Findi Limited (ASX: FND) (Findi or the Company) today announces it expects to report FY25 revenue in the range of A$80-90 million (FY24: A$66.5 million) and FY25 EBITDA in the range of $A30-35 million (FY24: A$27.4 million).

Circa Revenue growth of $66M to $90M Est 21%

The IPO of our subsidiary TSI India on the Bombay Stock Exchange in 2026 remains on track,

FINDI LIMITED (ASX:FND) - Ann: Findi provides FY25 earnings guidance and market update, page-1 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forum

Market Cap ($M): 177

Before the market open on Thursday the 11th of April, Findi entered into a trading halt pending an announcement. (Trading Halt Request)

I assumed this was in order to finally announce they had been granted final approval for their white label licence in India (through their subsidiary TSI - Transaction Solutions International). There was however, plenty of speculation that if this were the announcement, they wouldn't have entered a trading halt and instead just made a price sensitive announcement.

A few people floated the possibility that their licence was knocked back, or some other issue arising... but as of pre-market today, Findi released their announcement that Findi was granted in-principle authorisation for White Label ATM's

My key takeaway from this announcement is not the fact the licence was approved, it was this comment:

• "Securing a White Label ATM licence is also a key pillar for our strategy of becoming a full Indian transaction bank, as well as positioning us to participate in the long-anticipated industry consolidation and to complete well advanced acquisitions"

Today's announcement won't do much to the overall valuation (looks like the market didn't really care for it either, as the SP has dropped around 3.5%) as I believe the current SP is already priced in for the White Label licence, however I eagerly await FY2024 results in May and a few possible announcements in relation to some M&A.

Over the last six (6) months or more, the Findi SP has been going from strength to strength.

The SP has now far exceeded my bull case valuation of around the $2.92 mark, so I've been having the good problem of trimming my position as it begun to exceed my comfortable weighting within my portfolio. I'm still holding a larger weighted portion than I normally do, as I'm still bullish on the company and the overall economic growth in India as a whole.

What's changed over the last few months?

On the 30th of January 2024, Findi received $10.7 million in cash and issued just about 12 million new shares in the company.

On the 1st of March 2024, appointed a new CFO, Alastair Williams.

• If someone could explain his Employee Share Option Plan to me that would be great... does this mean that he can exercise these options, at the below prices, even if she actual SP is below the $2.50, $3.00 and $3.50?

On the 11th of March 2024, Findi released an update on the progress of their white licence agreement.

• Findi answered all outstanding questions from the Delhi Reserve Bank of India (RBI) to their satisfaction and the approval process has moved through to the final approval stage which will be done by the Mumbai RBI.
• They noted that they expect the final approval imminently... whatever that means.

... they got a mention in South Australia's 'The Advertiser' - ASX Tech March Winners

Valuation

The valuation I made on the 13th of March still stands. At todays price of $3.18 (with a high of $3.40 today), I think it's overvalued...

After watching an episode of "Somebody Feed Phil" on Netflix (Just about my favourite show on Netflix... I 'highly recommend... basically he travels around the world and eats food, what's not to like...the host is the creator of "Everybody Loves Raymond", he's hilarious and it's a great show)

Anyway, he went to Mumbai, India - and it looked amazing. A few mates of mine have gone there, and they've always raved about it... I'll go one day.

As of late I've been having a look offshore. I like keeping my money in Australian companies, but this time I wanted to look at a company that has its teeth into a country / region that I don't have any exposure to yet.

So naturally, I started to dig into all things India... from the economics, the population growth, imports and exports and tried to find out what makes India tick. After doing that, I started having a look on the ASX to uncover some companies that are looking to take advantage of this hugely populous country.

Findi Limited

Subsidiary, Transaction Solutions International (India) Private Limited (TSI)

What they do:

A technology company that provides a range of solutions for payments, electronic surveillance and managed services in India. They do this through five (5) main ways.

1. ATM machines - They deploy and manage ATM networks for the big banks in India, such as Central Bank of India (CBI) and the State Bank of India (SBI). They provide the supply, installation, commissions, along with on-going maintenance and support.
2. Electronic Surveillance - Including monitoring, analytics and reporting services.
3. FindiPay - A merchant- assisted payment marketplace which facilitates digital payment transactions between merchants and consumers.
4. Loyalty and Rewards - Similar to what we know in Australia.
5. Managed Services - Relating to payment infrastructure and technology. Services such as software development, system integration and customer support.

