Economic Overview
India continues to be one of the fastest-growing economies globally, with projections suggesting a robust CAGR of 7%-9% over the next five years, as noted by RedSeer and broker estimates. This impressive growth is fueled by rising consumption, a favorable demographic profile, and increasing urbanization. To realize the vision of transforming India into a developed nation by 2047, strengthening banking and payment systems is pivotal.
Payments: A Pillar of Economic Growth
The payments sector is integral to Indias economic growth. Investments in digital payment infrastructure, including JanDhan, Aadhaar, and Mobile, have allowed the country to leapfrog traditional development stages. India has achieved in under a decade what would typically take five decades.
With 1.38 billion Aadhaar enrolments and over 500 million individuals with bank accounts55% of whom are women and 66% residing in rural areasthe gap in bank ownership between the richest 60% and the poorest 40% has narrowed significantly. The gender gap in bank ownership has also nearly disappeared. This progress has laid a strong foundation for payment technology companies to innovate and cater to diverse user segments.
Unified Payments Interface (UPI) As a Digital Good
UPI stands as a sterling example of effective digital public infrastructure. Capitalizing on the widespread use of smartphones and mobile internet, UPI offers unprecedented ease of use, driving financial inclusion by supporting various payment methods on both feature phones and smartphones, including biometric authentication and voice instructions. UPI now represents over 75% of retail digital payments in India.
Business Solutions
We believe there is significant potential to deepen market penetration as customers and businesses increasingly adopt affordable and user-friendly technology. NPST plays a crucial role in advancing the digital payments industry by providing a comprehensive suite of switching, banking, and payment solutions to banks, payment aggregators, payment gateways, fintechs, and consumers. This positions NPST as a key strategic partner across the financial value chain.
NPST manages the entire payment lifecycle, including processing, issuing, acquiring, and settlement, and risk and dispute management, Our solutions enable customers to deliver a range of use cases-digital banking, bill payments, online merchant payments, offline merchant payments, dispute resolution -that address current consumer and merchant expectations while enhancing efficiency and driving growth.
With a strong emphasis on performance, and continuous innovation, NPST is dedicated to helping customers succeed in the evolving payments landscape.
Lines of Business
NPST businesses are organized into two product lines. The Technology Service Provider business empowers banks to thrive in the digital age, while our Payment Platform as a Service business offers optimized, cost-efficient solutions for payment aggregators, payment gateway service providers, and large merchants.
Technology Service Provider Business
Our Technology Service Provider business focuses on enabling banks to accelerate digital transformation. Through our innovative products, such as banking super apps, we help banks deliver superior customer experiences. Our UPI platform further supports banks by extending scalable, reliable, and secure transaction processing infrastructure for customer and merchant payment. We have also introduced a CBDC Switch for handling Central Bank Digital Currency transactions.
FY 24 saw us doubling the number of our banking customers.,
We are witnessing strong traction for our products and have devised a strategy to grow this business by selling to existing customers and expanding our overall customer base. We see substantial opportunities among large and mid-tier banks in India in the banking superapp and merchant acquiring space. The merchant acquiring market is currently concentrated among a few banks, presenting an opportunity for us to assist more banks in setting up their UPI acquiring stack on a fully managed service model.
Mid-tier and regional rural banks are opting for As-a-Service models as this helps them reduce Capex and provide the same solutions to their customers as Tier One banks.
For Tier One banks, we have adopted a land and expand approach with new innovations such as Online Dispute Resolution and Central Bank Digital Currency (CBDC). The strength of this approach lies in demonstrating the upfront value of our offering, then proving what our partnership can do on a larger scale and longer term, securing notable wallet-share gains as we go.
Payment Platform-as-a-Service (PPaaS) Business
Merchant acquiring is a hotbed of innovation and disruption, necessitating continuous innovation by payment aggregators to keep pace. Operating in a high-scale, low-margin environment, aggregators need to balance investments in innovation with efficient cost management. In the traditional model, payment aggregators have to incur upfront costs for building full payment stacks, which include the cost of licensing, compliance, technology, program management, and updating.
