Radiant Cash Management Services Limited (RADIANTCMS) Earnings Call Transcript
May 23, 2023
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to Radiant Cash Management Services Q4 and FY '23 Earnings Conference Call hosted by Antique Stock Broking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sohail Halai from Antique Stock Broking. Thank you, and over to you, sir.
Thank you, Niraj. We welcome you all to 4Q FY '23 and FY '23 earnings call of Radiant Cash Management. Today, we have with us Mr. Colonel David Devasahayam, CMD; Mr. Venkataramanan, CFO; Mr. Jacob, Director Operations; Mr. N. Muthuraman, Director, Strategy and Investor Relations. I thank David sir, for giving us this opportunity to host the call. And without further delay, I hand over to him for his opening remarks. Over to you, David, sir.
Good morning, ladies and gentlemen. Thank you, Sohail, for this -- for your introductory remarks and for coordinating this call. I'm Colonel David Devasahayam, the Chairman and Managing Director of the Radiant Cash Management Services Limited. Along with me are the members of my senior management team, our Chief Financial Officer, Mr. T. Venkataramanan; and our of Chief Operating Officer, Colonel Benz Jacob; and the Director, Strategy and Investor Relations, Mr. N. Muthuraman, who many of you have seen by my side, he's the runner to the IPO, who will be taking on most of your questions. I'd like to thank all the institutional investors. The high-net-worth individuals and retail investors who continue to repose their faith in our company. I would also like to thank all the analysts who joined us on today's call. We look forward to a fruitful and engaging discussion pattern with you all. I'll begin while an overview of our company's performance for the last quarter and for the full financial year ending 31st March 2023. Revenues for the quarter ending March 31, 2023, were at INR 89.7 crores. The EBITDA for the period stood at INR 221 crores, with a reported PAT being INR 15.5 crores. The numbers aren't comparable on a sequential quarter-on-quarter basis as third quarter tends to be our strongest quarter due to the festive season. For the financial year ending 31st March 2023, revenues were at INR 354.9 crores, registering a growth of 24.1%. The EBITDA for the period stood at INR 89.7 crores, growing by 50.8%, while PAT stood at INR 62.7 crores with the growth of 64.2%. As you can see, there has been a fantastic and eventful year for the company. We wish to keep growing and strengthening our endeavor further year-on-year. I'll hand it over now to Mr. N. Muthuraman to take you through the key performance indicators. It's over to you, Muthu.
Thank you, Colonel. Good morning, everyone. Thanks once again for joining this analyst call. I'll present the update on operational KPIs, and will try to link the same with our various business verticals. We are present in over 13,000 pin codes across 5,700-plus locations in India. This has been our strongest USP as a wide network helps in servicing maximum number of clients, thereby improving our route density and hence, our profitability. We handled INR 1.57 trillion of cash in FY '23. This reflects a 20% -- 20.6% growth over FY '22. We provided our service at 63,420 touch points during the year FY '23, comparative figure for the previous year was 49,980. As we have mentioned in our prospectus as well as in earlier analysts calls, we continue to add 1,000 to 1,100 points every month for the last 3 years. And this is the growth driver of our first business vertical, which is cash pickup and delivery. This segment accounted for 69% of our revenues, and the number of touch points is the key growth driver for this vertical because we charge our banks a fixed amount per point per month. This segment grew at 28% year-on-year. 63% of our revenues in FY '23 came from Tier 3 plus locations, where we have our strongest presence. This is also a key growth driver for our second vertical, which is network cash management or cash per year. For those of you are attending first time. This is a business where we pick up cash from end customer and deposit in Radiant's own bank account, and then electronically transferred to our client bank -- electronically transferred it to the client bank where they do not have a branch presence. So this is a value-added service that we provide to our clients. And this segment accounted for 18% of our revenues in FY '23. Tier 3 plus locations have limited branch presence as against the 61 bank branches per lakh population in urban area, India has only 6 branches per lakh population in rural areas. In such areas, this value-added product of network cash management helps our client banks offer the service to end customers even where they do not have a branch service. This segment for FY '23 reported a flat growth over FY '22. A combination of reasons for this flat growth, one, lower throughput in the petroleum sector, we spoke about it briefly in the previous call as well, lower throughput in the petroleum sector, which are predominantly network cash management clients. There is some marginal pricing pressures from banks from the [indiscernible]. Also, the revenue mix of newly added points were in favor of Tier 1 cities, where [indiscernible] revenues from a very small component. We expect 2 of these 3 reasons to revert to me, namely the petroleum sector as well as revenue mix to revert to mean shortly, while we have taken significant measures to control costs on this front, and our gross margins have remained fairly stable in FY '23 over FY '22 despite the marginal pricing pressure. As on March 23, we had 840 cash funds and the staff center of 9,297, including 2,172 employees and 7,125 contractual workers. Of this, 21% are from armed forces, a strong USP for Radiant, which has helped to keep our cash costs to the minimum. For the year '23, our gross cash losses before insurance claim was about INR 6 crores. The impact on the P&L is much lower, in fact, slightly lower than the cash loss impact in FY '22. We added about 24 clients in this financial year, all of whom are direct clients. This has helped increase the share of direct clients in our revenue to 2.9% in FY '23 as against 1.5% in FY '22. We serviced over 3,210 customers in this period, up from 2,675 in FY '22. All of these have helped generate very healthy ROCE of 33% and a return on equity of 27% for this year. More importantly, we generated cash flow from operations after working capital changes of INR 73 crores in FY '23 as against INR 31 crores in FY '22, a growth of over 135%. I'll now request Colonel to share his concluding remarks.
