Infibeam Avenues Ltd Management Discussions

Indias Digital Transformation

Introduction

Indias macroeconomic landscape has seen remarkable shifts in FY24, driven by the integration of digital technology, supportive reforms, and substantial investments in technology. These developments have significantly propelled the growth of Indias digital economy, fostering innovation and expanding the reach of digital payments.

Reforms Fuelling the Digital Economy

In FY24, the Indian government continued to push for a robust digital economy through various policy reforms. The "Digital India" initiative, aimed at bridging the digital divide, saw enhanced efforts to improve internet connectivity and digital infrastructure across the country. These measures have been crucial in laying a strong foundation for the rapid expansion of digital services.

Thriving Startup Ecosystem and Tech Investments

Indias startup ecosystem has experienced substantial growth, bolstered by initiatives like "Startup India," which provides incentives and support to entrepreneurs. FY24 saw a surge in tech investments, with a significant influx of funds from both domestic and international investors. This growth has been particularly evident in sectors such as fintech, health tech, and edtech, which are transforming industries and contributing to economic growth.

Revolution in Digital Payments

The digital payments landscape in India has evolved dramatically. FY24 witnessed a further increase in the adoption of digital payment methods, driven by initiatives such as UPI (Unified Payments Interface), mobile wallets, and contactless payments. The pandemic-induced shift towards digital transactions has now become a norm, with consumers and businesses alike favoring these methods for their convenience and security.

Opportunities Ahead

Looking forward, the digital economy in India is poised for significant growth. Key areas of opportunity include:

1. Financial Inclusion: Expanding digital financial services to include unbanked and underbanked populations, thereby promoting broader financial inclusion.

2. E-commerce Growth: The e-commerce sector is expected to expand rapidly, driving demand for secure and efficient digital payment solutions.

3. Digital Infrastructure: Ongoing investments in digital infrastructure, particularly in 5G networks, will support the growing needs of the digital economy.

4. Data Analytics and AI: Leveraging data analytics and artificial intelligence to enhance consumer insights and offer personalised services, including advanced payment solutions.

5. Cybersecurity: With the rise in digital transactions, there is an increasing need for cyber security.

Conclusion

Indias macroeconomic landscape is experiencing significant shifts, marked by several key trends in FY24. Government reforms supporting the digital economy, a burgeoning startup ecosystem, and a surge in tech investments are at the forefront of this transformation. Digital payments have become a ubiquitous part of daily transactions for millions, driven by advancements in fintech and widespread smartphone adoption.

In FY24, India has seen an unprecedented rise in Unified Payments Interface (UPI) transactions, with monthly volumes crossing the billion-mark regularly. This shift is complemented by initiatives like the Digital India program, fostering an environment ripe for innovation and digital growth. The startup culture continues to thrive, with record-breaking funding rounds and a growing number of unicorns, particularly in the fintech sector.

Looking ahead, the future holds immense potential. Indias proactive stance on innovation, strategic investments, and supportive policies positions the nation to become a global leader in the digital ecosystem. The next decade is set to witness exponential growth in digital payments, further integrating them into the fabric of everyday life and driving economic progress.

Fintech Industry

The fintech industry in India has experienced significant growth, driven by technological advancements, supportive government policies, and a thriving startup ecosystem. Fintech, short for financial technology, encompasses various applications and digital technologies to enhance financial services through automation and innovation. This sector includes payment technology, digital banking, lending, wealth management, insurtech, and more.

Like in any domain, even fintech businesses can be either business-to-business (B2B) category or business-to-consumer (B2C) category. B2B businesses are those that cater to other businesses with their products and services; whereas business that sell their products and services directly to end consumers are classified as B2C.

Payment Tech	Digital Banking	FinTech Lending	Digital Wealth Management	Capital market (algo trading)	Equity Crowd Funding	InsurTech	ResTech	PropTech
			Functional Areas

Increasing Digital Transactions

Over the past decade, the number of cashless transactions has surged worldwide, spanning various regions such as Asia-Pacific, Europe, North America, Latin America, and the Middle East & Africa. This upward trend is projected to continue, with notable growth observed year on year. The rise in cashless transactions can be attributed to several interrelated factors contributing to the shift from traditional cash-based economies to digital payment ecosystems.

Reasons Behind the Increase Technological Advancements:

The proliferation of smartphones and the development of mobile payment platforms have made cashless transactions more accessible to a broader population. Technologies such as Near Field Communication (NFC) and mobile wallets have streamlined the payment process, making it faster and more convenient for consumers.

Financial Inclusion Initiatives:

Many governments and financial institutions have launched initiatives to increase financial inclusion, providing banking and financial services to unbanked and underbanked populations. Digital payment solutions are often at the forefront of these initiatives, enabling more people to participate in the cashless economy.

E-commerce Growth:

The rapid expansion of e-commerce has fuelled the demand for cashless payment methods. As consumers increasingly shop online, the need for secure, efficient, and reliable payment systems has become paramount, driving the adoption of digital transactions.

