DiGiSPICE Technologies Limited — Q3 FY25 earnings call

Call held 17 Feb 2025

Management summary

DigiSpice Technologies reported a strong Q3 FY25 with a 16% QoQ growth in customer Gross Transaction Value (GTV) to ₹31,951 crores and a 7% QoQ revenue increase. The company's PAT from continued business turned positive at ₹1 crore. Key growth drivers included the collections business, which grew 80% YoY and now accounts for nearly half of total volumes, and the launch of its UPI offering, Spice Pay, currently in pilot. However, the shift in product mix towards lower-margin collections has impacted overall gross margin growth, and the company is addressing a ₹4.3 crore GST notice related to a discontinued business.

Highlights

  • Customer GTV increased by 16% QoQ to ₹31,951 crores from ₹26,258 crores in the previous quarter.

  • Revenue grew 7% QoQ and 2% YoY.

  • Gross Margin increased by 3% QoQ from ₹43 crores to ₹44 crores.

  • PAT from continued business turned positive at ₹1 crore this quarter, up from ₹(-1.5) crores in the previous quarter.

  • AePS market share maintained at 17% (closer to 18%), with 11.5% QoQ growth in AePS GTV.

  • Collections business GTV grew 80% YoY and 51% QoQ, now contributing 46-47% of total volumes.

  • Launched Spice Pay, a UPI offering, piloting in Bihar and Madhya Pradesh, with over 13,000 wallets opened and 10,000 active.

  • Subscription pack revenue grew 80% YoY, reaching ₹4.5 crores this quarter from ₹2.5 crores in Q3 FY24.

Concerns

  • Overall PAT for Q3 FY25 was ₹0.1 crore, and for 9 months FY25, it was ₹(-26.6) crores (including notional loss on investments).

  • Margin pressure due to product mix, as collections (a lower-margin product) now contribute significantly to GTV, impacting overall GM growth.

  • A GST notice of ₹4.3 crores was received for an erstwhile discontinued business, though the company is hopeful for a favorable resolution.

Key financials

  1. Customer GTV ₹31,951 Cr +16%QoQ
  2. Revenue — +2%YoY
  3. Gross Margin ₹44 Cr +5%YoY
  4. EBITDA ₹-1.9 Cr
  5. EBIT ₹2.8 Cr
  6. PAT (continued business) ₹1 Cr
  7. PAT (discontinued business) ₹0.9 Cr
  8. Overall PAT ₹0.1 Cr
  9. PAT (9 months, incl. notional loss) ₹-26.6 Cr
  10. Subscription Packs Revenue ₹4.5 Cr +80%YoY

What they filed

Q1 FY27: revenue down 12.9%, net profit down 4.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue109 113 117 124 125 +14%109 −3%107 −8%108 −13%
EBITDA-3 -2 1 6 7 +333%6 +472%1 +69%9 +34%
Net profit-7 -20 -12 7 7 +198%2 +112%3 +123%7 −5%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

medium confidence
  • M&A NBFC acquisition Acquisition · Pending regulatory

    To create own credit products for captive merchant base and MSME around merchants.

    As a third building block, credit continues to be an important part of our journey going forward. We are in the process of working with the regulator to look at a strategic NBFC acquisition from within the group so that we can use it as a platform to create our own credit products for our captive merchant base, as well as MSME around the merchants.
  • M&A Spice Money Merger · Pending regulatory

    To merge subsidiary FinTech business into the parent company DiGiSPICE Technologies.

    And also finally, in terms of amalgamation of Spice Money, which is today sitting as a subsidiary of DiGiSPICE Technologies to merge it into DiGiSPICE. Effectively, you know, our subsidiary which is Spice Money, our FinTech business, will get merged into DiGiSPICE Technologies. This process is well on its way since August 2024, and we are going through the necessary statutory approvals, and we will keep you updated through the stock exchange announcements as and when we get the approvals coming through.
  • Liquidity Liquidity disclosed Float income generated from a balance of almost ₹130 crores maintained in accounts.
    almost 130 crores is a balance that we maintain in these accounts today, and which is helping us generate a float value also.

Guidance & targets

Market Share

  • AePS Market Share Market Share · Medium confidence 20% plus

    From 17% today

    But as you see that as we get more denser coverage in South and West, those markets will also start improving market share beyond 10%, which will help us go closer to 20% plus market share on an all-India basis.

    — Dilip Modi

Product Adoption

  • UPI Consumer Onboarding Product Adoption · Medium confidence 300 million
    We believe that today India with over 400 million consumers is all set to figure out the next journey and that journey will come from Bharat, it will come from small towns. Today, there are multiple reasons which are holding back consumers from getting onto UPI, and we are trying to solve for some of them. ... there is an opportunity to bring in another 300 million to the UPI platform.

    — Dilip Modi

Credit Business

  • Secured Loan GTV Credit Business · Low confidence grow more and more
    this is a business that we are now focusing to grow more and more.

