Dhani Services

Dhani Services is undergoing a significant strategic pivot. For its credit product, the company is moving away from a monthly subscription model to a one-time^📎 upfront annual membership fee, allowing access to a credit facility of up to ₹50,000. This change is driven by the evolving regulatory landscape. Concurrently, the e-commerce platform is transitioning from an inventory-based model focused on select categories to a marketplace model, onboarding third-party suppliers to offer over 10 lakh products across 100+ categories. This aims to increase customer engagement and wallet share in a capital-efficient manner.

For the full financial year 2022, Dhani Services reported revenues of ₹1465 crores, an 8% increase compared to ₹1363 crores in the prior year. However, the company's profit after tax for the year was a negative ₹860 crores, a substantial widening from the negative ₹230 crores recorded in the previous year, attributed to the ramp-up of digital businesses. The legacy loan book continued its rundown, standing at ₹2199 crores as of March 31, 2022, down from ₹4160 crores at the prior year-end. The company maintains a strong balance sheet with over ₹1550 crores in cash and liquid investments, a CRAR of 63.9%, and a net worth of ₹5271 crores.

Dhani Services has built a substantial customer base, catering to more than 5.2 crore customers since launching its digital businesses. In the last year, the company acquired 78 lakhs paid individual customers across its credit and e-commerce segments. As of March 31, 2022, the active paid customer base stood at 61 lakhs. Management indicated a focus on monetizing this existing customer base, noting a new user ratio of approximately 35% to 40% from this base for orders on the store. The new model aims to increase customer engagement and stickiness by offering credit for purchases on the Dhani store itself.

The company addressed the evolving regulatory landscape, particularly concerning RBI guidelines for card-like products. The shift from a monthly subscription to an annual membership fee for the credit facility is a direct response to align with regulatory guidance. Management clarified that their revised product construct, which allows customers to use a credit limit for purchases on the Dhani store, is compliant and does not require new RBI approval. They emphasized that the engagement with the regulator on these matters has been concluded, with new additions made to their product.

Dhani Services is actively rationalizing its expenses, with a particular focus on customer acquisition costs, which are expected to be significantly lower going forward^⏳ after a large push in the last 12-18 months. The employee count has been reduced from approximately 23,000 to around 18,000, and employee benefit expenses are expected to be rationalized through the current fiscal year. The company aims for a capital-efficient growth model, particularly with the marketplace approach, which generates commission revenue from suppliers and minimizes money tied up in inventory.

Investors expressed significant concerns regarding the substantial decline in stock price, the widening losses, and the lack of clear timelines for profitability. Management acknowledged the feedback and reiterated their commitment to building the franchise and enhancing investor value. While specific financial guidance for the new models was not provided, citing 'early days,' they expressed optimism about seeing traction in the coming quarters. The company aims to achieve up to 10% commission from suppliers and expects the legacy loan book to run off in the next 18 months.