Security and Fraud Prevention:

Advancements in security technologies, such as biometric authentication and tokenisation, have enhanced the safety of cashless transactions. These measures have increased consumer trust in digital payments, encouraging wider adoption.

Government Policies and Regulations:

Various governments have implemented policies and regulations to promote cashless transactions. These include tax incentives for digital payments, reductions in cash-handling costs, and efforts to curb the shadow economy by encouraging traceable transactions.

Consumer Behaviour Shifts:

Changing consumer preferences, particularly among younger generations, favour the convenience and speed of digital payments over traditional cash. This demographic shift is driving the overall increase in cashless transactions.

Pandemic Impact:

The COVID-19 pandemic accelerated the shift towards cashless transactions as people and businesses sought contactless payment methods to minimise physical contact and reduce the risk of virus transmission.

The table below is number of cashless transactions worldwide from 2013 to 2021, with forecasts from 2024 to 2027, by region (in billions)

Year	Asia-Pacific (APAC)	Europe	North America	Latin America	Middle East, Africa (MEA)
2014	82.9	126.3	136.5	37.5	10.0
2015	105.7	140.0	141.3	39.0	11.4
2016	127.6	149.8	149.2	40.7	12.6
2017	153.5	171.4	160.5	44.3	12.5
2018	195.4	192.2	170.0	48.8	14.5	Reported
2019	257.7	216.0	180.3	55.5	18.9
2020	346.7	226.1	192.4	59.8	20.6
2021	456.0	259.0	205.0	72.0	24.0
2022	515.0	290.0	218.0	92.0	29.0
2023	637.0	326.0	232.0	106.0	34.0
2024	765.0	364.0	246.0	124.0	39.0
2026	1,232.3	466.8	280.8	99.3	42.4	Projected
2027	1,270.0	482.0	298.0	190.0	57.0

Cashless Transactions in India

The volume of digital payment transactions has significantly increased in recent years, due to coordinated efforts by the Government and various stakeholders. The volume of digital payments in FY24 was pegged at 164.4 billion transactions, up 18 per cent on a year-on-year (Y-o-Y) basis, from 134.6 billion transactions in FY23. India witnessed a remarkable surge in digital payments, with approximately 131 billion Unified Payments Interface (UPI) transactions amounting to US$ 2.39 trillion (Rs. 200 trillion) in FY24.

The progress made in digital payments over the past six years is detailed below. Various digital payment products are used, including Real-Time Gross Settlement (RTGS) for wholesale payments and several methods for retail payments such as Unified Payments Interface (UPI), National Electronic Fund Transfer (NEFT), Immediate Payment Service (IMPS), credit and debit cards, Prepaid Payment Instruments, National Automated Clearing House (NACH), Aadhaar-enabled Payment Service (AePS), BHIM Aadhaar Pay, and National Electronic Toll Collection (NETC). Efforts by the Government and the Reserve Bank of India (RBI) continue to focus on making digital payments more user-friendly and secure.

Financial Year	Volume (in crore)
2017-18	2,071
2018-19	3,134
2019-20	4,572
2020-21	5,554
2021-22	8,839
2022-23	13,462
2023-24	16,440

Overview of E-Commerce in India (2024)

As per a report in forbes.com The e-commerce sector in India is thriving, driven by increased smartphone adoption, rising affluence, and affordable data prices. These factors, combined with extensive internet penetration, have made India the worlds second-largest internet market. In India, the total telephone subscriber base stood at 1,176 million in July 2024. Tele-density of rural subscribers had reached 59.19% in March 2024.

According to data of Invest India The Indias online shopper base to be the 2nd largest globally by 2030, with nearly 500-600 Mn shoppers. The average revenue per user (ARPU) is expected to be INR 14,121 by 2029. Additionally, the Government e-marketplace (GeM) has achieved significant milestones, with its highest gross merchandise value (GMV) recorded at INR 4037 billion in FY 2023-24 and a cumulative GMV exceeding INR 9.6 trillion by July 2024.

Key Statistics

Aspect	Value/Year	Source
Internet users (July 2024)	960 million	Data Reportal
Telecom subscribers (July 2024)	1,176 million	TRAI
E-commerce market size (2024)	INR 4,500 billion	Statista
Projected market size (2029)	INR 7,800 billion	Statista
E-commerce user penetration (2024)	24.00%	Statista
Projected user penetration (2029)	36.00%	Statista
Average revenue per user (2029)	INR 14,500	Statista
UPI transactions (2023)	INR 150 trillion	NPCI
GeM cumulative GMV (July 2024)	INR 9.6 trillion	GeM

Review of Operations

Financial Performance Overview

For FY24, Infibeam Avenues Limited (IAL) delivered a strong financial performance with significant growth across key metrics. The following table provides a summary of the financial performance:

Particulars	FY24 Actual (INR Million)	YoY Change (%)
Gross Revenue	31,711	62%
Net Revenue	4,286	31%
EBITDA*	2,526	41%
Profit After Tax (PAT)*	1,478	56%
Cash and Bank Balance^	8,373	--
Cash Flow from Operations	7,197	--
Free Cash Flow (FCF)	325	--

Business Performance

• Transaction Processing Value (TPV): The TPV for FY24 was INR 7,043 billion, representing a 58% year-on-year growth. This increase was driven by the robust performance of both domestic and international payment solutions.