Well, I would like to thank you all for making time to join us for the call. It's always humbling to hear from our investors and larger analyst fraternity. We will now hand over to take your questions and feedback with [indiscernible] and incorporate learnings in our mid- and long-term business plan.
[Operation Instructions] The first question is from the line of from Laxminarayan from [indiscernible] investments.
A couple of questions. First is what part of your revenue is directly linked to the value of cash [Indiscernible]?
Yes. The biggest segment, which is the network cash management is directly linked to the volume of cash we handle. The third segment, cash processing, is also linked directly to the volume of cash that we handle. So these 2 together is roughly about 24% of our revenue, 18.5% and 5.5%, about 24% of our revenues will be directly volume linked. Our main business, which is cash pickup and delivery, it is not exactly directly linked to one on one to the volume of cash that we handle. These are the fixed amount per point per month for this [indiscernible]. Yes. It has an indirect linkage in the sense that we linked out as the limit for daily limit goes up, the charges goes up, but it's not exactly that is linked to volume of cash that we handle. Hope that answers your question?
yes. Yes. That helps. Second, what kind of capital expenditure at the business would incur in the next 5 years?
Yes. The total expenditure [indiscernible]...
This year, in FY '23, '24, our CapEx expenditure will be to the extent of about INR 23 crores to INR 28 crores, mainly to be incurred on cash paid -- cash/repurchase.
Got it. And this will be refreshed every couple of -- in a brack of 5, 7 years, so that will be a recurring CapEx for you, right?
As we have mentioned in our prospectus as well, this is a onetime insurance against any eventuality. Otherwise, today, we have 840 events, all of them are on lease -- substantially, all of them are on lease, very few wins in our books. The prospectus and the purpose of the IPO was to raise some amount of capital to acquire some wins in our books as well as insurance measure and -- but we'll continue to avail these vehicles here on as well.
So is it fair to assume that your annual CapEx will be in the range of INR 20 crores, INR 25 crores every year?
No. Only this FY '23, '24 will be exceptional. Last year, the CapEx is about INR 3 crores.
Got it. So only this year, you will have a higher CapEx, and that's predominantly for these things. Okay. Sorry.
This year based on the price issue; we have a certain amount of money coming in for a sale of cash finance. As Muthu is elaborating, we are now buying some cash out to be sectoral reserves and available -- in case there is a shortfall of a vehicles, but many of the leasing organizations from which we're getting to -- just to [indiscernible] we are going in for about [ INR 220 ] in our inventory. Otherwise, there is as Venkata, our CFO, the year before the CapEx is at INR 3 crores.
Got it. Got it. And what led to a higher operating cash flow to almost INR 75-plus crores this year. It's a great achievement when compared to last year. What led to it, and what is your plan for the [indiscernible], will it be this range going forward because this is just kind of higher cash flow from operations has stabilized now?
Last year in '22 PBT was INR 32 crores. That has increased significantly to INR 84 crores in March '23. That's the major reason why our operating cash flows increases, increase of about INR 32 crores in the PBT.
Okay.
Operating cash flow has increased from INR 31 crores to INR 74 crores. That's an increase of INR 43 crores. The major amount has come from the PBT increase and the balance has come down from increase in working capital. Our receivables have generated about INR 7.5 crores. These are the 2 major reasons for our increase in cash flow with extent operating cash flow to the extent of INR 40 crores during the year. The tight control on receivables is one of the key reasons for this year. We hope to continue to remain in future years as well. But last year, cash used in debtors was about INR 8 crores. This year, we are able to reduce the debtor levels over last year and INR 7 crores positive. Net impact over [indiscernible] last year and this is the INR 15 crores delta.
