Manipal Payment and Identity Solutions (NSE:MPIMANIPAL) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Manipal Payment and Identity Solutions Limited Earnings Conference Call. Please note that this call is being recorded. I now hand the conference over to Mr. Suraj from CDR India. Thank you, and over to you, sir. Thank you, Rayo. Good evening, everyone, and thank you for joining us on MPI's Q2 and H1 FY 'twenty seven earnings conference call. We have with us Mr. K Girishini, CEO and executive director Mr. Ramnathai, chief financial officer and Mr. Manipal, head of strategic finance and treasury. We will begin the call with opening remarks from the management. Following this, we will have the forum open for an interactive q and a session.

0:49 Before we start, I would like to point out that some statement made in today's call may be forward looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Girish to make his opening remarks. Thank you, and over to you, Girish. Good evening, everyone, and thank you for joining us. I hope you had a chance to go through our results presentation for the second quarter and first half of FY twenty seven. Let me start with the numbers. We have started the year on a strong note. In h one FY twenty seven, revenue from operations grew 40% year on year to 849 crores. Operational EBITDA grew 29% to 255.5 crores.

1:40 And our profit after tax grew 45% to 158.6 crores. In Q2 FY twenty seven, revenue grew 34% to $4.30.4 crore compared to last year. Today, I would like to highlight three things. Sustained growth across both our core and emerging businesses, steady progress on our international expansion, and continued momentum in winning new businesses. First, our core business, which compromises domestic payment card, government identity solutions, digital banking and automation, and bundled fulfillment services. We grew more than 23 in h h one FY twenty seven.

2:29 This was driven by higher domestic card volumes and deeper engagement with existing banking customers who are giving us a wider scope of work. During the quarter, an existing large public sector bank gave us an additional mandate to manage the logistics and distribution of its debit cards. Our wallet share with key customers has increased because of our service and delivery excellence. Large transit card projects also added to the growth. Our emerging businesses, which covered international payment cards, metal cards, tax stamps and RFID, grew 92% in the first half.

3:17 And now we make about one third of our revenue compared with one fourth last year. We are now extending our export approach beyond payment cards to our other emerging business as well. Our international expansion is on track. Our Nigeria bureau, which started in the first quarter, is scaling up well. And we have added more than 10 new customers in Q2, mostly large and mid sized private banks across Africa. Through our partners, we also added customers in Southeast Asia and The Middle East. In addition to the four new countries we entered in q one.

4:04 On our last call, we outlined our plan to set up a personalization bureau in developed markets this year. I'm pleased to share that our UK bureau is now operational. It's an important milestone in our international expansion. It brings brings us closer to our existing customers in The UK and centers our ability to win business across The UK and the Europe. We expect you to start contributing to the revenue in the second half. Internal... International business was 12.8% of our revenue in the first half compared with 5.44% last year. We continue to new... Win new businesses. In first half, we have added more than 30 new customers. Majority of them were outside India.

4:52 In metal cars, we are seeing growing demand for premium payment cars, both in India and in international markets. And our metal card business continues to add new customers. Metal card manufacturing is a highly specialized segment. With only a handful of players globally that are created in manufacturing technology, we are one of them. With a patent for our manufacturing process in India and several international markets, This gives us a competitive advantage and opens up opportunities to grow in developed markets. As indicated last quarter, our metal card capacity expansion is progressing well as planned. Metal Card and TaxTam are both high margin businesses and we continue to invest in them to drive growth in India and India internationally.

5:49 We are investing ahead in new geographies and businesses. In first half, the seeding cost for this were about 16.5 crores after tax. As this as this investment starts to up, we extend... Expect them to support our margins. Ramad will take you through the numbers in detail. Looking ahead, our pipeline uses good visibility for the second half. In government ID, we are participating in state tenders for polycarbonate, driving license and vehicle diesel cars and in several large transit card programs. In banking, we will build on our strong position with public and private sector banks, where our presence across multiple locations allows faster turnaround time in exports after Nigeria and The UK, we plan to set up in one more large developed market by the end of the financial year.

6:51 Historically, the second half has been stronger for our business. Supported by these opportunities, our growing international footprint and strong execution, we remain confident of closing FY twenty twenty five in line with our revenue guidance of 30% to 35% growth. Given the nature of our business, the onboarding of new customers and the rollout of large programs can shift revenue between quarters. We therefore believe our performance is best evaluated on a year to date basis as it gives a more meaningful picture of our underlying growth. To sum up, both our core and emerging business are growing. Our international expansion is progressing as planned, and we continue to win new customers in India and abroad.