• Payments Net Take Rate (NTR): The NTR improved to 8.8 bps, showing a steady increase from the previous years 8.2 bps.

• Merchant Base: The number of merchants using Infibeams platforms exceeded 10 million, indicating strong market penetration and acceptance.

Strategic Business Developments

• Acquisitions and Investments: IAL made strategic investments, including the acquisition of the remaining stake in So Hum Bharat Digital Payments Pvt. Ltd and Pirimid Technologies to enhance its global IT services and AI development capabilities.

• AI and Technology: The launch of the THEIA platform, a cutting-edge video AI developer platform, marked a significant advancement in AI-driven solutions for business productivity and decision-making.

• Regulatory Approvals: IAL received the RBIs final authorisation for both the Payment Aggregator License and the perpetual Bharat Bill Payment System (BBPS) License, further strengthening its regulatory compliance and market position.

Detailed Review of Operations

1. Payments Business Domestic Payments

• CCAvenue Performance: CCAvenue continued to lead the market with a TPV of INR 2,722 billion in FY24. The platform maintained a healthy mix of credit and debit payment options, with minimal reliance on zero-MDR UPI options.

• BBPS Contributions: The BBPS platform, BillAvenue, processed payments worth INR 210 billion, with significant growth in both value and volume.

• Bill Avenue( BBPS) , Go Payments and others : The BBPS platform, BillAvenue along with Go Payment and other platforms processed payments worth INR 363 Billion, with significant growth

International Payments

• Global Expansion: The international payment solutions segment saw robust growth, particularly in the UAE. The total TPV in this region surpassed AED 13 billion.

• Strategic Partnerships: Partnerships with PayPal and other financial institutions facilitated the expansion of payment solutions in the MENA region.

2. Platforms Business

• E-commerce and SaaS Solutions: Infibeams cloud-based SaaS platform supported large-scale online business operations, integrating payment solutions, order management, and digital marketing services.

• GeM Platform: The Government e-Marketplace (GeM) platform processed transactions worth INR 4,037 billion, showcasing its critical role in public procurement.

Financial and Operational Metrics

Financial Performance Indicators	FY24 Actual (INR Million)	FY23 Actual (INR Million)	YoY Change (%)
Gross Revenue	31,711	19,623	62%
Net Revenue	4,286	3,284	31%
EBITDA*	2,526	1,796	41%
EBITDA Margin (%) of Net Revenue	59%	55%	--
Profit After Tax (PAT)*	1478	946	56%
PAT Margin (%) of Net Revenue	34%	29%	--

Outlook and Strategic Focus

Growth Projections for FY25

Guidance for FY25	Range (INR Million)
Gross Revenue	39,000 – 42,000
Net Revenue	4,500 – 5,000
EBITDA	2,750 – 3,000
Profit After Tax (PAT)	1,750 – 2,000

Strategic Priorities

• Increase Net Take Rate: To Focus on enhancing the net take rate through strategic initiatives, including partnerships with banks and increased international contributions.

• Expand International Footprint: To Launch payment solutions in new markets such as Saudi Arabia, USA, Australia and additional GCC countries.

• Innovate and Integrate AI Solutions: Leverage AI for fraud detection and payment process optimisation to drive efficiency and growth.

CONSOLIDATED FINANCIAL PERFORMANCE

The consolidated financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on an accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 (‘Act) (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. The discussions in this section relate to the consolidated financial results pertaining to the year ended March 31, 2024. The significant accounting policies, involve the use of estimates, judgments, and assumptions that are significant to understand our results. For additional information, see Note 1-4 of consolidated financial statements.

A. Analysis of Revenue

1. Revenue from operations

(Rs. in mn)	FY 24	FY 23	Change
Operating Revenue	31,711	19,623	61.60%

Revenue grew from INR 19,623 million in FY23 to INR 31,711 million in FY24. The growth is aided by both higher number of transactions and higher value of transactions for payment processed. Details are given below:

	FY 24	FY 23	Change
Volume of transactions processed (Nos. mn)	531	360	47.50%
Value of transactions processed (Rs in bn)	7,043	4,447	58.38%

Our Fintech offerings are in two broad business segments and segment-wise generation of revenue has been as follows:

Business Segment (Rs. In mn)	FY 24	FY 23	Change
Payment Business	29,532	17,932	64.68%
E-Commerce Platform Business	2,179	1691	28.88%
Total operating Revenue	31,711	19,623	61.60%

The increase is mainly attributable to

- Higher utilization of Payment Gateway.

- Increased transactions in Government e Marketplace (GeM).

- Payments expansion internationally (UAE).

- Higher transactions in Bill Payments (BillAvenue).

