In conversation with Vishal Mehta, Managing Director, Infibeam Avenues Ltd

The long-term growth drivers are - the increased adaption of eCommerce by small, medium & big businesses (merchants/banks), elucidates Vishal Mehta, Managing Director, Infibeam Avenues Ltd

What is your outlook on the Indian fintech industry? What are the key emerging trends in digital payments that you are witnessing in the post-pandemic world?    

The fintech industry is booming, not only in India but also, globally! With lower digital penetration in India, the growth potential is high for the fintech industry to flourish.  

Apart from the statistical numbers on the good potential for the Indian fintech industry, the major reason behind its growth opportunities is the need to serve aspiring demography across this vast geography, where the government, various institutions, as well as the corporate world, want to spread their wings and reach out to these vast unserved populations.  

So, in the Indian context, fintech services & products are an enabler for people to serve their 'needs', unlike in western countries, where fintech is more of convenience along with the need.   

Hence, with huge demand for fulfilling this ‘need’ in India, the sky is the limit for the Indian fintech industry to grow, whether it's payments, WealthTech, InsureTech, LendingTech, RemitTech, SaaS, etc.   

Payments are at the centre of any fintech service to facilitate a digital transaction. Even in offline mode, digital payments will play a key role in replacing cash for convenience, speed, and safety.  

COVID has further accelerated digital adoption across various industries, and thus, created a runway to service one billion plus people through various fintech services.  

In FY22, the fintech payments (such as cards, UPI, and PPI) grew 86 per cent YoY. And a recent RBI data for the latest 4-5 months FY23 on PSI data indicates approximately 50 per cent growth, DP to cross Rs 150 trillion.  

COVID-impacted sectors like travel & tourism, hospitality, airlines, and entertainment, are witnessing a steady rise in the spends nearing the pre-COVID levels. Even offline payments have started gaining traction as pent-up demand catches up. Online to offline convergence in 2-3 years is likely to go up as consumers stay connected, demanding a seamless experience between the two. The implementation of 5G will further boost and improve internet connectivity deep in India, and hence, the fintech industry and fintech payment companies focus on providing an omnichannel experience to the consumers.   

Could you shed some light on the asset-light business model of CCAvenue Payment Solutions? How are you leveraging technology, automation of processes, and the wave of digital adoption?    

CCAvenue Payment Solutions have been developed specifically to operate on a SaaS model i.e. one solution that fits many business models. So, after we built the core application, it has become a valuable asset for the company as it is highly scalable and can maximise our advantage by using better economies of scale.   

Since the entire solution is built in-house, we also own its intellectual property rights (IPR).  We have the talent, resources & knowledge to improve it at will, and that forms the core of our technology DNA.   

The IAL ‘scale-up’ plan can happen across business segments or even new geographies. What makes this SaaS-based payment model more attractive is its ability to scale upward with an incremental increase in the variable costs, which are relatively small or minuscule cost increases.   

Now, with our SaaS-based payment infrastructure in place, we just need to customise it as per the customers'/merchants' needs and deploy it.  The only cost that we have to incur is on target marketing.   

Our payment solutions are driven by a combination of technology, analysis of big data, and automation in assessment models to provide a timely outcome to the management.  

All these elements come together and form the core of our asset-light model.   

This asset-light model allows us to drive the new wave of digital adoption by offering businessmen across multiple segments easy access to take their business digital.  

For Q1FY23, Infibeam Avenues posted a 137 per cent YoY growth in its profit after tax to Rs 23 crore. Transaction processed value (TPV) was up by 72 per cent to Rs 87,218 crore compared to Rs 50,651 crore in the June quarter last year. What factors are responsible for your stellar outperformance?   

The key factors that contributed to the growth of Infibeam Avenues in the last quarter were:  

-Opening up of high-margin COVID-impacted sectors like travel & tourism, hospitality, airlines, and entertainment; positive business mix.  