7:41 Our focus remains very simple, execute well and deliver consistently quarter after quarter. With that, I will hand over to Ramnath to take you through the financials. Thank you. Thank you, sir, and good evening, everyone. Let me now take you through our financial performance for Q2 and H1 FY 'twenty seven. All comparisons are year on year basis, unless stated otherwise. Revenue from operations for Q2 FY 'twenty seven was INR 430.4 crore, up 33.6%. While for H1 FY 'twenty seven, revenue stood at INR 849.4 crore, up 40.3%.

8:31 Revenue from core business was INR $2.94 crore in Q2, up 23% from INR $2.39 crore and INR $5.56 crore in H1, also up 23%. Revenue from our emerging business was INR 136 crore in Q2, up 63% from INR 84 crore and INR $2.93 crore in H1, which is up 92%. Emerging contributed 31.7% of our revenue in q two against 25.9% a year ago and 34.5% in H1 against 25.2%.

9:21 Operational EBITDA, which excludes other income, was 131.3 crore in Q2, which is up 17.5% with a margin of 30.5%. For H1, operational EBITDA was INR 255.5 crores, up 29.1% with a margin of 30.1%. Margins were impacted by adverse ForEx movements and elevated input costs due to geopolitical tensions. Depreciation rose INR 22.4 crores from INR 11.9 crores in Q2 as our asset base grew with new facilities and equipment, including metal card machines.

10:15 Profit after tax was INR 80.9 crores in Q2, up 7.7% and INR 158.6 crores in H1, which is up 45.4. PAT margin for H1 improved by 67 basis points to 18.7%. Our reported profit carries seeding and development costs for new businesses, geographies and facilities of about INR 8.7 crore in Q2 and INR 16.5 crore in H1 cumulatively after tax. Our top 10 customers contributed just over 52% of H1 FY 'twenty seven revenue as new customers and our international business continue to widen our base.

11:07 Networking capital was ninety six days at the end of September, again, four days in a year ago and seventy eight days in June. This reflects higher inventory built to ensure supply continuity and timely execution of orders amid ongoing geopolitical uncertainty. In addition, given the nature of our business, the receivable days are typically higher in the first half of the year and normalize in the second half. We remain focused on optimizing the working capital and improving efficiency as volume scale. Our balance sheet remains strong following the IPO.

11:54 Net proceeds from fresh issue were about INR $2.95 crores, primarily year month for growth CapEx. As of 09/30/2026, cash and cash equivalents, including current investments in mutual funds, stood at INR $4.59 crores, including the unutilized IPO proceeds of INR $2.95 crores and INR 62 crores held in escrow account for issue expenses, while borrowings remained negligible. Our annualized ROCE and ROE stood at thirty eight point zero six percent and thirty one point zero two percent, respectively, as of H1 FY 'twenty seven.

12:42 Our planned growth CapEx is focused on expanding manufacturing capacity, scaling international operations, and strengthening our presence in high value businesses such as metal card and tax terms. These investments are expected to generate attractive returns as the new capacities become operational and utilization levels improve. We also expect the ex... The resulting operating leverage to support our margin and the return ratios. With that, I would now request the moderator to open the floor for questions. Thank you. Thank you very much. We will now begin the question and answer session.

13:37 Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and one. The first question is from from Baroda BNP Paribas Mutual Funds. Please go ahead. Yeah. Hi. Good evening. Thanks for the opportunity. Am I audible? Yeah. We can hear you. Yeah. Hi. Congratulations for a good set of number. Just want to understand two, three quick points.

14:22 Firstly, on the international card business. So while we see that h one, there was increase in your mix of the growth engine. But however, on a Q o Q basis, there seems to be some decline in the revenue from coming from the emerging business. While for the Q o Q, the EBITDA margins were increasing. So just want to understand from where is the margin increase coming from? Is it largely supported by the cost? Or is it coming because of the mix change? And secondly, what is the contract for maybe the order pipeline for the H2 for the exports card business or the metal card business front? Those are the two questions I would like to basically know.

15:12 So if you see our international payment card business, we have now been operating in more than five regions. We have same stores deployed across all these regions. And we have added multiple customers across all regions. And today, the timing of the order varies from quarter to quarter. And we are confident that each and every region will move up into a steady scale of revenue going forward. And today, if you see in Nigeria, we have added more than 20 customers the in the in the in in the in the the the in in the in in And for the h two, we are confident on the guidance we have given for the impressions.