- Remittance & Assisted Commerce (Go Payments) Our Fintech offerings can be further analyzed from the following perspectives:

Perspective	Revenue from operations	FY 24	FY 23	Change
	India	29,494	18,446	59.89%
Geography	Abroad	2,217	1,177	88.37%
	Total operating Revenue	31,711	19,623	61.60%

Other Income ²

(Rs. in mn)	FY 24	FY 23	Change
Other Income	280.8	707.3	-60.3%

The change is mainly on account of one time (non-recurring) other income transaction namely M2M gain and profit on sale of investment in the FY23. Except the said one time other income, the remaining income primarily consists of Interest on Bank Deposits and others, Rent and foreign exchange fluctuation.

B. Analysis of Expenses

1. Operating expenses

(Rs. in mn)	FY 24	FY 23	Change
Operating expenses	27,425.0	16,339.7	67.8%
% of revenue	86.5%	83.3%

It primarily consists of costs incurred in operating online payment gateway with a real-time transaction validation process. Processing charges as a percentage of Revenue may vary due to several factors, such as our level of productivity and accuracy, changes in volume and size. We have reported processing charges of INR 27,425.0 Million in FY24 as against INR 16,339.7 million in FY23. The Payment gateway processing charges as a % of Revenues has increased by 3.9% as transaction value has also increased significantly.

2. Employee benefits

(Rs. in mn)	FY 24	FY 23	Change
Employee benefits	1,275.4	1,078.3	18.3%
% of revenue	4.0%	5.5%

Employee benefit costs primarily consist of cost of salary and other terminal benefits like, gratuity, provident fund contribution etc. along with cost of compensation of stock options issued to various employees. Our primary cost comprises of Technology costs to carry out technological research and development activities. Our prime requirement of employees is in various technological segments like application, production, design, maintenance, operation, and platform development for new and existing products and services and other technology infrastructure. We seek to invest efficiently in several areas of technology development so we may continue to enhance the customer experience and improve our process efficiency through rapid technology developments while operating at an ever increasing scale. We expect spending in technology cost to increase over time as we continue to add employees and technology infrastructure.

There has been 18.3 % increase in employee cost during FY 2024 mainly because of annual increments and recruitment of new employees to take care of growing business.

3. Finance Costs

(Rs. in mn)	FY 24	FY 23	Change
Finance Costs	23.7	19.4	22.0%
% of revenue	0.1%	0.1%

Finance cost remained consistent in view of optimum utilisation of working capital, timely payments and free cash flows.

4. Depreciation and Amortisation

(Rs. in mn)	FY 24	FY 23	Change
Depreciation and Amortization	687.8	616.0	11.7%
% of revenue	2.2%	3.1%

There is an increase of 11.7% in Depreciation and Amortisation as compared to previous year in view new addition to the fixed assets during the year.

5. Other expenses

(Rs. in mn)	FY 24	FY 23	Change
Other Expenses	483.9	409.5	18.1%
% of revenue	1.5%	2.1%

Increase of other expenses by 18.1% in FY24 is mainly on account of

• Increase in Web Hosting & Web servers support expenses due to increased consumption of web services.

• Increase in legal and professional expenses for business expansion/customer acquisition and other technical consultancy charges.

• Increase in provision conservatively provided for doubtful receivables

6. Income tax

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(Rs. in mn)	FY 24	FY 23
Current Tax	0.8	19.8
Deferred Tax	515.4	439.7
Total Tax Expenses	516.2	459.5
Profit Before Tax	2,075.7	1,822.2
Tax as % of Profit before tax	24.9%	25.2%

The Income tax provision for the FY24 and FY23 were provided based on tax rate opted under section 115BAA of the Income Tax Act, 1961.

Key Financial Ratios

Ratio	Calculation	FY 24	FY 23	Variance	Reason for Significant Variance
Ratios-Financial performance
Operating margin	EBIT / Operating Net Revenue	43%	36%	19%	Increase in EBIT
EBIDTA margin	EBIDTA* / Operating Net Revenue	59%	55%	8%	No significant variance
Net Profit margin	Net Profit */ Operating Net Revenue	34%	29%	20%	Increase in Net Profit
Interest coverage ratio	EBIT / Interest	78	61	28%	Increase in EBIT
Ratios-Balance sheet
Return on Net worth	Net Profit */ Average Equity net of Goodwill	9%	7%	34%	Increase in Net Profit
Current ratio	Current Assets / Current Liabilities	1.39	1.60	-13%	No significant variance
Debtors Turnover ratio	Operating Revenue / Average Trade Receivable	33	27	22%	Improvement in view of better trade receivable management
Return on Equity Ratio	EBIT/Total Assets less Total Liabilities	6%	6%	4%	No significant variance
Net Capital Turnover Ratio	Income from Operations/Average Working Capital (Current Assets less Current Liabilities)	6.05	5.17	17%	No significant variance
Ratios - Per Share
Earnings per share	PAT / Weighted average number of equity shares	0.57	0.51	12%	Increase in PAT

