August 17, 2015 - Vakrangee Limited

1 Page 1 of 11 Vakrangee Limited Q1 FY 2016 Earnings Conference Call August 17, 2015 ANALYST: MR. ALANKAR GARUDE EQUITY RESEARCH ANALYST, MACQUARIE GROUP MANAGEMENT: MR. DINESH NANDWANA - CHAIRMAN & MANAGING DIRECTOR Vakrangee Limited MR. AMIT DESAI Vakrangee Limited Vakrangee Limited August 17, 2015 Page 2 of 11 Moderator: Ladies and gentlemen good day and welcome to Vakrangee Conference Call for Q1 FY16 Earnings, hosted by Macquarie Capital Securities India Private Limited . As a reminder all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call please signal an operator by pressing * then 0 on your touchtone phone.

2 Please note that this conference is being recorded. I now hand the conference over to Mr. Alankar Garude from Macquarie Capital Securities. thank you and over to you Sir! Alankar Garude: Thanks Daryl. Good day and a warm welcome to all participants. We at Macquarie Securities are very please to host Vakrangee Q1 FY16 Earnings Conference Call. From the management we have with us Mr. Dinesh Nandwana, Chairman & Managing Director. We thank the management for giving us this opportunity. Now I would like to hand over the call to the management for the opening remarks, post which we will have the question and answer session. thank you and over to you sir. Dinesh Nandwana: Dinesh Nandwana here, good evening dear ladies and gentlemen. It is a great pleasure to greet you all once again on behalf of our board of directors and senior management.

3 We begin by thanking all of you for having spared time for joining us here today to discuss our first quarter earnings for the financial year 2015 -2016. Our key growth driver has been the government s massive push towards financial inclusion through the Pradhan Mantri Jan Dhan Yojana. The objective of this is to bring every Indian into the banking net by ensuring at least two bank accounts for households. These accounts shall be linked with the Aadhaar number of account holders and will become a single point of contact for receipt of all direct benefit transfers that is DBT from central and the state government and local bodies. Our company is at forefront to leverage this growth opportunity and said to become one of the leading players in implementation of financial inclusion in India. Our Vakarangee Kendra Outlet is our last-mile retail outlet that is in close proximity to the population of rural India.

4 We have embarked on a journey to be a preferred last-mile link across the nation for providing all services and products through our Vakarangee Kendra Model, technologically sound and a host of services and products offering, we would be the choice of citizen for availing the needs of household necessaries to conducting daily transactions. Through Vakarangee Kendra we offer a rich pocket of e-governance, banking insurance, e-commerce and ATM services. In addition to Maharashtra, Rajasthan and Delhi we are setting up and managing our Vakarangee Kendra outlet in 12 more states across India. Vakrangee Limited August 17, 2015 Page 3 of 11 Currently our company has been appointed as the national business correspondent by seven banks including Bank of India, Punjab National Bank, Union Bank of India, Allahabad Bank, State Bank of India, Baroda Gujarat Gramin Bank, Baroda Uttar Pradesh Gramin Bank et cetera.

5 We have become the preferred partners of choice to all the major PSU banks. We have a vision to complete around 75000 Vakarangee Kendra outlets by 2020. Of these 25000 will be set up in urban and semi-urban areas and the remaining 50,000 in rural area. We have shared our vision document along with our quarterly results a copy of which is also available on our company website. As of now we are already have 15108 outlets across rural and urban areas, on behalf of more than 15 banks, this is as compared to 12568 outlets as on March 31, 2015 , plus opening around 2000 outlets during this quarter. Post the launch of Pradhan Mantri Jan Dhan Yojana by the government there has been a strong push from banks to expand their network not only in rural but also in urban areas, hence there has been a strong ramp up in urban branches from around 1288 branches by March 2015 to 2091 branches in June 2015 .

6 Over the years we have led the ground work, developed strong resolution capabilities and nationwide till the gross root level with deep knowledge of consumer behavior and of challenges that exist in working for under served part of India we used to be an integral part of India s retail revolution. Through our initiatives we aim to contribute to well being of India s rural population. Our company has recently entered into a strategic tie-up with Amazon India in its constant endeavor to connect India s unserved and under served citizen to modern ecosystem. I would like to highlight that Amazon is now seen to be the biggest online store in India with more than 25 million products for sale. Our company sales provide marketing promotional and pickup services to Amazon through the Vakarangee Kendra. Connecting to our financial results for Q1 of 2015 -2016, our revenues for Q1 have increased by on year-on-year basis to million.

7 Our revenues from Vakarangee Kendra outlets retail segments has increased by almost whereas our e-governance segment revenue have lowered by as we are purposefully shifting our focus from capital intensive e-governance segment to asset light Vakarangee Kendra Retail Outlet Segment. Our EBITDA has increased by 21% on year-on-year basis to 1898 million, our EBITDA margins have increased by 400 basis points at around 27%. The EBITDA margins for our e-governance segment has improved by 1110 basis points as we are focusing on higher margin projects and moving out of lower e-governance projects. The EBTIDA margin for the Vakarangee Kendra outlets retail segment has been at We expect these margins to stabilize around 18% to 20% on a long-term basis as we have Vakrangee Limited August 17, 2015 Page 4 of 11 increased the commission ratio with franchisee to 80:20.

8 Our profit after tax has increased by on year-on-year basis to million. There is a positive operating leverage in our Vakarangee Kendra retail segment as our expansion is mainly through franchisee route with no major Capex. Our retail segment now contributes almost 50% of the total revenue. Economies of scope will further improve as new services are added leveraging the same technology driven platform. Recently new initiatives have been introduced by government to push financial security and financial insurance with schemes of this Pradhan Mantri Jeevan Suraksha Yojana and Atal Pension Yojana. With no incremental capex and operating cost addition of more and more services and increased targets and volumes over a period of time will result in further positive operating leverage. Therefore our incremental ROC is expected to further improve.

9 With this I would like to hand over the floor for question-and-answer session. thank you very much. Moderator: thank you very much. We will now begin the question and answer session. Our first question is from the line of Manan Shah from Manan Investment. Please go ahead. Manan Shah: Dinesh Ji, I would like to shed some light on the Amazon tie-up. So what is the rollout of the Amazon distribution and what is the commission sharing on an indicative basis in the revenue model? Dinesh Nandwana: See as a pilot we have started in three outlets of the Bombay namely Bhandup, Govandi and Kalyan, theen outlet main humne ismay just recently launch kiya, in these three outlets we have just launched it recently and we are getting good response from there and first pilot hum complete kar rahey hain is month ke andar, first pilot we are completing within this month and then we will prepare the SOP and roll out all India before March 31, 2015 .

10 There will be mega launching in Diwali. Manan Shah: So post to the Diwali quarter you will see revenues coming in from Amazon? Dinesh Nandwana: Right. Manan Shah: Send secondly on the debt front when I had spoken to you a quarter back you had said that debt would be reduced to zero by year end so are we on track? Dinesh Nandwana: Yes definitely. Right now if you see before three years the debt was 380 Crores long-term debt, right now that is only 71 Crores. In my opinion this will be cleared up in this current year only, by March 31, 2016 I think we will be long-term debt free. Vakrangee Limited August 17, 2015 Page 5 of 11 Moderator: thank you. Our next question is from the line of Pratik Gandhi from Geecee Investments. Please go ahead. Pratik Gandhi: Can you throw some light in both of the business and how you want to take up both the businesses over next two to three years?