16:05 Yeah. Yes. On the margin portion. So it is primarily because of the in the sales mix and the product mix. So even if you say simply our domestic business as well, that mix might change between private to PS two at the at the margin mix. Right? So on a quarter on quarter basis, we will see even as we move ahead, this variation could be there. But on an annualized basis, so what we suggest is that the margin has to be looked at a annualized basis. Okay. So on steady state basis, where can the margins move considering that we are moving more on the emerging side and that piece is growing well for us? Yes. So two questions to this. One is beyond our control, the ForEx movements and the geopolitical tensions, the raw material increase or whatever it is. But apart from that, the considering the mix which is changing currently and as we mentioned earlier as well, metal card and tax terms are our margin accretive to businesses.

17:11 And as we move ahead, as we increase our revenues in those segments, that should be a good margin coming as we move ahead. And what will be the mix of mix coming from the metal cars and the tech sense right now in Q2? And what was it like one year back? See, overall, emerging business was 25% last year. No, not the emerging one. Just the metal parts and the cash stems, which are margin accretive? Yes. So, Biash, as we mentioned, we don't we divide the portfolio into two parts, the growth emerging business and the core business. So within that individual segment, we do not classify. But as Ramad alluded, tax terms and metals are higher margin accretive and good businesses for us.

18:09 Got it. Got it. Perfect. Thanks. The next question is from Aditya from Aventispark. Hello, am I audible? Yes, we can hear you. Yes. First of all, congratulation on your good set of numbers. My first my question is on the emerging segment business. Considering it consists of wide diversified business portfolio, I would like to know what is the growth trajectory going forward in next two or three years? Which division of our overall emerging business is going for a higher growth or which will provide a stable growth rate or something like that? Can you give me some picture on that part of it?

19:10 You can see our emerging we have international payment cards, metal, and IoT and RFID solution. In the international payment cards, now we are present across five regions, and we have started our Nigeria operation, and the revenues have been considered for income margin, Nigeria operation. And now we have started UK, and we are very confident for the revenue coming from our UK operation. Similarly, we are looking at opening up a new personal bureau in any one of the larger growth market going forward. But it... And on the metal side, in the domestic market, we are doing multiple variants across all the top issuers today in the country.

19:59 And with the opening of markets in UK, Nigeria, with the with the presence in more than five regions and with our patents across the the metal card, we are confident to expand this metal card portfolio in our energy segment. Tax terms, we have one one large project in q one. We are confident to add one more in the current year in the domestic market, and we have plans to expand even into the international market. And this will be one of the larger segment in terms of growth. RFID, we have been doing a good amount of work in retail. Retail is good. Now we are looking at jewelry, government and health care and FMC sector in the RFID segment. And this is growing at a 15% kind of a CAGR in terms of.

20:56 Okay. My next question is on our core business. How insulated are our margins against this rising import costs? Like, does our contracts with our fellow customer banks or other financial players, do we have a pass through clause where we pass on the cost of raw materials when we are importing it there in parallel? Just want to know an idea on that part of it. Yeah. So overall, we have multiple set of customers, PSU, private, fintech, cooperative bank, etcetera. In case of PSU, it will be largely driven by RFP process where the contract will be a long term contract between two to three years, in some cases, five years. And pricing will be fixed for the tenure.

21:41 Having said that, there will be four major clauses where if there is any significant increase in the raw material, we can go back and negotiate the pricing. But in other cases, like, whether it is private or a corporate events or vintage, we can go back to the customers and we can renegotiate the pricing. So so usually our contracts are multiyear in nature. And when we are pricing the contract, we ensure... We we plug in our... We factor in all these kind of variances happening in the in the contract. Thank you. That's it from my side. Thank you. Next question is from Deepa Kagarwal from Param Capital.

22:28 Please go ahead. Yes. Hi, team. Am I audible? Yeah. Deepa, we can hear you. Yes. Yeah. Yeah. Yeah. So my first question was on the sales mix from H1 to H2. So how should we see? Is it that, say, 40% of the business happens in H1 and about 60% in H2? Yes. So if you see our historical records, it was somewhere between 45 to 55. But currently, as we are increasing our foothold into multiple geographies, multiple products, so it can change.

23:14 But historically, yes, it was between 45 to 55. Got it. Got it. My second question was on the international piece. So in the longer run, so we are at about 15%, 17% international business. In the longer run, where do you see the share stabilizing? Deepa ji, on that international operations, see, basically, if you look at it, this is a growth lever for us. And as Girish alluded in his opening remarks, while we are dividing the business between core and emerging, actually, you look at it, a lot of these businesses are actually even... Are going global.