CONCLUSION

Digital Payments Opportunity in India to Increase >3x to US$ 10 trillion by 2026 The growth of the digital payments ecosystem has been supported by an expanding e-commerce marketplace and the wider availability of acceptance infrastructure at physical stores. With changing customer preferences, new use cases are being made a part of product offerings, rendering traditional payments modes obsolete. New product offerings developed with technological and infrastructural advancements are ushering in an era of innovative and fast digital payments, and nurturing the growth of retail payments. India is one of the worlds largest growing FinTech markets, including Digital Payments. Its overall Digital Payments market opportunity is estimated to be US$ 10 trillion by 2026 (Source: BCG Phone Pe Pulse Analysis), growing more than 3x in five years. Banks and card networks are collaborating with FinTechs to redefine product offerings and enhance customer experience, in order to create effective solutions and thrive in the new payments landscape. Payment Service Providers (PSPs) are leveraging existing platforms to offer a plethora of innovative digital payments solutions. The pandemic has resulted in more users adopting digital payments, and this trend is expected to continue as economies worldwide continue to recover.

Additionally, to democratise digital payments, the payments acceptance infrastructure needs to improve, and Fintechs need to innovate and offer cost effectively PoS solutions that will increase the payment acceptance, as digitalising and including the Tier 2-6 parts of the country is integral to Indias ambitious growth targets. And Soft PoS makes for a good, cost effective alternative. Further, the RBI has also issued regulatory guidelines supporting the soft PoS ecosystem, which ease merchant acquisition via remote onboarding and encourage merchants and customers alike to turn to the use of contactless payments. Hence, the soft PoS has the potential to revolutionize the merchant acquiring business, allowing merchants to accept payments via a simple app download, and thus increasing digital payments penetration in the country.

RISK FACTORS

Our business is susceptible to several risks and we believe in highlighting some of the key risks to maintain transparency with all our stakeholders. You should carefully consider these risks and all other information in the Annual Report. Any of these risks could adversely impact our business operations, financial position and prospects. For more risk factors, refer to our IPO prospectus filed with Securities and Exchange Board of India (SEBI).

1. We face intense competition in our business

Our web services industry, and especially the digital payments industry is intensely competitive and we expect competition in the industry to continue to increase. Our present and future competitors may range from large and established companies to emerging start-ups, Indian as well as large multinational companies, operating in India and in international markets where we have our operations. Since the barriers to entry for the companies are relatively low, we may also face increased competition from new entrants in our industry. We may respond by increasing advertising and promotions, which may increase our costs and may not reflect past trends. Our competitors may have one or more of the following advantages compared to us – greater financial and other resources, advanced technology, larger sales and marketing networks, greater knowledge of the target markets, more extensive research and development and technical capabilities, logistics support, greater pricing flexibility, longer operating histories and/or strong branding and reputation. These advantages may assist them in attracting our merchants and customers. The management of some of these competitors may have more experience in implementing their business plan and strategy. Our present and future competitors with requisite financial and other resources may be able to innovate and provide superior products and services more efficiently than we can. If our competitors leverage on these qualities to provide comparable or superior services and products, and we are unable to respond successfully to such competitive pressures, our customers could significantly decline, which would have a material adverse effect on our business, financial condition and results of operations.

There can be no assurance that we will have sufficient resources to respond to competitors investments in pricing and other promotional programmes or technological developments. We may be required to reduce our operating margins in order to compete effectively and maintain or gain market share. In the event that we are unable to provide superior services than our competitors, including superior technology, value added and user-friendly services, we may not be able to attract customers to us, which could have material adverse effect on our business, results of operations and financial condition.

2. The payment processing industry is intensely competitive in India

The payment processing industry is very competitive. We are facing competition from new players that are offering services below cost price to increase their market share. They are backed by significantly large investors providing strong financial support, despite these players burning heavy cash. Accordingly, these competitors may be able to offer more attractive fees to our current and prospective clients that we are not able to provide. Competition could result in a loss of existing clients, and greater difficulty attracting new clients. Furthermore, if competition causes us to reduce the fees we charge in order to attract or retain clients, there is no assurance we can successfully control our costs in order to maintain our profit margins. One or more of these factors could have a material adverse effect on our business, financial condition and results of operations.

3. Our financial performance may experience high degree of fluctuations and we may also experience decelerated growth rates

Our revenue growth may not be sustainable, and our percentage growth rates may decrease. Our revenue and operating profit growth depends on the continued growth of demand for the web services offered by us and our services offered through our agent network. Our business is also affected by general economic and business conditions in India and in the regions we operate. It is impacted by the macro factors prevailing globally as well. A softening of demand, whether caused by changes in customer preferences or a weakening of the India or global economies, may result in decreased revenue and growth.

Our operating results will also fluctuate for many other reasons, including some of the following: Unfavorable changes in regulation; Our ability to offer our web services on favourable terms; The success of our service line and expansions; Variations in the mix of services we sell; Factors affecting our reputation or brand image; Our ability to retain and expand our business network; Our ability to satisfy our customers demands and meet their expectations; Changes in usage or adoption rates of the internet, eCommerce, electronic devices, and web services, in the regions we operate and where we plan to expand; Timing, effectiveness, and costs of expansion upgrades of our systems and infrastructure; The outcomes of legal proceedings and claims, which may include significant monetary damages or injunctive relief and could have a material adverse impact on our operating results; The extent to which we invest in technology and other expense categories; Our ability to collect amounts owed to us when they become due; The extent to which use of our services is affected by spyware, viruses, phishing and other spam emails, denial of service attacks, data theft, computer intrusions, outages, and similar events; and terrorist attacks and armed hostilities.