NPSTs Payments-Platform-as-a-Service (PPaaS) addresses this challenge, enabling payment aggregators to offer a differentiated value proposition to merchants without committing undue resources to the development of these offerings internally.
Designed on a build to run model, EvokPPaaS is a cloud-native payments platform that simplifies transaction processing, value-added services, fraud monitoring, and analytics through a single API, alleviating the burden of managing technology real estate. NPST assumes full responsibility for the platforms software, infrastructure management, and support services including digital onboarding, data security, reconciliation, regulatory compliance, and ongoing maintenance.
NPST enhances the merchant experience by enabling banks and payment aggregators to QR and Soundbox payments to merchants. NPST manages the merchant lifecycle, ensures smooth transaction processing, and oversses the logistics of device shipment and ongoing maintenance.
By outsourcing these critical functions to NPST, payment aggregators can focus on growth and delivering exceptional payment capabilities to their merchants. NPST collaborates with sponsor banks for connectivity to central payment schemes and to manage related regulatory and compliance aspects.
Our Business Model
Our business model is structured to cater to diverse customer needs across different verticals, ensuring a robust and scalable revenue stream.
Technology Service Provider Business
In the TSP vertical, revenue is billed based on the products and services delivered to customers. This model ensures that our revenue aligns with the value provided through our technology solutions.
License Model
Software sales in our business follow a license fee model, which includes four key revenue components:
One-Time License Cost: A one-time license fee is charged at the point of software product sale, as specified in the purchase order. This upfront cost reflects the value of the software provided to the customer.
Annual Maintenance Charge (AMC): An annual maintenance charge is calculated as a percentage of the total license fee paid by the customer. This fee can be billed annually, quarterly, or half-yearly, depending on the terms of the agreement. It ensures ongoing support and updates for the software.
Change Request: Post-delivery, we provide additional services based on customer-initiated requests for changes or upgrades to the software. Fees for these services are charged per man- day as approved in the change request, with billing based on milestones achieved, as outlined in the purchase order.
Manpower Support: We charge fees for providing technical support to customers, ensuring efficient and effective operation of the software. This fee is billed per man-month based on the resource skillset, as detailed in the purchase order or agreement.
SaaS Model
Our SaaS (Software as a Service) model is based on usage, allowing customers to pay according to their software utilization.
This model is offered to banks and payment aggregators, payment gateway and merchants and includes the following variations:
Per Transaction: Customers are charged a fee for each transaction. This model ensures that our revenue scales with customer activity. Billing is done periodically (weekly or monthly) as agreed in the contract.
Per Month: Customers pay a fixed monthly fee for software usage. This predictable billing cycle simplifies budgeting for our clients and ensures a steady revenue stream for NPST.
Per User Login: Customers are billed based on the total number of active users within their ecosystem. This fee can be structured per month, per quarter, or per annum, depending on the agreement.
Hardware Product Sales
In addition to software, we also generate revenue through the sale of hardware products. The revenue components for hardware sales include:
One-Time Cost: Customers pay a one-time fee for the hardware and associated package as per the purchase order terms. This upfront cost reflects the value of the hardware provided.
Implementation Fee: An implementation fee is charged for the setup and installation of the hardware package. This fee is typically billed after installation, as agreed in the purchase order.
Annual Maintenance Charge (AMC): An annual maintenance fee is charged to maintain the hardware and package. This fee is billed according to the terms specified in the purchase order, often following a back-to-back model.
Business Update and Outlook
FY 2024 was a transformative year for NPST, marking its transition from a small and medium enterprise to an emerging player in the PayTech space. The company registered robust growth, with key financial highlights underscoring this success:
Revenue Growth: Total revenues crossed the INR 100 crore mark, reaching INR 130 crore and growing by 216%.
