs to comply not just from a regulatory perspective and compliances, but also ensuring that the data privacy and many other components of that have been met. And only after the audits to those licenses come through. So in Middle East, we have rooted ourselves. We would want to make such investments. Compliance-related softwares and frameworks also need to be in place. And so I think one can expect that as we build up more and more international regions, the 2 regions in Middle East today that we are focused on is UAE and Saudi. But we've also opened up our framework to banks and institutions in other regions like Oman and others.
So as we build up each country at a time, we will incur that level of CapEx. The good thing about that is that it's incrementally highly accretive for the company. So we believe that if we can scale up and if we have an aspiration to scale our international business from a single-digit percentage to a 2-digit percentage number in the coming 24 months, we'll do the appropriate level of CapEx funding for the same.
So the next question is from the line of Pranav from Dolat Capital.
So just one piece on the net take rate. So sequentially, we have dipped from about 9.3% to 8.4%. Is this primarily attributed to international business?
Yes, we have tried to scale the international business. So you're right, it's attributed to the international piece.
Okay. So we face some higher processing costs over there?
Correct.
Pranav, this is Purvesh here. In our international business and one of our subsidiary, Go Payments, we are scaling up the business significantly because we think there is a lot of opportunity to grow. As our Chairman was just speaking on the previous question, we have a lot of opportunity there to scale and even increase our market share. So currently, we are in a mode to grow in these areas where we've seen a slight dip in our take rate. But we also mentioned that our India take rates are at the same level like we had in the previous quarter, and we are profitably growing in India.
So international is probably just a little bit of blip maybe for a quarter or 2m as we keep scaling and we expand in the international geographies. So you will see the overall take rate maybe has slightly come down, but the future prospects are very bright in these markets.
Second one will be on the AI piece. So maybe if you could just elaborate what kind of opportunities would will be seeing in terms of enhancing our core business? I understand we've made an acquisition. But for our own transaction business, how can we use AI to give us next level of growth?
Sure. The way we look at AI is there are 2 ways in terms of the traction. One is, how can we use AI to improve the productivity of everything that we do within the company. That's one. And second is, how do we use AI to make transactions more efficient, better, security-related issues, fraud-related issues, so on and so forth, and how do we do it across billions of transactions that we do, so that we can make it smarter and better over time?
And what we find is that as far as the productivity is concerned, and if you look at the overall ecosystem, 80% of the people we believe who are working in the ecosystem or working on productivity-related solutions. In other words, we believe that AI has an opportunity to make every job within the company more productive. And what you could do maybe in few hours, you can perhaps do it in minutes. And for each of the productivity-related metrics, you can have tools that can come up.
But this productivity-related tools will not be a competitive advantage in our opinion in the long term, because we believe that the adoption of productivity-related tools will be pervasive, it will happen across the board, not just in one company. What will be really defensive and which would be, I mean extremely thorough would be the framework that we've developed, which potentially allows us to make our business smarter, better and more productive. And that's where we believe that AI plays a role.
We've already started implementing the training frameworks for the same. We believe there are 2 aspects of this, training and inference for everything that we do. And we are trying to get more and more better by the day. And I think you have to go multimodal in this case. It is not just transactions, it is authentication as well for the users that essentially originate even before the transaction. Because a fraudulent transaction happens because of authentication failure as well or spoofing of an authenticated engine.
So you may have heard that we have launched something called Theia, which is a tool which is in data mode for visual AI. It identifies quite a few things visually when you want to be video KYC and many others. All the way from there to transaction processing, how we process transactions, how do we look at not just checks and balances. Fortunately, we've got significant amount of data that we sit on top of. Because finally, you see, we're sitting on a lot of data, and a lot of people say we're sitting on data, but it's basically fool's gold if you don't use it properly.
So in order to make it gold, we need to actually make sure that we are using the right frameworks that give us very high level of accuracy in terms of what we'd like to accomplish, and remove all the false positives and negatives. So we believe that these tools and frameworks that we build out are not just going to be utilized by ourselves, will be used by several financial institutions across. And we think that maybe in the next 1 or 2 quarters, we'll be publishing a few frameworks out there for people to utilize, for the greater community to utilize. And there'll be enterprise-level products which will be utilized for financial institutions, banks and others, which we'd want to publish. While we'll use it for ourselves, we'll also open it up for others.