4. Our expansion into new technology, geographical regions, other web services is subject to additional business, legal, financial and competitive risks

We have in recent periods experienced significant and rapid growth in our business operations from organic growth and acquisitions, which has placed, and will continue to place, significant demands on our managerial, operational, and financial infrastructure. Our integrated Web Services business model involves wide range of modular, customisable solutions developed on an advanced technology platform. We continue to rapidly grow our business operations, targeting rapid merchant and customer acquisition in India as well as internationally, particularly in the Middle East with our current operations there, and as we plan to grow in many more international locations. We have already announced to launch our operations in the KSA and USA where we will face challenges related to the local market.

As our operations grow in scale and complexity, whether through offering of new services or expansion into new markets, we must continuously improve, upgrade, adapt and expand our technology systems and infrastructure to offer our merchants and customers enhanced services, features and functionality ahead of rapidly evolving consumer demands, while maintaining the reliability and integrity of our systems and infrastructure in a cost-efficient and competitive manner.

In addition, to effectively manage our growth, we will also need to continue to improve our operational, financial and management controls, and our reporting systems and procedures. In particular, continued growth increases the challenges involved in, amongst others, continuous training and development of skilled and competent personnel and employees and developing and improving internal administrative infrastructure. These systems, enhancements and improvements will require significant capital expenditures and management resources. Our capital expenditure in the past may not reflect our future.

5. We may not be able to expand our share of the existing payment processing markets or expand into new markets which would impede our ability to grow and increase our profitability

Our future growth and profitability depends upon the growth of the markets in which we currently operate and our ability to increase our penetration and service offerings within these markets, as well as the emergence of new markets for our services and our ability to penetrate these new markets.

Our expansion into new markets is dependent upon our ability to adapt our existing technology and offerings or to develop new or innovative applications to meet the particular service needs of each new market. In order to do so, we will need to anticipate and react to market changes and devote appropriate financial and technical resources to our development efforts, and there can be no assurance that we will be successful in these efforts.

Furthermore, in response to market developments, we may continue to expand into new geographical markets and foreign countries in which we do not currently have any operating experience. We cannot assure you that we will be able to successfully continue such expansion efforts due to our lack of experience and the multitude of risks associated with global operations or lack of appropriate regulatory approval.

6. We may be unable to effectively manage our funding and liquidity risk arising from unsecured loan in Credit Card business we are entering into, materially affecting our funding, profitability, liquidity and ability to meet our obligations

We need funding and liquidity in our credit card business to effectively run and grow the business. We may exhaust our own cash surpluses once we achieve scale, at which point we will have to access various funding options from multiple sources to get sufficient liquidity and/or credit line to scale the business. If we are unable to get funding or sufficient credit line from lending institutions we will not be able to grow the business.

We need to effectively manage our funding and liquidity in order to meet our daily cash requirements relating to operating expenses, extensions of revolving credit to our cardholders, payments of principal and interest on our indebtedness and payments on our other obligations. If we do not have sufficient liquidity, we may be exposed to maturity mismatches between our assets and liabilities, face liquidity shortfalls and may not be able to meet our obligations when due, particularly during a liquidity stress event.

We may also face issues in collection once we have offered credit to corporates who may not be able to make payment for the spends on the credit cards or may defer payment which can severely impact our growth and can also result in Non-Performing Assets (NPAs).

Disruptions, uncertainty or volatility in the capital or credit markets, such as the uncertainty and volatility experienced in the capital and credit markets during periods of financial stress and other economic and political conditions in the global markets, as well as the Government of Indias indebtedness levels and fiscal policies, may limit our ability to obtain additional financing or refinance maturing liabilities on desired terms (including funding costs) in a timely manner or at all. As a result, we may be forced to delay obtaining funding or be forced to issue or raise funding on undesirable terms, which could significantly reduce our financial flexibility and cause us to contract or not grow our business, all of which could have a material adverse effect on our results of operations and financial conditions.

7. Our credit card portfolio is not supported by any collateral to ensure repayment. We may be unable to collect the unpaid balance

We will extend revolving unsecured credit to our cardholders as part of our business operations. Unsecured credit card receivables present a greater credit risk for us than a portfolio of secured loans because they are not supported by realisable collateral thatcouldhelpensureanadequatesourceofrepayment for the credit card receivables. Although we may obtain direct debit instructions from our cardholders for such unsecured credit card receivables, we may still be unable to collect in part or at all in the event of non-payment by a cardholder. Further, any expansion in our unsecured credit card receivables portfolio could require us to increase our provision for credit losses, which would decrease our profitability.