Currently, Findi has a network spanning across thirty (30) states and union territories. They process transactions worth around 1.5 trillion INR (roughly 27 billion AUD) across all of their product lines.

Findi's mission is to, "Empower individuals, businesses, and communities with convenient and accessible financial services. Findi aims to achieve this by expanding it's ATM network, growing it's digital payment offerings, and investing in innovative technologies and strategic partnerships".

In the most recent annual report (FY2023 - released 30 June 2023), Findi touched on a few key points relating to India's current use of cash, and transition to a digital payment system.

• "India is witnessing a harmonious blend as ATMs embrace the digital realm, fusing convenience & connectivity. The convergence of ATMs and digital payments symbolizes a transformative era, empowering individuals with seamless financial access.”
• The company has expanded its ATM network by deploying over 2000 ATMs and onboarding more than 1500 FindiPay merchants. "This is in line with our endeavour to increase our offline and online footprint to enhance our penetration in the underserved areas", "While ATMs continue to play a crucial role in financial inclusion, the company recognizes the importance of expanding its digital payment offerings, particularly in underserved regions"
• "Continue to invest & grow both organically and inorganically in this space towards our aspiration to create a full stack digital payments entity."

According to a report by the RBI in 2021, cash remains the preferred mode of payment for a majority of the population, particularly in rural areas and among lower-income groups. The report found that cash accounted for 89% of all consumer transactions by volume and 68% by value.

They outline a few factors which contribute to the use of cash, over digital currency.

1. Large unbanked population: Despite efforts to increase financial inclusion, a significant number of Indians still lack access to formal banking services.
2. Limited digital infrastructure: In some rural and remote areas, internet connectivity and access to digital payment platforms remain limited.
3. Cultural preferences: Some people prefer cash due to its tangibility and the sense of control it provides.
4. Informal economy: Many small businesses and individuals in the informal sector rely on cash transactions to avoid taxes and maintain flexibility.

The RBI report also noted that digital payments have been increasing at a CAGR of around 50% over the last five (5) years.

Annual Report 2023

The Outlook:

They've outlined five (5) key points moving forward

1. ATM deployments: Deployed over 2000 ATMs under its contract with CBI and has the potential to secure an additional 625 ATM licenses from CBI over the next 12 months. The company also renewed its contract with SBI for 3912 ATMs until the end of 2024.
2. White Label ATM license: Findi has applied for a White Label ATM license, which could provide strategic benefits, support the integration of its ATM and digital payments business, and assist with potential acquisitions.
3. Organic growth initiatives: The company plans to focus on organic growth initiatives in FY2024 to generate further value under the CBI contract, such as introducing debit cards, increasing activation ratios, and improving acquiring vs. issuing transaction ratios.
4. Strategic acquisitions: Findi remains alert to strategic acquisition opportunities that can enhance its market position and create value for shareholders.
5. Digital payments: The company aims to expand its offline and online footprint in the digital payments space, particularly in underserved areas, to create a full-stack digital payments entity.

The Financials (snapshot):

• Revenue growth up 1000% ($4.7 million in FY22 to $54.5 million in FY23) - this is hugely inflated due to the consolidation of TSI's results following the acquisition in February 2022.
• Profitability - The company turned a profit for the first time... NPAT of $2.4 million compared to a loss of $1.5 million in FY22. EBITDA up to $16.8 million from $2.7 million (again, largely due to the TSI acquisition)
• Cash flow from operating activities - an inflow of $4.6 million. However, a negative FCF of $27.5 million in FY23 due to significant capital expenditure (deployment of ATM's, renewal of SBI contract, technology upgrades & white licence application)
• Cash & Cash Equivalents - $18 million.
• Debt - Increased to $63 million in FY23. Mostly due to investments in ATM deployments and the acquisition of TSI. (total net debt sits around $37 million).