Got it. Got it. And one last question from my side. You mentioned that there is a throughput reduction in the petrol pump, right? And that has actually related to the second segment being flat. Now what -- why do you think that has actually happened? And why you think in the next 1-year it will kind of ease up, that's what you mentioned in the initial remarks.
Well, in the petroleum sector, you are aware that once the pricing was got down. So particularly once it privately driven by petroleum companies, there was a there was a move their resources into an export orientation. And that's the reason we found that the sales at these particular banks went down drastically. In fact, it has had an impact. We had a much -- in fact, we had wanted to conclude with the much higher PAT figure, if possible, but this had an impact on this. But then this is slowly now we signed month-on-month; it is slowly growing. And we feel that it will, over this year, slowly stabilize and come back to near normal as what it was before this particular phenomenon.
And then you don't cater to public sector petrol pumps, that it's only for private? Is that the reason why it had a larger impact.
Yes, it is largely private sector because public sector, we do a very limited extent only for the company-owned and company-operated outlets. Those are very far and few. The rest of which, the cash management as it has to come through direct clients because individual franchises decide how they want to handle their cash. For a private sector, it is decided at the corporate level. And to add to what CMD just mentioned, the private sector has built a large petroleum infrastructure as in petrol bank infrastructure. I don't think they will let it is an opportunistic time to capitalize on the differential in export pricing because Europe cannot directly import from Russia. So I don't think this is going to be a permanent situation. Things will revert to mean sooner than later is what our expectation.
[Operator Instructions] The next question is from the line of Prashant Kutty from Sundaram Mutual Fund.
Just wanted to check with you. One is in terms of the commissions, have the commissions kind of come off as compared to what we were probably having in the past? Because when we look at the touch point number growth and the kind of cash management system, they don't seem to be kind of coinciding with the revenue growth number?
No, there has not been any reduction in the commissions, Prashant. In fact, our points growth and our net -- the cash pickup and delivery revenue growth are matching exactly, 27% and 28%...
No, I'm not asking on an annualized basis, I'm asking for the quarter. So if you look for the quarter, your touch point number and your sequential growth. There seems to be a drop, whereas your touch points have actually increased just wanted to understand that point?
Yes. The sequential growth is because we had [indiscernible] given last time and even earlier presentations. Q3 is our best quarter because of the festive seasons and holiday seasons. So Q4 tend to be slightly lower than Q3 in the past as well, and that's what has happened in the current Q4 as well. The point that we add in this quarter may not reflect significantly on revenues immediately, it will take it's own time to start generating the revenues. Because they will start with a lower threshold, it will be throughout from January to March, every month, it will get -- every day, it gets added. So we -- immediately, that number will not reflect in our revenues, Prashant.
Surely. I got your point. But typically, we've always said that we would want to kind of maintain at least a 20% kind of a growth rate. Against that, the growth rate, I understand that there is a moderation on a sequential basis. But given the fact that we are in that growing phase and given the fact that we have been actually increasing the number of touch points, this year is almost say 25% plus kind of a touch point improvement. Is it because that a lot of them have been Tier 3, that's why maybe the throughput is not so big or any thoughts on that? Because if I just look at the revenue number for the kind of scale of operations and the size of operations that you're doing, 15% seems to be a lower number, given that you've always, in the past, you have guided for about [indiscernible] net worth in terms of growth rate?
Yes. 15% is because of what we just explained in the petroleum sector did have an impact on it.
Yes. Yes.
Well and posed to reach that 20% plus. And our guidance remains so.
Got it. And [indiscernible] right now largely done in terms of the one-off, which is there? How much of the impact of that? I'm sorry, I understand that number [indiscernible]?
Yes. So the -- the numbers are there and very stable, there is a net impact on the top line of about INR 8 crores.
INR 8 crores.
Yes. On the top line.
Is it addressed right now?
Slowly getting addressed, not fully.
It is low month-on-month growth we are witnessing, but not as rapidly as we are hope for.
Which is why I probably also explains the EBITDA number also kind of getting impacted as well, right?
That's right. As we had explained in the past also. I mean we are a high operating leverage company.
Yes.
If you see that revenue growth of 25% for full year resulted in a PAT growth of 64%. The thing with the operating leverage is that it's both ways. So INR 8 crores PAT.
Understood. The point of mentioning you've added a lot of clients in the last year, what kind of sectors these clients would have gotten added into in the last 1-year? Any thoughts on that.