8. Government regulation is evolving and unfavorable changes could harm our business

We are subject to general business regulations and laws, as well as regulations and laws specifically governing the internet, eCommerce, electronic devices, and other services. We are also subject to regulations and laws in all the international regions we operate in. Existing and future laws and regulations may impede our growth. Unfavorable regulations, laws, and decisions interpreting or applying those laws and regulations could diminish the demand for, or availability of, our web services and increase our cost of doing business.

9. We may be subject to risks related to government contracts

Our contracts with the Indian government are subject to regulations and other requirements as laid out in the government contract. We may be subject to audits and investigations relating to our government contracts, and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contract, refunding or suspending of payments, forfeiture of profits, payment of fines, and suspension or debarment from future government business. In addition, such contracts may provide for termination by the government at any time, without cause.

10. Our business could suffer if we are not successful in growing our investments and acquisitions.

We have in recent periods acquired and invested in companies, and we may acquire or invest or enter into joint ventures with additional companies. These transactions create risk of loosing management focus on existing business, retaining key employees, potential impairment of tangible and intangible assets and goodwill, additional operating losses, difficulties in implementing at companies we acquire the controls, procedures, policies appropriately for a public or a private company, potential unknown liabilities in companies we acquire or invest in, difficulty in integrating new companys accounting, financial reporting, management, information security, and the lack of control if such integration is delayed or not implemented.

As a result of future acquisitions or mergers, we might need to issue additional equity securities, spend our cash, or incur debt, contingent liabilities, or amortisation expenses related to intangible assets, any of which could reduce our profitability and harm our business. In addition, valuations supporting our acquisitions and strategic investments could change rapidly.

11. We may not be able to protect our Intellectual Property or may be accused of infringing intellectual property of third party

All our trademarks, domain names, copyrights and other intellectual property rights are material assets and are integral and critical to our business operations. We depend on a combination of copyright, trademark laws, non-competition and confidentiality agreements with our employees, contractors, merchants and third-party service providers to protect our logo, brand name, domain names, merchant and customer database and technology infrastructure including customised Infibeam Avenues Limited that are integral to our advanced technology platform. Some of our trademark and patent applications are currently pending and there can be no assurance that these applications will be successful and these trademarks would be registered in our name. Confidentiality agreements with our employees require them to keep confidential and waive any rights to any of our trade secrets, works of authorship, software developed and other technology infrastructure upgrades made by them during their employment with us. However, there can be no assurance that our data or proprietary technology will not be copied or otherwise misappropriated or abused by third parties. There may be irreparable damage to our business in the event that our intellectual property are infringed by competitors, in which case an award of damages may not be an adequate remedy.

Third parties may claim that we infringe on their intellectual property rights as we acquire new technology companies. We may be subject to claims and legal proceedings regarding infringement of intellectual property rights. Such claims even if they lack merit or not may result in significant financial and management bandwidth, including satisfying of indemnity if required.

12. Failure to deal effectively with fraud, fictitious transactions, and poor customer experiences would harm our business, our brand image and result in losses

In the event that merchants using our payments web services do not fulfil their obligations to consumers or a merchants goods or services do not match the merchants description, we may incur substantial losses as a result of claims from consumers. We seek to recover such losses from the merchant, but may not be able to recover in full if the merchant is unwilling or unable to pay. In addition, in the event of the bankruptcy or other business interruption of a merchant that sells goods or services in advance of the date of their delivery or use (e.g., airline, concert tickets and subscriptions), we could be liable to the buyers of such goods or services on payment cards used by customers to fund their payment.

We could also incur substantial losses from claims that the consumer did not authorise the purchase, from customer fraud, from erroneous transactions, and as a result of customers who have closed bank accounts or have insufficient funds in their bank accounts to satisfy payments. We have taken measures to detect and reduce the risk of fraud, but these measures need to be continually improved and may not be effective against fraud, particularly new and continually evolving forms of fraud. If these measures do not succeed, our business could be harmed.

13. We could be affected by changes to payment card networks or bank fees, rules, or practices could harm our business

We rely on banks or other payment processors to process transactions and pay fees for the services. From time to time, payment card networks have increased, and may increase in future, the interchange fees that they charge for each transaction that accesses their networks. Payment card networks have or may impose special fees for transactions that are executed through a many of our payment options, which could impact us and significantly increase our costs. Our payment card processors may have the right to pass any increases in interchange fees on to us as well as increase their own fees for processing. Any changes in interchange fees could increase our operating costs and reduce our operating income.

14. We could face the risk of security breach and loss of data

We offer software as a service to clients and that we process, store, and transmit large amounts of data, failure to prevent any breach could expose us to potential liability and harm our business. We use third-party technology and systems for variety of reasons, including encryption, authentication, employee email, back office support and other functions. Although we have developed systems and processes to prevent data loss and other security breaches, such measures cannot provide absolute full proof security.

15. Reliance on information technology systems, networks and infrastructure, and internet penetration

Our business is technology driven, and we rely on information technology and networks and related infrastructure. As such, our business operations and quality of our service depend significantly on the efficient and uninterrupted operation and reliability of our information technology systems and networks and related infrastructure, both internal and external. We cannot guarantee an uninterrupted operation and reliability of these systems.