Half Year Report to September 2023

Outlook Update:

I'll summarise a few of their key updates for the half:

1. Secured a 10-year contract with State Bank of India (SBI) that will generate revenue of up to $620 million. Under the contract, Findi will provide 4,219 ATMs in India, with an initial 3,375 ATMs and a further 844 ATMs within 12 months of the contract start date in early 2025.
2. The SBI contract is expected to deliver between $550-620 million in revenue and $250-280 million in EBITDA over the 10-year period, with an expected Internal Rate of Return (IRR) of over 35%. The contract will be 100% funded from Findi's free cash flow and new bank facilities.
3. Redeploy all existing SBI ATMs as Findi branded ATMs, adding over 3,000 ATMs to their network. The white label license will provide strategic advantages such as supporting the integration of Findi's ATM and digital payments business and potential acquisitions.
4. During the half year, TSI management received additional shares in the Indian subsidiary, increasing their shareholding and the minority outside interest in TSI from 10% to 19.4%, with no further shares available under the original sale agreement.
5. Post period end, Findi's Indian subsidiary TSI India raised $37.6 million via the placement of Compulsory Convertible Debentures to Piramal Alternatives. The debentures reflect a fully diluted equity interest of approximately 16.7% of TSI India once converted at IPO.

Financial Update (snapshot):

• Revenue growth from ordinary activities - up 28% (from $23.7 million to $30.3 million)
• NPAT - up 352% YoY (from $171,000 to $773,000)
• Cash flow from operating activities - Significant increase from the previous half of -$1,024 million to $19.4 million. Largely due to receipts from customers increasing from $20 million to $31 million whilst payments reduced from $21 million to $12 million. (few other factors including timing of receipts from customers took its effect I believe)
• Cash & Cash Equivalents - down to $2.8 million. (note - total cash, cash equivalents and term deposits is $32.8 million as of the half year report compared to $25.8 million at last report)
• Debt - Up $5.2 million to a total of $68 million.

Announcement - 6th of December 2023

Announcement - 11th of March 2024

My Concerns:

• A pretty obvious one, the debt levels - As they burn through cash, they eventually run out of it. They either borrow money or issue more shares. Not a bad thing to raise money, however they need to get a decent return on the cash..

@Noddy74 brought something slightly concerning to my attention a while back on this one, and I'll copy his picture here.. (I hope you don't mind)

This is a chart from Respiri Limited (ASX:RSH) - unfortunately, this is the share count... as @Noddy74 outlined, Nicholas Smedley (CEO of RSH) is also the Chairman of Findi.

I'm slightly concerned that Findi's share count might end up looking similar.

• Market and Economic Risks - The Findi business model is pretty closely tied to the Indian economy and consumer spending patterns.
• Competition and Pricing Pressures - This is a very competitive market with other ATM operators, fintech companies and digital payment providers.
• Dependence on Key Partnerships - Heavy reliance with CBI and SBI for ATM deployments.

My Outlook:

I'll start off by saying, I think there is a lot to like about the company and how they've gone about business - albeit, considering the concerns I have as I have outlined above.

• They've reached profitability and I'll be looking to see this grow at a decent rate YoY.
• YoY cashflow growth.
• Reduction in debt.
• Even if they don't increase their profits, I want to see them spending their money through smart investments back into the company.
• Hitting the target of 25,000+ merchant acquisitions by the end of March 31st 2024.
• The white label licence being unconditionally approved.
• Market disruption - I want to see Findi begin to really take over the market share.

Valuation:

I'll be updating my valuation within the valuation section over the coming days... I'm still having a play around with a few valuation methods.

Disc: I hold both in RL and in SM.

I didn't buy enough of this little beauty who's focus is solely on India.

Without re-scribing all the great news recently released I'd urge those interested in a profitable business focussed on India and in the financial sector to have a look.

Nothing new in this update.  Key takeaways:

1) On rack to achieve previously announcd revenue and profit guidance.  

2) Reduced valuation of TSI India business - This was always going to occur, and the market did not seem to realise the value of the business anyway.  A presentation of the business was attached.  Presumably, this presentation is being used as part of the sales process, as the TSI India business is up for sale.  

3) Highlighted the secular trends of cyber security being a massive tailwind for the business.   

In recent IT news (June 18, 2020), https://www.itnews.com.au/news/nsw-govt-pours-16-billion-into-digital-549406, it was reproted that the NSW Government is intending to spend $240 million – or $80 million a year – to improve the government’s cyber security capability, building on the last significant funding provided in 2018. 