Yes. If you just look at the sectoral composition of our revenues. Looking that we have had a fantastic run in organized retail. It was 11%, last year, it moved to 15% this year. E-commerce and e-commerce so to speak continue to remain at about 24%, 25%. Petroleum was down. Railways, we have had a fairly good growth, I mean not reflecting in the proportion because overall revenues also grew. Railways showed good growth because of the restoration to pre-COVID levels. And others have also grown. I mean we -- as we have mentioned, our focus has been on direct clients and improvement in the direct clients. We are almost 100 basis points over last year, 1.5% to 2.9% more than 100 basis points. So that basis was across diversified sector.
Sure. No, I just specifically asking if it's a client addition and since the larger amount of clients have gotten added in the organized retail. [indiscernible] earlier talk about maybe QSR outlets or for that sector jewelry outlets, just wanted to understand that are we kind of seeing that happening? That is what I want to check. When you're saying organized retail increasing, is it that you're seeing a number of outlets? Is it being QSR of is getting added? Or is it jewelry outlets getting added? Or is it fashion retail outlet getting added? Is this what we are seeing?
I'll not be able to put a number on which of those subsegments within organized sector has given us the maximum contribution. But if I have to put the topmost, it will be like the organized -- the routine as in like more retail and [indiscernible] retail and those kind of numbers, those are the ones which are getting maximum add on.
Understood. One last point from my end, you've actually seen a significant amount of increase in the touch points covered. What's the outlook going forward in terms of touch point addition? We've also seen a 27% increase. Should we kind of still maintain that you'll be adding about 1,000 outlets per month? Is that the way one should look at it?
Well, currently, we are looking at that. And we have a large number of end customers. This is driven by the end customer. Like our clients or the bank mainly, but the end customers either of them have their own growth objectives. So any additional touch point, outlets or retail stores that they keep adding on, that organically that just keeps increasing our numbers. And so we are confident that this particular number will be maintained, and it will be sustained over a period of time.
Sure. All the very best to you.
[Operator Instructions] Next question is from the line of Aejas Lakhani from Unifi Capital.
Sir, my first question is that you mentioned about the loss of petrol pump revenues in the third quarter. But I -- we were under the impression that since you are adding 1,000 to 1,100 touch points every quarter on the cash management, wasn't there an offset of a growth in revenues that came through because the shortfall was only INR 3 crores to INR 4 crores per quarter? So didn't that play out where the segments where you were growing could catch up for that missed revenue? Could you first clarify this.
Just to give you a generic answer to this, you see the full bank the individual pickups are fairly large. And this is volume based because the entire thing is network cash management. So that product is an extremely lucrative segment. And that's the reason why we had this impact in the last quarter, and it is continuing this quarter. It has impacted us to an extent in this financial year, but at the same time, the same as I like to say that it has been a fantastic year on every add account. And whatever we had hoped to achieve, and we set out to do, this was in some ways to kind of [indiscernible]. But I'm very sure that this will be overcome in a few months in the coming year.
Noted. And sir, again, just to reiterate, you mentioned that there's a recovery taking place in this account of -- that you're referring to. So could you call this out more clearly? Is it that the loss which you are facing in terms of business of INR 3 crore to INR 4 crores is at least the business has restarted, and you're seeing a certain percentage of that INR 3 crores to INR 4 crores, that ground being covered, what exactly is the recovery here?
The recovery is -- that earlier, the sales are really very high. Let say -- let me give a number, let's say, INR 900 crores, okay? Now that has come down to, let's say, INR 150 crores to INR 180 crores. And the recovery that we are saying is on an average about INR 25 crores to INR 30 crores additional growth month-on-month. So there is a steady growth, but it is taking some time, and we hope that over time, it will come to that core level of INR 700 crores to INR 800 crores per month.
Got it. Got it. Sir, my second question is you mentioned in your opening remarks that there is a margin pressure from banks. So could you explain exactly what is the margin pressure? Is it happening on renewal? Is it happening in the steady-state business? Could you speak more about this?
Yes. So this is specific to the network cash management segment, where we have a flat growth over last year. If you see our [indiscernible] also, we were at INR 64 crores last year INR 64 crores this year as well. I mean the -- so it's a combination of all these 3 points. One is the Tier 1 -- higher share of Tier 1, where network cash management business is not warranted. And some marginal pricing pressure. So these are specific individual deal level pricing. I mean you can compute we have given in KPI; we have the volumes and the pricing is there, very marginal, but correspondingly, our costs also come down. I mean if you see the corresponding bank charges, it is slightly lower than last year. So the net margin from this sector on this segment is healthy and remains [indiscernible] I mean there is no -- there is limited growth in this segment because of these 3 factors, 2 of which we believe are temporary and will quickly revert to me.