Internet penetration especially broadband services in India is limited and, though it has been increasing over the past few years, there can be no assurance that internet penetration in India will increase in the future as slowdowns or disruptions in upgrading efforts for infrastructure in India could reduce the rate of increase in the use of the internet. Further, any slowdown or negative deviation in the anticipated increase in internet penetration in India will affect our ability to attract and add new merchants and customers.

16. Proper functioning of payments solutions and platform is essential

The satisfactory performance, reliability and availability of our websites, our transaction-processing systems and our network infrastructure are critical to our success and our ability to attract and retain customers and maintain adequate customer service levels. Our revenues depend on the volume of transactions we process and other service level agreements that we have in place. Any system interruptions caused by computer viruses, hacking or other attempts to harm our systems that result in the unavailability or slowdown of our website or reduced order fulfilment performance would reduce the volume of our services and the attractiveness of our offerings.

Our servers may also be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions, delays, loss of data or the inability to complete a transaction. We may also experience interruptions caused by reasons beyond our control. There can be no assurance that such unexpected interruptions will not happen, and any such future occurrences could damage our reputation and result in a material decrease in our revenues.

17. A decline in the use of any payment option as a payment mechanism or adverse developments with respect to the payment processing industry in general could have a materially adverse effect on our business, financial condition and results of operations

If consumers do not continue to use the payment options as a payment mechanism for their transactions or if there is a change in the mix of payments between cash, alternative currencies and technologies, which is adverse to us, it could have a materially adverse effect on our business, financial condition and results of operations. Moreover, if there is an adverse development in the payments industry in general, such as new legislation or regulation that makes it more difficult for our clients to do business, our business, financial condition and results of operations may be adversely affected.

18. Our risk management framework to mitigate our risk may not be fully effective against all types of risks.

Our risk management framework seeks to mitigate risk and loss to us. We have established processes and procedures intended to identify, measure, monitor, manage and report our risks. However, as with any risk management framework, there are inherent limitations to our risk management strategies such that there could be risks that we cannot anticipate or identify. If our risk management framework were to become ineffective, we could experience unexpected losses that could have a material adverse effect on our business, financial condition or results of operations.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

We have well-documented policies and procedures, which cover all financial and operational functions, thereby ensuring an adequate system of internal controls in place. These aid in providing a reasonable assurance regarding maintenance of proper accounting controls to ensure that financial reporting is reliable, operations are monitored, assets are protected from unauthorised use or losses and regulations are well complied with. As always, our processes and controls are in alignment with the best global practices. Some significant features of the internal control systems are:

- At all locations of IAL, the Internal Auditor monitors and evaluates not only the efficacy and adequacy of existing internal control systems, but also their compliance with the operating systems, accounting procedures and policies. On the basis of the report prepared by the Internal Auditor, respective process owners carry out corrective actions, thereby strengthening the existing controls. Major audit observations and the respective corrective actions taken up are presented before the Board.

- As per the listing requirements, documentation of major business processes and testing thereof are conducted, which includes financial closing, computer controls and entity-level controls, as part of our compliance programmes. We are very strict with our security policy and update our IT systems on a periodic basis.

- As part of the established practices for all operating and service functions, detailed business plans for each segment, investment strategies and year-on- year reviews, annual financial and operating plans and monthly monitoring are carried out.

- An independent, well-established and multidisciplinary internal audit team operates in line with the best practices of governance. It reviews and reports to the management and the Audit Committee on compliance with internal controls and the efficiency and effectiveness of operations as well as the key process risks. The scope and authority of the Internal Audit Division is derived from the Internal Audit Charter that is duly approved by the Audit Committee as well as the anti-fraud programmes, including whistle blower mechanisms that are operative across IAL.

Throughout the organisation, the Board takes responsibility for the overall process of risk management. As per IALs objectives, our business units and corporate functions address risks via an institutionalised approach through an Enterprise Risk Management programme, after which an internal audit is carried out. The Risk Management Committee reviews business risk areas covering operational, financial, strategic and regulatory risks. The business risk is managed through cross-functional involvement and communication across businesses, the results of which are presented to the senior management.

During FY 2023-24, we conducted an assessment of the effectiveness of the internal control over financial reporting and have determined that our internal control over financial reporting were operating effectively as on March 31, 2024

HUMAN RESOURCES

Employees are the ultimate force behind our Companys success. We consider it our responsibility to provide our people a favourable, secured and supporting work environment. At the same time, we have in place a well-defined Code of Conduct and ensure that ethical business practices are followed at all levels of the organisation. To maintain a constant, connect between the organisational goals and employee performance, we have put in place a fair and objective performance management system. Our appraisal mechanisms help in identifying the best performing employees and rewarding them accordingly in terms of the best-in-class compensation packages. To sharpen the existing skills and for the overall development of our employees, we conduct training programmes from time to time. This also helps us in identifying the loopholes in our existing talent and the taking necessary steps to address them in the best manner possible. It is because of this consistent involvement with our employees that we have been able to maintain our position as one of the most sought-after employers. As on March 31, 2024, we had an employee strength of 815 people.