The next question is from the line of Mayur from Profitmart.
Congratulations on good set of numbers. Sir, my first question is regarding your AI advancement and MOU signed with the Gujarat Government. Could you please provide more details about the AI-Hub that we're envisioning?
See, fundamentally, what we realized is that retailers had 2 major problems. First is being able to -- when you look at the entire framework and when you think about smaller retailers, not everyone has an ERP solution, not everyone actually works with ERP. I mean, larger retailers definitely will do. But when you think about small and medium size retailers, they don't. And so one of the things that we are looking at doing is visual AI, which means that through a simple camera how do I identify small objects, inventory within the retailer.
A lot of companies -- if you think about retailers, they use CCTV cameras. And these CCTV cameras have no use, only when there is an issue, it's more like an insurance. Whenever there is a theft or an issue, they actually go and look at frame by frame what happened. So what we can do is we can actually use that same framework and use a software framework on top of it to be able to identify every single small object, which is the quantity of inventory, the kind of inventory which is out there. And that becomes the basis of being able to, I wouldn't say, share, but through a single click, be able to publish that inventory across multiple places, including ONDC and others.
So I think that becomes the first element of how one can utilize visual AI frameworks to be able to help retailers. And then to be able to offer payments to all these retailers using TapPay. Because one would want to actually accept any kind of payments. In artificial intelligence, not going too technical, but there is something called supervised learning. So through these supervised learning frameworks, you can actually identify whether the models are communicating properly and being able to identify objects properly and be able to assist the retailer in terms of being able to communicate and do whatever they want to do.
So this is just one example of what we would want to accomplish. There are 3 phases in which we would implement this project. And it essentially gives both -- I think the world is very close enough where you can actually start talking to the video cameras. Rather than actually going and looking frame by frame, you can start talking to them. Every event of a consumer can be mapped out using artificial intelligence in terms of what they are doing. And you can give elevated levels of customer experience based on what each of the individual is performing.
So I'm just leaving you a very abstract concept, but when you actually look at implementation, there are thousands of training frameworks and things that you'd want to do to be able to accomplish the same. And the MOU that we've signed up is the one that enables these activities, and we'll be implementing that in phases.
Okay. Could you please give me the details about the 3 phases?
I think we'll share more as we come through, but it's essentially the level of participation. It's actually about how many to become statistically significant in accuracy. You don't want to do it on 5 or 10 retailers, you want to do it on a few thousand retailers. And so what you want to do is work on statistical significance in terms of proving the accuracy and not necessarily just showing a few implementations saying that it's accurate. So I think the phases are really about getting comfort on the statistic -- see, one should know, I am yet to see any artificial intelligence model that does not hallucinate as of today. I can promise you that.
Even OpenAI will hallucinate. So hallucination means that it will give you wrong results. And so what you want to do is actually increase the accuracy of each of these models to a point where they become important, they become relevant. So just going and communicating saying that we have a model with a very low level of accuracy will not help. You want to get to a very high level of accuracy. To give you an example, somebody like a Venmo or someone who is actually driving self-driving cars, you need an accuracy of [ 99 point -- maybe 99.999 ], but you don't want to have an accident. But sitting with the retailer and identifying the options, you may be okay with a 96%, 97% accuracy of small object identification and detections.
So one needs to actually come up with the right kind of set of metrics. And the more we process and the more we do, the models become smarter. Because the only way to actually make them better is with some human reinforced learning as well as being able to have more data. So I think, for us, rather than going all out, we need to get it into phases. To answer your question, it's just about the number of retailers that participate.
Okay. Okay. And my last question is what key strategies are we implementing to gain market share in the payments space and maintain the competitiveness, especially in the face of emerging market players across this space?