-Increasing credit card spends and hence, their positive contributions to our payment option mix.  

-Cost optimisation measures.  

-Doubling of merchants from 2.5 million in FY21 to 5.7 million in FY22.  

Can you elucidate your current segment-wise and geography-wise revenue mix? How do you expect this to evolve in the next 3-5 years? Also, what are your plans to further expand in Qatar and Australia?   

In FY21, our total income from payments & platforms business stood at Rs 6,760.36 million, out of which, 81 per cent was from payments and the rest 19 per cent came from platforms business, segment-wise. While geography-wise, 86 per cent contribution was from domestic market and only 14 per cent came from international markets.    

In FY22, the (payments & platforms business) income increased to Rs 12,939.34 million, where segment-wise, 88 per cent was from payments and 12 per cent was from platform business. Besides, geography-wise, the domestic market’s contribution surged to 94 per cent while the international market share was 6 per cent.   

In the next 3-5 years, as we grow our new initiatives/businesses, we expect to see the contribution from offline payments increase to 25 per cent-33 per cent of the total payments processed.  

One of our major initiatives in the lending space will let us witness our lending portfolio contribute in double digits by servicing both, online and offline merchants. 

The payment and business mix is set to further evolve as we will offer the largest payment bouquet in a single integration, as we do today.  

Our international business to keep growing as our USA, Australia, and Gulf Cooperation Council (GCC) to be fully-functional and new geographies added, as we plan to increase our global play. Recently, we have consolidated our three fully-owned international subsidiaries namely, Infibeam Avenues Australia Pty Ltd (Australian market), AI Fintech Inc (USA market), and Infibeam Avenues Saudi Arabia for Information Systems Technology.co (Saudi Arabia market) will become a step-down subsidiary of the company after being transferred to Infibeam's UAE-based wholly-owned subsidiary - Vavian International Ltd, which is the second-largest payment aggregator in the UAE.  

What are your key long-term growth drivers?   

The long-term growth drivers are - the increased adaption of eCommerce by small, medium & big businesses (merchants/banks). E-commerce will not limit itself to just marketplace providers but would be democratised wherein the coming days, even a small kiranawala will have its own app store on the Android platform to serve its local & captive customers, if not an eCommerce website.  

With more online business, eCommerce, and with the economy moving towards a digital way of doing business, Infibeam Avenues Ltd will grow exponentially as we already have our fintech & payment infrastructure in place, and we can optimise it. 

The government’s initiative on the open network for digital commerce (ONDC) is one of such efforts to make all kinds of merchants sell their products/services via online/eCommerce.   

The increase in eCommerce penetration from single digit to 12-15 per cent over this decade has already opened up many untapped opportunities for the fintech sector. And with a surge in the adaption of ecommerce and ONDC, there will be a further acceleration of digital/eCommerce penetration across the country.   

There is also a strong tailwind in India, owing to an increase in consumer & business demand and policy support from the government. RBI Payment Vision 2025 will continue to provide impetus to the sectors as well as to our growth trajectory.   

Digitalisation of most services including governance and with a number of digital merchants expected to reach over 75 million from the current 25-30 million over this decade will further facilitate the transition to a digital economy.   

As per a prediction by Chief Economic Adviser to the Govt of India, V Anantha Nageswaran, the Indian economy will become $10 trillion by the year 2033-34. The ongoing digital revolution and deeper proliferation of the 5G network will create further opportunities.  

 What is your earnings outlook for the next few quarters?   

As per our business outlook for FY23, our aim is to increase our total processed value (TPV) and expect to touch Rs 4 lakh crore ($53 billion). Currently, we command an 8 per cent market share in India’s digital payments, excluding UPI. Now, we expect to garner a 9-10 per cent market share.   

We are also looking to be in the range of Rs 1,600 - Rs 1,700 crore gross revenue, with EBITDA in the range of Rs 170 - Rs 190 crore, and expect PAT to touch Rs 110-120 crore in FY23.