    — Aastha Garg

What to watch in Q4 FY25

AePS Market Share Growth (South & West)

Next quarter
Current Sub 10% in South, 17% all-India
Target Improvement beyond 10%, closer to 20%+ all-India

Why it matters

Key to achieving overall market share growth and national presence, particularly in underpenetrated regions.

But as you see that as we get more denser coverage in South and West, those markets will also start improving market share beyond 10%, which will help us go closer to 20% plus market share on an all-India basis.

Risks & concerns

  • Fraud in AePS transactions

    medium

    Operating in financially vulnerable areas requires continuous investment in fraud monitoring models and systems to maintain control.

    We are working in a part of India that's very financially vulnerable. So, we have to make sure that we stay on top of it. We at Spice Money continue to invest in our kind of fraud monitoring models and systems to make sure that we can keep the ratios under control.

    Management acknowledged

  • Margin compression due to product mix

    medium

    The significant growth in the collections business, which is a lower-margin product compared to banking or AePS, is causing overall gross margin growth to lag behind GTV growth.

    collections as a product in compared to other products such as banking or AePS, where we are traditionally a leader, collections is a smaller margin product. So, what happens is when we grow too much on CMS, the margin is growing, but due to the change in the product mix, the overall GM is not growing in line with the growth in GTVs.

    Analyst acknowledged

  • Competition for Adhikaris (agents)

    medium

    Competitors offering higher commissions could lead to Adhikaris moving away, necessitating strategies like subscription packs for retention.

    If competitors come and give higher commission to the Adhikaris, they will move out. What are we doing to retain them? ... what happens with subscription, Suraj, is that the Adhikari starts getting more onto our platform because they've paid for a longer period of time, and they've got the benefits associated with that. So there's an incentive for them to keep transacting on our platform.

    Analyst acknowledged

  • GST notice of ₹4.3 crores

    low

    A GST notice related to erstwhile discontinued export services, with the company hopeful for a favorable resolution after providing details.

    my next question relates to the recent GST order that was received by DiGiSPICE amounting to somewhat Rs. 4.3 crores. Any updates that you can give about that? ... we are very hopeful that this case will be in our favor

    Analyst acknowledged

Q&A highlights

8 direct
Strategies to strengthen AePS market share Direct
We are one of the few national players who have a national presence. We see an opportunity because now this space is also going to get consolidated due to a lot of self-regulation as well as a need to bring in more products to drive cross-sell for the merchants to grow income... we are very confident if you look at our market share at a state level, there are many states in the Northern East where our market share is upwards of 20%.

Outlines the company's multi-pronged strategy (national presence, cross-selling, compliance, state-specific focus) to grow its core AePS business and market share beyond the current 17%.

Asked by Aniket Redkar

CMS GTV growth (51% QoQ) Direct
The growth in GTV is a combination of both growth in large SMEs as well as growth in business per enterprise. So, one of the things that we are doing is we are doubling down on some of the larger enterprises and doing more with them to drive more stickiness.

Provides a clear explanation for the significant quarter-on-quarter growth in the CMS business, attributing it to strategic focus on larger enterprises and increased business per enterprise.

Asked by Naman

GST order of ₹4.3 crores Direct
this GST notice what we have received for the, some of the export services, what we were doing with the erstwhile discontinued business. And we have provided, because we were not given enough opportunity to, kind of put our view on the record. But we are hopeful that we have now provided almost all the details with respect to the collections, whatever the export was there, and we are very hopeful that this case will be in our favor and whatever the provisions we have to follow, we have followed that.

Addresses a potential financial liability, clarifying its origin from a discontinued business and expressing management's confidence in a favorable resolution.

Asked by Naman

Impact of 2FA on remittance volumes Direct
the two-factor authentication was something that came in at a transaction basis for our AePS business, which now has moved on from not having to apply on every transaction to just the first transaction of the day. So, as Aastha showed in the AePS numbers, we have already seen the impact of that quarter-on-quarter on quarter 3 versus quarter 2, in terms of growth in volumes of business.

Explains how a regulatory change (2FA) initially impacted volumes but has since been mitigated by an adjustment to its application, leading to recovery in transaction volumes.

Asked by Pratik Giri

Impact of UPI adoption and zero-balance savings accounts on transaction volumes and revenue growth Direct
we believe that as an industry, we have to solve for growth in number of UPI users from 400 million to 700 million as a country. So, the next 300 million users on UPI will come from Bharat... So, to us, fundamentally, we are working to see how we can enable more and more digitization in small towns by enabling customers to have access to more digital accounts, whether it's a full-fledged bank account or a wallet. Both serve the purpose of enabling people to do UPI and make digital payments.

Highlights the strategic importance of UPI and zero-balance accounts as key drivers for future digital payment adoption and revenue growth, particularly in rural India, and how Spice Pay fits into this vision.