One thing you should know is that RBI has been very proactive, and they have been very selective about who to grant the payment aggregator license to. So in some ways, you weed out the bad actors and make sure that you allow everyone to become compliant. So that is one. It is a competitive business, let's be honest about it. And we think that the thesis that we have is it's very easy to compromise a few bps in payments to make more bps in lending. We have always taken the approach, it is not either/or, it's an and.
One should be able to make money in payments as well as make money in lending. And that thesis means that you have to optimize -- extremely optimize your framework to a point where you know that you squeeze out every penny, every bps out of it. So I think that, that has helped us in terms of being able to remain competitive. I think with scale and with the network that we operate, we will continue being competitive. And then we have to work on innovative solutions, which are AI-driven solutions that potentially allow us -- we are very bullish on AI, just to let you know. I think that it has a potential to, I mean, somewhat overhaul quite a bit of whatever we are doing in the next 5 years.
And the thesis -- while it's very hard to borrow somebody's conviction, but we are convinced that, that is the case. So as far as being able to make more efficient frameworks, being able to identify and predict activities before they happen, being able to ensure that we can become productive, all of these things will have an important participation in keeping us competitive in my opinion.
[Operator Instructions] The next question is from the line of Deepesh Sancheti from Manya Finance.
Yes. Just wanted to know, the GeM gross merchandise value has experienced a quarter-on-quarter decrease, dropping from over INR 1 lakh crores in the previous quarters to around INR 91,000 crores in this quarter. Is this the first time that the quarter-on-quarter decline in GeM merchandise value has happened? And what is the specific reason for this? And also going ahead, in quarter 4 and other quarters, how do you see the GeM GMV?
See, of course, we can't comment specifically on the reasons why GMV went down or up, but this sequential quarter-on-quarter has happened in the past also. So this is not the first time. I mean, for the first time, what I can tell you is that what happened in the full last year, GeM has accomplished more of that in the first 9 months of this year compared to what they did in the full last year. So I think overall, the value has gone up significantly. So that's the one part.
The reasons behind that, so on and so forth, that you have to figure out because they are clients and they would know more about it than we would. Historically, Q4 is a good quarter for GeM. And I mean, given the election year and given that there is a lot of incentive and commitment to actually make GeM successful, we expect that, that should continue building up from here. So...
Okay. The second question is can you provide me an update on your business in UAE? What kind of growth and revenues contribution are we currently experiencing? Additionally, I mean, could you also give me the TPV we are processing there? And do we have any other plans? And I mean, also the plans what we are doing in the new geographies. You mentioned in the investor presentation, but I mean, what are the CapEx which we are doing in the other geographies?
Vishwas, you want to take UAE?
So the actual processing numbers, Purvesh, you'll give out, right? So basically, we're doing about UAE...
Vishwas, it's lightly audible. Vishwas.
You want me to take that question now?
Yes.
Yes. On the numbers part, Purvesh, you take it, and the business side, I will answer.
I'll give you the numbers, and then I will hand it over to our Joint Financial Director, Vishwas Patel, to answer this. So we don't separate out UAE, but I can tell you that UAE has been growing at more than 50% CAGR. Last quarter also, as in Q3 also, we have grown by more than 50% as far as GMV is concerned. Take rates have always remained in the double digits. As I just mentioned in the previous question that we've been expanding in the UAE geography and soon we'll be launching in Saudi as well due to promotional activities. And in the last quarter also we mentioned that we've launched the offline business in UAE. So we are seeing an extremely good response.
Q3, you will know that even in the UAE space, there are a lot of travelers, there are a lot of people from various parts of the world traveling to UAE, especially in the month of November and December, where we saw a very good uptake of our offline as well as the online, which is why we went a bit more aggressive on the promotional side to push our UAE business, and we have seen an extremely good response to that, which is why the take rates slightly came down, but they still continue to remain in the double digits. And whatever we are building with the partnerships that we have in the whole of the GCC region, I think from FY '25 onwards, in fact from Q4 onwards, we will see a better performance here, much better performance rather. Vishal bhai, over to you. I hope, Deepesh, I have answered your question.
Yes.
The next question is from the line of Rahul Jain from...