EBITDA Increase: EBITDA grew from INR 12.38 crore to INR 43.7 crore, a significant 253% jump.
Net Profit Rise: Net profit increased from INR 6.52 crore to INR 26.71 crore, marking a substantial 309% jump.
Additionally, we prioritized the management of revenue streams and controlled expenses to build the companys cash reserves, enhancing our financial stability. NPST proudly secured a position among Indias top 1,000 listed companies by market capitalization, reflecting substantial gains in market growth and the high level of confidence investors have in our continued success.
Particulars |
FY 24 | FY 23 | YoY Growth |
Total Revenue | 130.08 | 41.13 | 216.27% |
EBITA | 43.70 | 12.38 | 252.99% |
EBITA % | 33.59% | 30.10% | 3.49% |
Net Profit | 26.71 | 6.52 | 309.66% |
Net Profit % | 20.53% | 15.85% | 4.68% |
EPS | 13.78 | 3.36 | 310.12% |
Key Financial Ratios
Particulars |
As on March 31,2024 | As on March 31,2023 | % Change | Reason for Significant Variance |
Debtors Turnover | 136.43 | 13.88 | 883.08% | Improvement in view of better receivables management |
Inventory Turnover Ratio | 2.80 | 0.90 | 211.56% | Improvement due to increased efficiency |
Interest Coverage Ratio | 1727.24 | 1189.93 | 45.15% | Improvement in view of operating efficiency |
Current Ratio | 3.69 | 2.74 | 34.52% | Efficient management of the Working Capital |
Debt Equity Ratio | 0.002 | 0.007 | -66.60% | Reduction due to repayment of the borrowings |
Operating Profit Margin (%) | 27.76% | 21.44% | 29.47% | Increase in EBIT |
Net Profit Margin (%) | 20.94% | 15.99% | 31.00% | Increase in Net Profit |
Factors Fueling Performance
Our performance was driven by:
Sustained revenue growth due to product and platform expansion
Diversification into offline business.
Strengthening and building new organizational capabilities.
Product Expansion
We have also made significant improvements on the technology front with the launch of new products including Online Dispute Resolution and Instant Merchant Refunds, designed to enhance customer experience and operational efficiency in digital transactions.
Additionally, we improved our online payment capabilities with the introduction of EvoK 2.0, which broadens business opportunities. New capabilities like the UPI Plugin help merchants avoid redirection to external websites improve checkout experience and reduce transaction dropouts. EvoK, our online payments platform, now supports payment collection and requests, and we also piloted payouts, opening a new revenue stream.
We have built new operational risk and fraud management systems that are equipped to cater to Indias payment growth.
New Lines of Business
This fiscal year, NPST has strategically expanded into the offline payment market, which is three times larger than online payments. Qynx offers a merchant switch integrated with a QR and Sound Box system to banks and payment aggregators. NPST manages the transaction lifecycle, merchant relationships, and device operations, enabling acquires to focus on their core business.
Looking to the future, the incorporation of Time Pay Digital Infotech Private Limited holds significant promise for expanding our service offerings and market reach to consumers.
Strengthening Business Capability
NPST has undertaken a significant organizational restructuring to enhance business focus and operational efficiency by dividing its operations into two core lines of business: Technology Service Provider (TSP) and Payments Platform-as-a-Service (PPaaS). This strategic realignment is aimed at better serving customers and improving our ability to deliver specialized solutions.
In conjunction with this restructuring, we have bolstered our internal capabilities by establishing dedicated departments, including Product Development, Marketing, Pre-Sales, and Customer Success to drive innovation, strengthen brand awareness and market presence, support the sales process, and ensure customer satisfaction, respectively.
To support our future growth and innovation, NPST has also made key leadership appointments. The addition of an Executive Director to our board has enhanced our governance and strategic direction, providing us with the leadership needed to navigate the evolving market landscape effectively. These changes are expected to streamline our operations, position us for continued success, and enable us to capitalize on emerging opportunities in the technology and payments sectors.