Got it. And sir, you used to earn INR 1 for every INR 1,000 transferred in that ballpark range. So is that INR 1 under pressure? Is that what you're saying?
No, we have cut down the cost also. So the margins between FY '22 and '23 have remained the same if you can see that.
Got it. Okay. And sir, what are the kind of segment level margins. So if I were to just ask you that, say, cash pickup and delivery, what kind of EBITDA margins does that segment have? And what kind of margins that the network cash management have?
Okay. We cannot put -- mathematically also we cannot give segmental margins because the same infrastructure is used across all these verticals. Only thing that we can give is for network cash management, which I've already said, there are bank charges that is disclosed, and there is -- [indiscernible] network cash management revenue [indiscernible]. That is the only segment where you can even improve gross margin level. EBITDA cannot be given segmental because it is payment process divisions across the sector.
Got it. And sir, it was our endeavor to pay a higher dividend that we had called out. So could you just speak regarding the dividend?
Well, I had said that we would be a strong dividend-paying company. And if you remember, in the last quarter, we had declared a dividend of INR 1 per share. Now we have included as of yesterdays' Board meeting, of course, it will be gain to the shareholders of INR 2 per share that we'll be declaring. So that is our stated policy, and we'll always be -- we'll try to abide by that...
And dividend payout ratio is too together?
Can you give the dividend paying ratio?
About 52%, sir. Yes.
51% is being paid as the dividend.
Sir, it's INR 2 on an EPS of INR 6, right? So that will be roughly 30%. Please correct my understanding.
Into INR 1 interim divided also [indiscernible].
Okay. Okay. So this is a final dividend. Okay. Okay. I've understood what you're saying.
We Paid INR 1 January '23.
Okay. Okay. Got it. And sir, just finally, if I can just ask you that what do you think investors should sort of pencil as your growth drivers for FY '24? And what should we be monitoring?
Can you just repeat the question?
So I just wanted to understand that your growth drivers for FY '24, what should we be observing for? And what should we be -- how should we be thinking about growth in '24?
Yes. Drivers of growth, like we mentioned, as in the point additions quarter-on-quarter, what is the number of clients that are getting added. And only these 2 as in volume of cash that we handle. The volume of cash that which handle affects about 25% of our business. Point that we add affects about -- is about 70% of our business. The rest 5% is the cash flow from operations. So that is -- there is one small temporary listing as we get [indiscernible]. I mean, if you could see this even in the Q4, there's been a good jump in our cash from operations.
Okay.
Cash in transit business. We could see some bump in that because of the ongoing INR 2,000, not exactly demonetization, but [indiscernible].
Yes. With regards to the INR 2,000 notes, we'd like to say that only compares of 10% of the cash in circulation. And over last year itself, most of the banks have been restraining and holding back the INR 2,000s have not been giving into the [indiscernible]. It's only less than 10% of the overall volume of INR 2,000, which is currently in the hands of the body public, and that is now coming back. In terms of our cash pickup, I feel that now quite a few of these will get utilized in the different outlets as well. So personally, I feel that with over 24% in INR 500 of the cash in circulation, 25 -- sorry, INR 24 lakh crores in circulation being INR 500, there is going to be a very marginal impact on margin term -- in revenue terms.
Got it. So this will be an added tailwind for the next at least 6 months -- sorry, 4 months?
For the 1 quarter. Yes. So marginal [indiscernible].
The next question is from the line of Aditya Sharma from Aditya Birla Sun Life.
Sir, I want to understand the levers that you talked on the network cash management. So the share deteriorated because of the core mix in the Tier, so we added more touch points in the Tier 1. So I just want to understand how is the touch point addition currently? Is it still -- is the mix [indiscernible] as in -- are we adding more touch points in the Tiern 1? So that is one. And in terms of the second, I want to understand when you said there were some pricing pressure from the bank, was it limited to a few clients? Or was it pervasive across clients? And how do you see that going forward? Will the share decline further in FY '24? So if you could just answer these questions around network cash management.
With regards to your question, Aditya, what I'd like to say is, as you've seen, the growth has been in the retail segment. Now organized retail, we are seeing there has been a lot of growth, particularly in the Tier 1 and Tier 2 locations. And in these locations, typically, the network cash management segment is always not as strong as it is there on the Tier 3 and Tier 4 locations.