Tushar, wait. We haven't completely addressed Deepesh. Deepesh, numbers are okay with you? So then Vishwas can...
Yes, yes, numbers are fine, numbers are good. If you can just answer that how much CapEx are we planning to do for the other geographies?
Yes, [indiscernible] on the business part of the UAE and Saudi. So on UAE part, we have grown almost all the GMVs from the online businesses that are there, so focus with 7,000-odd merchants, so all the top merchants there in UAE, [indiscernible] everybody is coming from the online business. So now we are expanding the scope, as Vishal said earlier, how do we go from 10x merchants, from 7,000 to 70,000. So that's where we are focusing right now on totally the offline solutions. The QR code is already deployed in many of the establishments there in UAE. And now with TapPay, we'll be getting into -- TapPay and our revenue solution, both, we'll be getting into a lot of offline businesses for processing offline through our CCAvenue app there.
Of course, we're also working on the platform side with multiple banks that we will announce subsequently in the quarters. Same way, the CapEx part is already built out in UAE over the last 5 years that we are approaching there. So it's just incremental operations that we are doing on certain specific solutions that is there. Saudi, we are just starting off, because of the licensing norms. We've got the in-principle approval from SAMA, the Saudi Arabian Monetary Authority, to start business. In the next quarter, even Saudi market also will be reflected in our business.
In Oman, we have opened up our platform to 3 of the biggest banks there. There is Bank Muscat, Bank Dhofar and Bank Sohar. On another one bank, so they're using our entire platform as a service there and other things. So this kind of, I think, the growth pattern in the Middle East, very quickly cover one of the small markets before we move on to another geography.
On the CapEx side, as I said -- Purvesh, you want to take that one?
Typical CapEx that you see -- one can leisurely assume that for any geography, we'd light it up and we can create a localized and so on and so forth, will be $2 million to $3 million CapEx.
Okay. That will be for each and every country or...
Yes, every country, depending upon the rules and regulations. Because if you want to have localization in every country and become compliant, we expect that, that will go that route, if not today, tomorrow. So while we can operate centrally, depending upon -- because every country will have certain rules and regulations around payments. And over a period of time, we will need to become compliant to these rules and regulations.
Right. So if any AI module also, which we develop, that will also be expanded throughout the geographies, right?
Yes, that's correct.
And the AI module gets developing self or are we also talking to companies like OpenAI or Microsoft or Enterprise Bot or something like that? Are we open to that? Or we are doing everything by self?
See, fortunately, we're not working on large language models, LLMs that we talk about. To do LLMs is going to require, in my opinion, and it's open information, 16,000 GPUs, $1 billion CapEx, a very large investment. What we are looking at is training and inference. And when we look at video analytics, we will work with companies to be able to build up everything that we're building out right now would be proprietary to us.
But if you wanted to actually go and say that I want to start talking with videos and not look frame by frame, then you'll look at partnerships where you would need be a base framework, base foundation model. And then you actually allow the video to be able to talk to you in certain specific ways. So whatever, Llama, did you talk about, when you think about -- I mean, what I talk about is large language video analytics framework or when you think about LLMs, you would need to think about foundation models.
And what we realized is that there are several foundation models. It is not just one foundation model. And those foundation models will go through their own ups and downs and turbulations. But the thing that we realized is that each of these foundation models need applications for monetization. Otherwise, these foundation models don't have monetization opportunity. So getting into the details of it will be hard right now, but you can think about us as, we are building out a proprietary -- it's all internal proprietary, and then we'll partner with the right companies to be able to build up feature sets and functionalities that potentially make the entire offering very rich.
So you're doing partnering with this foundation model. And then over that, you'll be layering it up with what exactly is good for your application. Have I got this right?
Most likely yes.
The next question is from the line of Rahul Jain from Dolat Capital.
Just wanted to understand your thoughts on 2 aspects. Firstly, the transaction that we did with the Pirimid lending solution. What is the kind of synergy that we are seeking out of this transaction for our business? And secondly, on the investment that we have done in the -- for acquiring the minority, the rest of the stake in the So Hum, what kind of investment it will entail and what are the next 2-, 3-year objectives that we plan to achieve from that?