Business and Operational Risks
In an ever-evolving business landscape, NPST faces various risks that could impact our operations and financial stability. Addressing these risks proactively is essential to sustaining our growth and maintaining our competitive advantage.
Macroeconomic Environment
NPST remains vigilant in monitoring and adapting to macroeconomic conditions that may impact our customers and, consequently, our business. We are committed to taking all necessary actions within our control to mitigate any adverse effects from these conditions.
Financial Risks
Our focus continues to be on improving profitability while making disciplined investments in key areas, including hiring additional personnel, broadening marketing and promotional activities, and expanding our product and service offerings. As we grow our business operations, we anticipate a corresponding increase in expenses.
Further, we may offer performance guarantees or indemnities related to business tenders or contracts, which can potentially impact the topline. Our experience shows no material claims arising from such guarantees.
Pace of Technology Innovation
We continue to invest significantly in enhancing the scale, stability, and functionality of our technology infrastructure as well as new technology including AI and Big Data. The risk of failing to develop best-in-class systems could adversely affect our business and future prospects.
Competitive Threats
NPST faces intense competition from established firms and emerging fintech startups. To maintain our competitive edge, we continually invest in enhancing our platform and customercentric services. Differentiation through innovation, improved operational efficiency, and exceptional customer value are vital for sustaining our leadership position.
Strong Brand Visibility
We are investing significantly in building a recognized and respected brand to attract and retain customers in a competitive market. Enhancing brand awareness through effective marketing strategies and customer engagement initiatives is crucial for our continued success.
Information Security Risk
As NPST provides a global financial technology platform that works with some of the worlds largest businesses, this leads to an inherently high-risk exposure to intrusion and disruption attacks. To counter this risk, NPST invests significant resources to minimize the likelihood and impact of financial crime occurring through our platform, products, and services.
Our platforms are designed with multiple layers of protection to ensure business continuity and manage cybersecurity risks. We employ automated fraud detection during transaction processing and use encryption protocols to safeguard data confidentiality. Despite these measures, the vulnerability of our data and technology infrastructure to cyber-attacks remains a concern, as such incidents could damage our reputation and significantly harm our business.
Regulatory Risks
NPST operates in a highly regulated business environment where the fast-evolving regulatory landscape necessitates robust internal controls and management. To ensure that applicable laws and regulations are identified and mapped to our activities and services, NPSTs regulatory compliance specialists continuously screen the regulatory landscape, with validation from external legal counsel. Further regular reviews by legal and audit teams, along with checks by banks, ensure strong governance and compliance.
Strategic Initiative for FY 2025
As we look ahead to FY 2025, NPST is poised to embark on a series of strategic initiatives under the banner of NPST 2.0, centered on our core principles of innovation, transformation, and growth. These initiatives reflect our commitment to seizing emerging opportunities and addressing evolving market needs.
Investments in Innovative Tech
Since its founding, NPST has embedded innovation in our DNA, building our business for the long term with the philosophy "Innovation in Every Byte." This focus serves as a compass guiding our decision-making, ensuring we select the right picks to enhance our product portfolio. We are making significant investments in several areas to capture the opportunities that lie ahead.
On-Demand Credit
With less than 5% of Indias population currently holding a credit card and UPIs user base reaching 400 million, there is a significant opportunity to address the credit needs of young millennials. NPST will introduce solutions that offer an instant line of credit, catering to underserved segments, and enhancing financial inclusion.
Bill Payments
The Bharat Bill Payment System (BBPS) in India provides an interoperable platform for billers, transforming bill payment services across the country. Currently, 42 authorized billers offer these services, and with infrastructure growth, there is substantial potential to expand bill payment services further. NPST aims to tap into this market with its BillDirect offering.