Okay.
So that's the reason why there has been a marginal impact of this -- and for your second question, I'll ask Muthu to take it on.
Yes. There is no -- even individual client wise, there is no pressure like that. It is individual deal level pricing for specific end customers that are some negotiations.
Okay. Okay. So according to Colonel David sir, so the mix will continue to remain inferior and that would actually hamper both in terms of reducing the share of network cash management in the coming years and also the margin profile would be weaker because I would suppose this is the most allocated segment of our company?
No.
If you understand me?
No. No. No. Not necessarily. See this is one particular quarter and last 2 quarters where a few large retail clients -- organized retail clients added more in the Tier 1 segment. But over a longer period of time, we have observed that in the growth in Tier 2 -- Tier 1 is saturated for many other segments and the growth in Tier 3 and Tier 4 are Q1, which drives [indiscernible] performing the growth. In our presentation, if you see there is one slide, which we've talked about [indiscernible] even e-commerce from various Tiers. Only 37% of the revenues are from Tier 3 plus to rate, and that number could be higher -- could go higher as the penetration improves. So over a period of time, we expect that the share of Tier 3s will be -- will improve from where we are today, and which should mean network cash management also will continue to improve.
Got it, sir. So also, I want to understand the idea in terms of the margin expansion was that there is inherent and operating leverage in the business, largely stemming from almost fixed employee cost, so the employee cost would grow around [indiscernible]. But what we've seen as a percentage of sales at the employee cost has been constant at 17%, while we have delivered a strong growth. And so if you could help us understand why that is and how is -- what is the way forward?
Venkat, would you like to take this one?
Yes. The employee cost is '23 is about 17%, 15.9%, 16% to 17%. We expect it to growth around 15.5% in the current year, '23, '24.
Probably what you're doing is sir you're adding the other income in the revenue, which I am excluding, so that is why, if we exclude that, you'll get around 17% odd for these years? So I'm just trying to understand like it -- so...
There's a 0.4% improvement would have liked to see a little higher than -- like he mentioned, I mean It could be -- like -- I mean, we mentioned in Q3 results also. If you see our Q4 employee cost vis-a-vis Q3, it is actually a reduction. Okay. So those -- so we don't expect that the employee costs to continue to grow in line with revenues. Revenues guidance is at 20%, plus employee costs will be in the range of 10% to 12%.
Right. And also the other operating leverage that we were talking about that half of the other expenses is more or less the extra the land charges, et cetera. So just want to understand, while the growth has been great, but the margins have been quite lackluster just adopting in terms of expectations. And so how do we thrilled in terms of the margin profile going forward? While you are guiding for around 20% growth, the margins that we were expecting, the delivery has been quite lackluster. If you could help us understand how to look this forward.
See, the margins are definitely better than last year, but not as much as we expected because the petroleum sector, I mean [indiscernible] both ways, right, in the operating leverage. We lost about INR 8 crores of revenue in petroleum sector. If it had come through, there would not be hardly any additional costs, which would directly have significantly higher EBITDA numbers. So that was in a sense of post measures. We expect it to revert to me in a much healthier margins going forward.
Okay. So 2 things are happening. One, it is already in the base; and second, you changed the situation is reversing. So probably next year, we should get an added benefit while it is in the base. And second, we are making progress and the operating leverage continues to kick in. So we expect the EBITDA margins will expand going forward FY '24?
Yes, you can expect that, Aditya.
The next question is from the line of Agastya Dave from CAO Capital.
Am I audible?
Yes.
Sir, you have actually answered the questions, but I'll just -- just to get like a final closure here, please tell me if my understanding is wrong. If I look at the margin pressure that you're talking about the pricing pressure, it's -- that's purely because of mix, right? If I look at like-for-like, if I look at Tier 1 and compare it with Tier 1 last year, and if I look at Tier 3 and compare it with Tier 3 last year, the pricing has not changed. It's just a mix, which has changed. Is my understanding correct, sir?
Sir, our pricing is never based on the Tier.
Okay.
Our pricing is across the -- we just kind of long-term contracts with the bank and irrespective of which location it is, whether within city limits beyond city limits per location. That is the only thing. Whether there's a bank brand within 5 kilometers, 10 kilometer or not. Right. So it doesn't matter whether it is Tier 1 or Tier 2 or Tier 3, pricing across the last is [indiscernible].
Sir, whichever way you want to look at, I don't know the reality because I'm very new to the company. But if I look at on a like-to-like basis, on a location-by-location, like-to-like basis, the pricing has not changed. So whatever has happened, it's because of the mix change?