Sure. So to answer the second question first. So Hum was 50.5% owned by Infi. And this announcement is about acquiring the remainder 49.5%. So Hum was the entity that was utilized to be able to apply for the new umbrella entity license for retail payment systems. So Hum had applied as part of a consortium, and we discussed this in the past, there are several consortiums that have applied for the new umbrella entity license with RBI.
So far, we have not heard back from RBI. But we believe that we need the aggregator licenses, but first evaluate it. And with due time, we'll hear more from RBI in terms of the overall perspective. The amount of investment is INR 45 lakhs. So we are acquiring the remainder part for 45 lakhs. Given that the entity is a consortium partner and it has to go through the process of RBI vetting, there are several consortiums that have applied. It's all public information of who has applied with whom. And we're here to hear. So that's the part in terms of So Hum.
Once we get -- and once we hear back and once we are awarded, as a consortium, any specific license from the regulator, at that point we'll be sharing more information in terms of what it requires and what it entails. But as of now, we have taken over 100% of So Hum. So it will become 100% subsidiary of ours. And the amount of investment is about INR 45 lakhs. So that's So Hum.
What was the second question, Rahul? Regarding Pirimid. So basically, as far as the rationale for Pirimid is, Pirimid does zero latency software frameworks. They have frameworks for account aggregation, they have frameworks that they've built for lending applications. Many of the clients, that may include large companies, include the likes of Lendingkart and others, who utilize them. And they've given trading frameworks, capital markets trading frameworks to international companies as well, some really reputed ones.
So our objective was twofold. One is, how do we integrate payments, because payments and settlement in capital markets will become a very important facet in the next few coming quarters. And we believe that there is a place to inject payments as a core competency into that. So that is one place that we'll explore, which we don't exist right now in that space at all. And we believe that while it's the capital markets, and given that one needs to look at real-time settlements, I think they'll be an important facet of how one can participate in that setup. So that's one area that we'd like to build out.
Second is when you provide such zero latency, high-performance frameworks to companies, role of artificial intelligence and big data becomes very important. And we'll be exploring frameworks. We have already started exploring frameworks in terms of how we can inject the framework that we build out into specific offerings to clients.
And I think, Rahul, to answer your question, see, data is everything. Data will actually allow you to train it. Over a period of time, models is important, but without data, you can't actually do much. And so what that does is for every client, we make it specific to the client and they can learn from the generalized model as well as specific data for their own models. Think about Turbo-4 -- I mean, ChatGPT-4 Turbo, where you can customize it based on your data. But rather than actually doing your generalized data, given that it's verticalized for fintech, you can actually do a much better job in terms of overall performance compared to any generalized model.
So we'll work on those kinds of opportunities to be able to build up from there. We see good synergies in that space. Lending is important to us. This is the third facet of it. We think that we have been appropriately conservative. We did settlement funding, that is Express Settlement that we talked about in the past. But we've also built out our thesis in terms of what we'd like to participate in, because that's a very large opportunity given the number of merchants that we hold. And maybe in this quarter itself, you'll hear more from us in terms of what we'd like to do in that space.
Right. And just last bit on the GeM side of the business. You said you have this billing until this point, which you have accounted for this quarter. And since they continue to use the IP, is it safe to assume that until the point they use it, the revenue has to come in, it's just that it's not contracted at this point? Or you see a risk of not getting paid for that part as well?
See, I'll tell you, our internal bias is always to be appropriately conservative, much like an investor would think, and make sure that you expect the best and account for the scenarios that you don't expect then to unfold. So we've accounted for revenues only until December 14. And until we have -- there's a difference between a cup and a lid, so until we have a contract, it would be hard to actually comment on it. One thing we know is that it's our intellectual property that's being utilized for every transaction that happens today.
Yes. And just to reconfirm that. So essentially, we have booked revenue for 74 days and cost for the full 90 days in this quarter?
Sorry, 74 days and what? I'm sorry, I didn't hear the last part.