IOT Payments
The Internet of Things (IoT) is revolutionizing payment acceptance by transforming any connected device or endpoint into a transaction platform. We aim to leverage IoT to create innovative payment solutions in collaboration with industries such as automotive OEMs and infotainment systems. Harnessing the vast data generated by loT devices will enable deeper insights into customer behavior, improving decisionmaking in areas like fraud prevention, KYC, instant credit, and targeted offers.
Regulatory Tech
To ensure the integrity of the payments ecosystem, NPST will enhance its regulatory technology focus. This includes strengthening compliance frameworks via investments in Al Operations (AlOPS) and developing comprehensive guardrails to maintain a secure and compliant environment.
Augment Current Offerings
NPST will embed advanced AI and ML capabilities into its existing products to enhance security, efficiency, and scalability. Investment in cutting-edge technologies and infrastructure upgrades will support growing transaction volumes and maintain our competitive edge in the fintech industry.
Expand Customer Footprint
NPSTs goal is to grow its customer portfolio by 2X through strategic upselling and expanding our overall base. Additionally, we anticipate generating additional revenues through our Payment Platform as a Service (PPaaS) business by bringing more offline payment aggregators onto the Qynx platform.
Tap into Adjacent Sectors
Our payment solutions, such as UPI Collect and Payouts, are well-suited for multiple segments. We are foraying into new verticals, including NBFCs, insurance, and mutual funds, to tap into the opportunity.
Strengthen Customer Centricity
At NPST, customer centricity is more than a priorityit is a core value woven into our culture. We place great emphasis on listening to our customers needs and integrating their insights into our product development and strategic planning. For example, in response to our customers emphasis on cost optimization, we utilized our EvokPPaaS platform to effectively reduce their total cost of ownership.
Our commitment extends beyond innovation; we are dedicated to enhancing customer service and delivery. We aim to create positive experiences throughout the project lifecycle by integrating our people, processes, and systems to bolster support and delivery frameworks. This holistic approach positions NPST as a trusted partner and advisor.
We are on a relentless path of improvement, consistently engaging with key customers and industry leaders to gather feedback. This input drives our ideation, collaboration, and growth, reinforcing our commitment to enhancing stakeholder value and maintaining their confidence in us.
In alignment with our customer centric philosophy, we are strengthening our functions in marketing, sales, account management, and delivery. We enforce rigorous governance standards to ensure that our product, technology, operations, sales, pre-sales, and delivery teams are aligned in their efforts to drive customer satisfaction and achieve excellence.
Cultural Transformation and Organizational Growth
At NPST, we believe in constant iteration in pursuit of improvement. Whether through the continual development of our platform or the careful, constant shaping of our culture to meet our teams evolving needs, we recognize that growth and culture should always go hand in hand. In 2023, we grew our team to its largest size to date.
To support our growth trajectory, NPST is focused on investing in the development of future leaders who will advance the organization. We are actively hiring at senior levels to enhance our product focus and establish dedicated lines of business. This includes expanding our functions in marketing and branding, pre-sales, delivery, and account management.
With a more diverse and geographically dispersed team, we have introduced our organizational value framework, ICARCI (Integrity, Collaboration, Accountability, Respect, Customer Value, and Innovation Focus), which will guide us through our next phase of growth. This framework is designed to align with our values and drive both people and product excellence.
As we embark on this next chapter, we remain humble and driven, ready to seize emerging opportunities and continue our journey of growth and innovation.
Cautionary Statement
Statements in this document/discussion pertaining to future conditions, events, or circumstances, including descriptions of the Companys goals, projections, estimates, and expectations, may constitute "forward-looking statements" within the meaning of applicable laws and regulations. These statements are subject to numerous risks and uncertainties and are not guarantees of future performance. Actual results could differ materially from those expressed or implied in these forward looking statements.
Important factors that could impact the Companys operations include economic developments, advancements in the Fintech ecosystem, changes in government regulations in India, and other incidental factors. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
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