To a large extent, yes.
So that's what [indiscernible] got out earlier during the discussion. I think I say, it is in the new deal level pricing, which is coming up, where we are trying too different. But we already have strong operating leverage, so we may be able to absorb that.
Understood.
Otherwise, there is -- these are long-term contracts with fixed pricing, and there's no change in that, because across all Tiers.
Understood. Understood. And whenever these contracts are for renegotiation, the prices at least keep up with inflation or they are, again, like rolled over at the same rate?
Well, there have been priced -- so far, for at least, twice there has been an increase in 10%.
Okay.
But otherwise, normally year-on-year, many contracts are for a year on an annual basis and order renewals that happened, so therefore, the pricing is not a matter of negotiation every year or every time we come for renewal.
Okay. Understood, sir. And sir, you have mentioned several times that there is a lot of operating leverage in the business. And if I go by a guidance of 20% to 22% growth, and if I extend it far into the future, there is always a ceiling in every business beyond which margins cannot increase. So in your business, is it fair to assume that let's say, that saving could be around 25%, 26%, 27%. Is there a number beyond which it cannot theoretically go because, obviously, you'll have to increase your costs?
On the nature of business, currently, the whole industry together is growing about 1.7 lakh -- 1.6 lakh to 1.7 lakh outlets, while the available opportunity is over 30 lakh outlets. [indiscernible] market and this is only a small segment of it, which is what -- if you look at the U.S. market today, which is around 85% is organized retail compared to our -- growing to 20%, now there, 65% of the organized retail is done by network cash management -- I mean retail cash [indiscernible] investment. We are just to see whether the flat point of this and to see whether if there is any -- that year after it's already a mature market, that -- decent certain level I think that would be too premature to take that kind of a view.
Sir, I completely agree with you on the opportunity side on the revenue side. You can keep growing for a very long time at a very decent pace. All I'm asking is in terms of costs. There is obviously an operating leverage as you have discussed. But is there an upper limit? Like, for example, can you ever be a 30% EBITDA margin business from the -- triple the scale? So let's say, today, if you are approaching INR 350 crores, INR 400 crores, but let's say when you become a INR 1,500 crore, INR 1,600 crore company, will your margins be 30%? Is there a limit beyond which the margins cannot go because the additional cost is picking?
Yes, our fixed costs are debt fixed costs, yes, you are theoretically, what you say is right. So we have not given our guidance on the margins in the future. But One thing we can say is that today, we are not anywhere near hitting the ceiling.
Great, sir. Great, sir. That is exactly what I wanted to understand. One final question, sir. You mentioned that next year, you'll be doing INR 20 crores, INR 25 crores of CapEx. So what will happen to our depreciation going forward when these are fully capitalized? Can you give some number to that? Will we see a doubling of our depreciation?
This year, our depreciation was about $45 million. The next year depreciation to be in -- will be around to the extent of INR 65 million to INR 70 million. That's all.
INR 65 million to INR 70 million, right? And then roughly at that level going forward, right, because this is an exceptional...
Right.
INR 65 million to INR 70 million. Great, sir. All the best.
Thank you very much, for your lovely questions.
Next question is from the line of Gaurav Nigam from Tunga Investments Private Limited.
Yes. So [indiscernible] the questions. I'll start with first. Sir, what is the number of points per yield that we serve as on date? And what has been this number over the last 3 years FY '21, '22 and '23?
Sorry, just number of points...
Per yield?
Number of point per [ beat ]. I didn't understand the question. Can you repeat.
Yes. [indiscernible] on a yield basis, right, in a particular route. So a number of point that you service on a per route basis.
See, we don't have -- it's a wide-ranging number, there is no fixed number that I can put. But you have a sense we have serviced 63,000 plus points in FY '23. And we have about 7,000 plus cash aggregators, okay? So this number is disclosed in our RFP as well and in the presentation material for yesterday. So you can get a sense, roughly about 6 to 7 points surplus.
Okay. And is there possibility of increasing it, or we have near the [indiscernible] of number of points which can be done?
No. No. No. There are -- I mean, it's as I told its just wide range. There could be some routes where in 22 points to some routes where it is 28 points also.
Okay. Got it. So that will depend on the density of which stop that we are servicing?
That's right.
Okay. And sir, how many -- how many visits is done by per van on a single day, on a an average?
Please repeat that question?
I mean how many visits are done by per van? Like how many routes are done by 1 van on a single day basis?
These vans, there was [indiscernible] to take it on.