So in a way, we have booked revenue for 74 days, but the cost is for the full quarter?
Yes. That's right. 100% true.
[Operator Instructions] The next question is from Hemal, he's an individual investor.
Hello? can you hear me?
Yes, we can hear you. We can hear you, please go ahead.
Just very simple question. I don't know if you publish this. If you do, how much is our revenue this year of 9 months from -- like what percentage of our revenue would be from GeM?
We don't publish that, but one can assume that it's a low single-digit percentage.
The next question is from Ayushi Shah. She's an individual investor. Hello? There is no response.
The next question...
Hello?
Hello.
Yes, sir. So basically my question was that regarding the jump in of INR 120 crores in the operating expenses, so what does it pertain to, like what have we spent on?
Rise in operating expenses and basically the payment processing channels.
Payment processing charges. So can you elaborate a bit more on that? Nothing from like DRC mark-to-market or anything like that, that has come in over here, right?
Operating expense cannot include mark-to-market, right? So the mark-to-market losses for this quarter have been recorded in the other expenses. This quarter, we processed a lot of credit cards, where -- which our CFO was mentioning, somewhere around 53% to 55% is the contribution from the credit card. As you are aware, we have been saying in every call, if credit card cost to the company is on a higher side, say around 180, 185 basis points, for example, and we give it to the merchant at 200 basis points. So the operating expenses get recorded at this 180 or 185 basis point. Because the volume of credit card has increased, so the processing -- payment processing charges have increased in proportion to the contribution from credit options.
Okay. And sir, so where do we stand on the [indiscernible] for UAE like we've in?
We've not announced anything of that sort. So maybe you're referring to whatever you may be referring to. But one thing we know is that [indiscernible] and subsidiary of ours and we are building on the business. And as and when we have more information, we'll share with you.
All right, sir. Sir, and regarding the patent, regarding tax base, is there any update on it? I've been asking since a while now and it's almost been a year since we applied for the same.
Vishwas, do you want to take that?
Yes. Yes, yes. So we have applied for the patent. We are waiting a further response from the respective trademark copyright patent office. We have not heard anything for it exactly [indiscernible]. So if we hear anything from the office, then we'll definitely update you in the next call.
Okay. Sir, on Slide 14 of the investor presentation, it was mentioned that we are awaiting a retail payment network license. So that is...
Sorry to interrupt. Today, we have lots many people in the queue. Could you please come back?
The next question is from Pranav from Dolat Capital. Please go ahead.
Yes, can you hear me?
Yes.
Yes. So just on the tie-up with Bandhan Bank. So how does this expand our opportunity for our payments business and what kind of partnerships can we expect going forward?
Bandhan Bank is a tie-up for different [indiscernible] of instant EMI that we can get on cards and offering to the end customers or the merchants. So if you are a Bandhan Bank customer and shopping on any of the websites that are powered by CCAvenue, you can instantly convert your transactions into EMI, giving you flexibility to buy higher ticket items for yourself.
So these kind of tie-ups we already have with almost 17 or 18 of the banks but we are the only player to be able to get instant EMI with the agreed rates for specific purposes for specific periods. So that's one part. Of course, there's some processing and there's also other platform users with Bandhan Bank relationships. So as you say, we have almost 75-plus banks relationships going on, with various services utilization from acquiring the [ others ], Bandhan Bank is one of them.
The next question is from the line of an from Pranay Jain from DealWealth Capital.
One, I just wanted to understand when are we expecting the retail payment network license that's on the retail side? And on ERP, could you give us a flavor of some of the clients we could see in the presentation by the end of the year, other than the big names we are seeing on a regular basis?
Sure. So in terms of the retail payment license, the NUE license which is the one that you are referring to I assume. And for that particular license, we have heard as much as you've heard from the news, in terms of when RBI is expected to pick up -- pick up so on and so forth. But we'll share more from them, from the regulator, as soon as we hear, we'll let you know. The thing that we know is that several consortiums have bid on the NUE license. It's a very large license, because it enables you to do a lot more, and not just payment aggregation, but a lot more in terms of coming up with your own in some ways completing framework to anticipate many others possibly.