Asked by Aniket Redkar

Plans to expand into adjacent fintech verticals (insurance, wealth, AI) Direct
We are very encouraged by a part of the start-up ecosystem also looking at local language models and also looking at how we can use Al to drive down cost to serve and be able to innovate for small ticket financial products. So, we are committed, we are a tech-first company, we are committed to leverage Al and are working to find partners in this space.

Outlines the company's diversification strategy into new fintech verticals like insurance and wealth management, emphasizing the role of AI and partnerships to drive innovation and reduce costs.

Asked by Aniket Redkar

Leveraging technology for digital lending and microfinance Direct
one of the things that we are very committed to is striving formal penetration of formal credit into small merchants in small towns. We have 1.5 million small merchants already on-boarded on our platform and there's a lot of data around these merchants we have... I think with technology, there's an opportunity to create a kind of 2.0 revolution. So, we are taking this journey forward and credit is going to be definitely the next growth engine for us.

Details the company's approach to digital lending, focusing on leveraging alternate data for its large merchant base and viewing credit as a significant future growth engine, while also being mindful of regulatory compliance.

Asked by Aniket Redkar

Margin pressure due to GTV growth not aligning with revenue/profitability Direct
collections as a product in compared to other products such as banking or AePS, where we are traditionally a leader, collections is a smaller margin product. So, what happens is when we grow too much on CMS, the margin is growing, but due to the change in the product mix, the overall GM is not growing in line with the growth in GTVs.

Explains the underlying reason for the discrepancy between GTV growth and margin expansion, highlighting the impact of a product mix shift towards lower-margin collections business.

Asked by Utsav Behati

3 min read 7 chapters

Detailed narrative

Q3 FY25 Financial Performance Overview

DigiSpice Technologies reported a customer Gross Transaction Value (GTV) of ₹31,951 crores for Q3 FY25, marking a 16% quarter-on-quarter growth from ₹26,258 crores. Revenue increased by 7% QoQ and 2% YoY. Gross Margin saw a 3% QoQ increase, reaching ₹44 crores from ₹43 crores. The company achieved a positive PAT of ₹1 crore from its continued business this quarter, a significant improvement from ₹(-1.5) crores in the previous quarter, though overall PAT for Q3 was ₹0.1 crore and for 9M FY25 was ₹(-26.6) crores including notional losses.

Strategic Focus on FinTech and Digital Inclusion

The company is focused on digital financial inclusion, leveraging technology to penetrate formal financial services into deep India, particularly small towns. Operating under the Spice Money brand, DigiSpice has built a leading FinTech platform that enables small merchants to act as assisted digital payment points. This allows millions of consumers in rural India to access services like cash withdrawal, EMI deposits, bill payments, and new bank account openings, effectively digitizing cash at the last mile.

Growth in Core Assisted Digital Payments (AePS) and Collections

DigiSpice maintained its market leadership in the Aadhaar-enabled payment system (AePS) business with a market share of over 17%, showing an 11.5% QoQ growth in GTV. The collections business has emerged as a significant growth driver, experiencing an 80% YoY and 51% QoQ growth in GTV. It now contributes approximately 46-47% of the total transaction volumes, making it as substantial as the AePS and Micro ATM businesses. The company's merchant network has grown from 240,000 in FY20 to over 1.5 million by December 2024.

Entry into UPI Space with Spice Pay

DigiSpice has launched Spice Pay, its new UPI offering, which is currently being piloted in Bihar and Madhya Pradesh. This product is designed for cash-first consumers, allowing them to open full KYC PPI wallets, load cash, and perform digital payments like sending/receiving money, bill payments, and scan-and-pay. Since its beta launch (October-January), over 13,000 wallets have been opened, with 10,000 actively used. The company aims to onboard an additional 300 million users onto the UPI platform from Bharat.

Banking Business Expansion

The company's banking business has seen substantial growth, with approximately 7.8 lakh savings accounts and 50,000 current accounts opened to date. This expansion has led to the generation of float income from a balance of almost ₹130 crores maintained in these accounts. The number of 'Adhikaris' (agents) who have opened 5+ accounts has reached approximately 27,000, indicating a growing base of repeat banking counters and a shift towards a bank branch-like network.

Credit Business Development

Credit is identified as a key future growth engine. DigiSpice is working towards formal credit penetration for its 1.5 million small merchants, many of whom lack traditional credit histories. The company is in the process of a strategic NBFC acquisition from within the group to create its own credit products. Currently, the secured loan business is generating approximately ₹20 crores a month in GTV, with a focus on expanding this segment through multiple partners and leveraging alternate data.

Product Mix Impact on Margins

Despite strong GTV growth, the company's overall gross margin growth has been impacted by a shift in its product mix. The collections business, while growing significantly and contributing 46-47% of total volumes, is a lower-margin product compared to the traditional banking and AePS services. This change in product composition means that while individual product margins are growing, the blended gross margin is not increasing proportionally with the overall GTV growth.

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