Each van generally run in the 1 route only in case of cash pickups and delivery because they will start in the morning at 10:00, and then till in case of bank deposit, they work till around 1:00, 2:00 go to the bank or in case of working [indiscernible], they come to the mall by around 6:00. So it's 1 route. And the van duty so it depend that maximum points [indiscernible] in the van.
Okay. Understood, sir. Sir, this number cannot be come to like...
Gaurav, can you please speak through the handset.
Yes. Is it better?
Yes, now it's better. Yes.
Yes. Sorry, sir. Question is this number of routes, will it always remain 1 for the business construct that we are in?
That's right. Because the cash deposit banks don't accept cash deposits beyond [indiscernible].
Next question is from the line of [ Hina ] from DAM Capital Advisors.
Yes. Am I audible now?
Yes.
So in the first question that I had is basically continuing from the previous participant about the growth levers for the business basically. And of course, you indicated that touch point addition would be one of them and increasing your network currency business. But could use probably pinpoint industries that would be contributing to the growth?
Yes. Yes. What we are witnessed in FY '23 is that fantastic growth in organized retail and very good growth in BSFI side and both e-commerce and e-commerce logistics.
Sure. Yes. And sir, going forward, what can we expect?
Yes. We expect that these 4 segments as in all of them will continue to contribute fairly healthy.
Okay, Ecom, BSFI and retail.
E-commerce, e-commerce logistics and retial.
Okay. Okay. And your network currency business, is there any way of pivoting away from moving the concentration on petroleum industry is too large. Is it then -- you pivot way from that, some industries that could possibly add to this business?
Sorry, can you just repeat the question? I just missed the first part.
So the reliance on the petroleum industry for our network currency business is too high. So is there any way of pivoting away from this adding other industries to the mix, which could possibly, in the future, in case there's an impact here, it wouldn't be a huge one.
No, no. I don't think that's the correct statement to make. Yes, it is the other way. I mean petroleum industry; a good part of the business enjoys network cash management. Network cash management is not dependent only on petroleum. It is from across various sectors across all sectors.
Okay. Okay. Okay. And just last on the pricing pressure. I know there's been a lot of questions. There is just one thing that I wanted to clarify was, pressure is coming on new deal addition. So is there competitive intensity rising or probably some competitor cutting prices, which is why customers are asking for a lower price?
I don't know something wrong with your voice. I think we really -- can you just probably adjust the microphone and speak again.
Yes. Actually I'm on the handset. So whatever was trying to ask was on the pricing pressure, specifically on the new deals? Is it because of the competitive intensity has gone up or there's some competitor cutting prices? Is that management expecting a lower price?
There is [indiscernible] that increase in competitive intensity. It's a -- maybe marginal unintended effects of us going public. They're seeing a healthy margin. So margin level pricing negotiations. But we have a strong relationship with all these banks for 15-plus years, 17 years. So we don't expect that to have any [indiscernible].
[Operator Instructions] Next question is from the line of Raju Barnawal from Antique Stock Broking.
My question is on the new business areas that you are looking to enter into the diamond, jewelry, bullion, metals. So could you please help us understand that the opportunity in competition in this segment? And by when one can see the revenue additions on these segments. Could you please elaborate on this.
No. No. So we have just taken a Board resolution amend the articles as an enabling provision at this point of time. We feel that it is an adjacent market, which can have a significant scope, and probably we can utilize our strength in handling high-value cash to similarly replicate in diamond, bullion and jewelry. But at this point of time, it is just an enabling provision, it needs to get the shareholders' approval. And thereafter, we may think of it. It's too preliminary for us to give you anything concrete.
[Operator Instructions] As there are no further questions, I now hand the conference over to the management for closing comments.
Well, I must thank the analysts for some wonderful questions. It has set us all thinking, and thank you very much for analysts taken the time to attend this call and pose all those interesting questions. To conclude, I'd like to say that at the core, we are a network management company, operating with the rigor and discipline of the armed forces. I'd like to reinforce that, at the core, we are essentially a network management company operating with the rigor and discipline of the armed forces. We take great pride in our culture and see it as a platform and exploring business opportunities and adjacent as well as new way businesses. I want to emphasize an appreciation for the trust and confidence [ they are ] placed in our company and promise you of our commitment to deliver long-term value to our shareholders. Lastly, I'd like to thank Antique for having taken the effort for having hosted the call this morning, especially Sohail Halai. Thank you very much, Sohail. And thank you very much all of you.
Thank you, David, sir, for sharing and the team for sharing the insights and I wish you all the best, sir. And hope to stay connected. Thanks a lot sir, for you time.
Thank you very much. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.
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