So when we hear more about it, we will let you know. Other consortium, we believe is a strong consortium that we've established. And we think that -- as soon as we hear back from the regulator, we'll update you in terms of the next steps process, so on and so forth because the acquisition was made several quarters ago, if you recollect. So in terms of the priority, the focus was really about payment aggregation license first. Actually, we believe that since this payment aggregation license has been awarded and continues to be valuated, we think that hopefully we should hear back shortly, we do not confirm timeline for the same.
And on the ERP side, customer, [indiscernible] what's it looking like?
On the sorry. on...
On the ERP side, I mean, recently we see examples like GeM, [ Vivo ] or Sony, so what...
Yes, we will be talking about that very shortly. So by the end of the year, you'll have more information.
Okay. And the second part was internationally, what are we penciling for U.S., Australia next couple of years as we are making our foray there? And on a consolidated basis, anything that we are aiming on ROA and ROE? It's single digits at present. I just wanted to know what's the path we have.
Sure. So internationally, I think for each geography, Australia and U.S. also they are very large geographies. And we mentioned earlier that, today, international business was a single-digit percentage of our overall revenue. And we expect in the next 2 years, it should be a good 25%, 30% of our overall business. So while India will also grow, international should grow and that's what -- that's the thesis that we want to work with. And that will involve -- that's to actually build up quite a bit of frameworks in international.
Fortunately, we've seen success with UAE geography. We know the thesis. We've tried it out. We've been present, and it's growing significantly well for us. So we believe that we can replicate the same model. We call it country in the box, which means that we can actually build up a team within the country and then we can actually make it work. For you to set up from ground zero, it will involve a good amount of CapEx. But with incremental CapEx, we can actually build out a country. And countries where we believe that we don't have huge opportunity or maybe the volume is not as high, we actually work on the CGPA solution, which is where we provide our framework to a bank so that they can give it to clients.
For example, Oman, maybe a small geography today for us to pick up, but we gave it to a bank who eventually onboards clients. So it comes with a bank white label solution and not a CCAvenue white label -- white CCAvenue solution, let's put it this way. So I think that in geographies -- so it will be like a pick-and-choose approach. In certain geographies, we'd like to work with a bank because we don't think that the geography is large enough for us to actually get a team out there. Or in terms of our priority of the countries that we want to pick up because that is not very high up on the list. If you go to anyone in UAE and maybe if you've asked a few process through CCAvenue of payment gateway, they would have -- maybe most of the times they would see us. They would have recollected us.
And I think with QR code solution that we have [ launched ] the product, where we are introducing TapPay, it will be even more pervasive in that geography. And we believe that that's a good base for us to start building up on top of that.
The UAE piece is well understood. For U.S. and Australia, I was asking, what kind of partnerships do we see as vital, whether with the financial players or fintech players? I mean we have solutions which are tested, but like you said, these are very advanced large financial economies and perhaps the strategy needs to be tweaked a little bit. We must have identified the collaboration that partnerships over there that we are working on. So any light you can throw on that?
Sure. So to give you an instance, in the U.S., we think that it was going as a payment infrastructure provider may not work. We need to work on solutions and payments together, which was brought up something called ResAvenue in the past, where we provide [ payments to ] hotels. And so when we provide solutions along with payments to such aggregators, then it makes it very interesting. And fortunately, on a lighter note, most of the hotel owners are Patel's in U.S. So we think that there will be some chemistry out there that we can perhaps work our magic through.
But having said that, I think you need to work on your strength. And we think that the strength is that we vertically focus ourselves where the margins were significantly higher. In the entertainment business, the margins are very high and the inventory is variable. So if you are able to make it a win-win situation for someone who's utilizing us by providing infra with payments, and also, on the other hand, allowing them to monetize better, I think that becomes a good combination where we can take over quite a bit of the volumes.
And on the partnership side, you need to work with acquiring banks. So large-enough acquiring banks who have a huge set of margins, where, given the efficiency and the progress with which we have our framework build out and the solution and capability that we're looking at, including the frameworks that we had that we bring up that they would want to migrate the merchants onto our framework.