It will go towards securing existing systems, deploying new technologies and increasing the government’s cyber workforce. 

Cyber security continues to be a thorn in the side for what is otherwise a leading digital state, with most agencies struggling to meet new requirements under the government’s cyber security policy. 

At $240 million over four years, Dominello said the new funding was the “biggest single cyber security investment in national history” - the federal government’s 2016 investment was $230M over four years. 

He said the funding will “strengthen the government’s capacity to detect and respond to the fast-moving cyber threat landscape" and make NSW the “cyber security capital of the Southern Hemisphere” 

Perrottet said the “record investment in technology recognises that digital infrastructure is as important as transport infrastructure to the state’s economic growth". 

Cloudten Industries (part of Vortiv Group) counts the NSW Govt. as a key client, having been awarded approx. $880 k in IT projects for the NSW government (refer attached) over the past 12 months.  Potentially, contract awards may well incease by a factor of 3-4x over the next 3-4 years, should Cloudten continue to win work at the current rate / share.  

Vortiv released results overnight.  Key takeways:

1) Profit before tax of $1.4M.   EPS = 0.9 cents per share (PER = 14.5)

2) Demand for services reportedly unaffected by COVID-19.

3) On target to report record result for Q1 2021 as previously reported.  

4) $1.7 million operating cashflow for the year, with $1.7 million in cash as at May 15 2020.  

Vortiv, named after the Norwegian goddess Vor. Vor was wise and inquiring, so that nothng can be concealed from her (source: wikipedia).  

Vortiv plans to emulate Vor, protecting their clients with their cyber security and cloud skills, and is benefitting from strong tailswinds as enterprises race to modernise their IT infrastructure in the cloud based world.  

Vortiv consists of two core businesses, Decipher Works, and Cloudten.  These two businesses are gradually being intergrated, and are professional services bsuinesses that advise and assist their enterprise clients improve their cyber security, and transition to the cloud.   The businesses have AWS accreditiation, and relationships / expertise in identity management/enterprise security.   

The businesses are heavily reliant on their team's expertise and client relationships, which is a strength and a weakness.  Vortiv is capital light and can grow rapidly, but it can only do so if it can retain its key people.   As with consulting businesses, key personnel loss is the most significant risk to the business.  

The key personnel in the Decipher Works business remain, and are contracted to remain in place until around August 2020.   They have a board position, and own 3% of Vortiv individually.  Should they depart, the thesis is busted. 

For Cloudten, one of the two founders left arfter a failed initiative to startup a London office.   However, the remaining founder remains, and has strong incentives to remain a the helm until 2022.  

Vortiv's value to Decipher Works and Cloudten founders is provided through operational and strategic management to help the businesses drive organic growth, freeing up the founders to do what they do best.    That is the theory, and the most recent results show early signs it is working.  

FY2020 profit before tax is reported to be $1.4M, on $11.5 M revenue.  Revenue is forecast to grow 20% in FY2021, with EBITDA margin expansion to +20%.  

Furthermore, VOR have a non-core interest in TSI India, which they are seeking to divest.  This should raise at least $5M, but it is  not an ideal time to sell a business, and it is uncertain when this transaction will occur.  

VOR is not a high quality, high moat business that can scale and grow indefinately.   But it is profitable, with some oeprational leverage at least initially, and showing promising growth in the short term, and at a good price.    

Its success is reliant on retaining its key staff, and developing future leaders.  This has proven a challenge to professional services businesses over longer time frames, and it is the key risk to watch. 

DISC - I HOLD.   

Vortiv own 25% share in TSI India, an owner and operator of some 15000 or so ATMs in India.   TSI India generated $15M AUD in revenue, and $1.7M in profit.   

VOR have a valuation of around $9 million on the balance sheet for this investment, however, I don't think the share price reflects the value of this business. 

VOR are seeking to sell out their stake, and apparently the majority owner is looking to sell out as well.   If they can get $6 million or more for the business, It will understandably have an impact on the share price of a company with a market cap of $18 M.  

Given, VOR are on track to achieve at least $2M PBT this FY, and may benefit from a +$6M "windfall", it looks good value.