All right. And the consolidated numbers on ROA and ROE?
Pranay, I will answer that. This is Purvesh here. So if you notice, we had just mentioned in the beginning of our opening remarks, the stand-alone constitutes about 94% of the consolidated revenue that you see. Majority of the business comes from our India payments and the platforms business, the marketplace software and the entire suite around this marketplace that we have sitting in our stand-alone business, where we are generating about 66% EBITDA margin. This business is the core of Infibeam Avenues, which we have been doing for past couple of decades since we began.
This business, as you see, has been generating an ROE of somewhere close to 25%. How 25% are not the single digit, as you were mentioning? We've made investments in a lot of subsidiaries just about a year or 2 before the COVID, and these are start-up kind of businesses. So when they just started in about a year or 2, we were hit by COVID, and there was a slowdown in those businesses, but the investments are already made. So you will see a large chunk of investment in our stand-alone balance sheet as well.
So temporarily, if you keep those investments aside, which are for the long-term prospects of the investments that we have in these subsidiaries, and we have a large part of goodwill also sitting in the books, you will see that the stand-alone business, its sales is generating an ROE somewhere close to 25%. You will also notice that in our presentation on the last slide, the way we have shown it. So the ROE is not single digit, it's actually somewhere close to 25% for the whole -- for the core business that we are in.
The last page shows 19% ROE for standalone...
That's FY '23, I'm talking of first half of FY '24, then we already had a balance sheet and a cash flow published.
So this is going to look like what over the next 1 to 2 years?
So we plan to sustain it or grow it in future. We also mentioned that we are getting the benefit of operating leverage because of the scale that we are into. So going forward, we should -- we will try to sustain or increase our ROE levels from here.
And anything on the assets?
On the assets, can you touch base with me offline, because I'll have to work that out. I don't have it readily available, but I think it is somewhere in the range of 5% to 6%, if I'm not wrong.
[Operator Instructions] The next question is from Souvik Kumar Ghosh, he's an individual investor.
Congratulations on the good set of numbers. So I finally had 2 questions for the AI domain. One is when do you see the AI offering start to contribute meaningfully to the top line? That is the first question. And second question is what has been the operating expenditure relating to the AI vertical in this quarter? And what could be the run rate going ahead?
Sure, I'll take that. So basically, we don't bisect every segment and then publish the numbers in terms of the OpEx and so on and so forth on the AI business. But as far as the overall opportunity is concerned, we think that the first question is that when will AI significantly contribute to the numbers. AI will -- the framework has been horizontally, which means that our existing businesses, both the platform and payments business, will continue to grow. AI will support those businesses by being a horizontal layer as far as the core business is concerned, which is what I was talking to you earlier. It will make that business more smarter, intelligent, optimal and be able to -- and as well as in some cases, productive and marketable. So we think that, that becomes the core competency for us.
The second piece and on the impact of it, you see the moment you actually go into retail stores, and what I talked to you earlier about was officially a component of it. If you are able to -- in our opinion, not many people work on those frameworks, but if you are able to actually make it very meaningful and you provide some security solutions, payment solutions and inventory tracking solutions, customer experience solutions, and if you're able to make it -- significant will make a big impact, then those solutions become very critical. Because without data, nobody can build out such solutions.
And that's -- I think that, that is where we feel there will be a significant impact. My expectation is that you start seeing the impact in our numbers both [ the parent ] and platform business in the coming quarter. And as far as AI business specifically is concerned, which is outside, you see we introduced TapPay and it goes into physical retail stores. So if we have a solution where we are offering [ visual AI ] with TapPay. We always think of combinations that's what which actually our module more productive and also allows us to increase our core business. So I don't know if I answered your question, but we'll not segment out AI in a separate line item until it becomes a business that we offer as a stand-alone to third party, at which point we will.
Thank you. That was the last question. I would now like to hand the conference over to management for closing comments.
Thank you all for visiting our third quarter earnings call, and we look forward to keeping in touch with you and update you on the latest in the company. Thanks again.
On behalf of Go India Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.