24:01 So to to really give you... For for example, let's say metals is obviously a global offering for us. So is, let's say, PVC cards and even in tax stamps, we are now trying to go global. So the idea is it will be difficult to kind of give you a particular number, but broadly, we can give you structurally that that the direction is most of the businesses that you see there domestically is now taking... Getting international traction and which is leading to growth for us globally. Got it. Got it. My third question was on if you look so we grew the revenues at 33.6% in this quarter, whereas the EBITDA grew about 17.5%. And you have given the explanation of one is the cost of goods sold and freight expenses have really gone through the roof.

24:51 So do we see this correction happening starting Q3? Or it will take some time for you to get this kind of price hike from your customers? So how should we look at H2 onwards in terms of the EBITDA to revenue growth? Yes. So see, as we given our guidance earlier as well. So our emerging businesses are growing significantly. And even going forward, we believe that there will be significant growth coming from the emerging business. And, again, we have given a guidance that... Within that, our metal cards and the tax terms are margin executive.

25:40 So as we get the increased revenues from these two segments, there will be definitely margin increase or uplift possibility as we move it. However, any factors which is outside our for you, like, for its moments or for that matter, global geopolitical tensions, we'll have to normalize that. But, directionally, if we are on the right move move to increase our margins. Yeah. And, just to add to Ramna, see, if you look at it, the... As you kind of mentioned, the export mix is increasing, which basically becomes a natural hedge to the imports, which... And if the... Let's say, if rupee doesn't slide to the to the extent the rupee deficiency, which we've seen last year, then obviously, that gives us...

26:33 I mean, it becomes margin accretive for us. That's one. And second, broadly, overall idea is that, as we said, are trying to get into markets and businesses which are further margin accretive. So where you see because there's a revenue base increase and there's a better fixed cost absorption. So with these two factors, we believe along with the, let's say, the sales mix changing, there could be we are looking for better margins provided geopolitical and the rupee is in control. Got it. My last question was on this depreciation.

27:18 So if you look versus our relative peers for our depreciation on the kind of fixed asset we run, that seems to be on the higher side, which is a good thing because you are depreciating it much faster. That typically, I think the net block is closer to about INR $3.80 crores and on that roughly this quarter we did INR 22 crores. So we are almost in three years, we are writing off the asset. So your thoughts of so if I look at Q2 last year, it was about INR 12 crores, now we're at 22 crores quarter to quarter year on year. So this base will continue going forward? And how should we look at it? Because I think for your competitor, it's a much higher gross asset number and they seem to be doing much lower depreciation.

28:08 So how should we compare it? Thank you for that question, Deepak. So we cannot comment on the competitor, but definitely on our balance sheet, see, last year, we have invested roughly around 135 crores in assets. This year till h one, we have invested around the 58 crores. So overall asset base is increasing. And as we mentioned earlier as well, as a policy, we had taken a a strategy that the... Any incremental investment will happen through leasing mode. And this leasing is with the five years kind of a tenure, and all depreciation is done over five years. So hence, this you can see that elevated the depreciation cost. But having said that, having our IPO process in place for 240 crores for new CapExes, so the overall depreciation as we move ahead, it might normalize.

29:03 Got it. Got it. And overall... Yeah. And overall, the life of the assets will be between... Again, depending on the machine, it's between seven, ten, and fifteen years. Got it. In a way, so your cash back is much higher, right? So it will be actually closer to INR 100 crores back already if I look at the cash. Got it. Yes. Thank you so much. Thank you. I'll come back. Thank you. The next question is from Sunil Jain from Nirmal Bank Securities. Please go ahead. Yes. Thank you very much for the opportunity and congratulation on good number.

29:53 So my question relate to the customer additions in the international market. You said that Nigeria, you added around 20 customers in H1. Can you talk about the situation in U. K. And U. S? Are you expecting or have you added good large customers over there as well? So if you see our UK region, we have been doing business with the largest new bank out of UK. And our sales force was deployed in the region almost, let's say, two years back. And with the with the credentials we have with the largest customer, we are in good connect with all the tier one, tier two, and the fintechs. And you will see UK as a market, there are more than 200 fintechs in the market.

30:41 And with our metal card patent, we are very kind of very confident to enter into the the fintech space and establish ourselves in The UK market. And as I mentioned in my opening remarks, revenues will come in the second half of The UK. And US also, if you see, it's a very, very larger metro card market. More than 30, 40,000,000 cards are issued on metal. And our... We have our sales teams even in The US region. And, yeah, we hope to see some news coming in the year even from this. So any breakthrough expected from any of the large bank in next H2?

31:30 We will inform as and when we progress. Okay, fine. Second question relate to the freight cost. The freight cost has increased substantially, almost doubled year on year in Q2. So can you talk about this? Why is this happening? And even also quarter on quarter, it has increased substantially? Yes. So, Nirman, this is related to a direct freight cost. So one of our business is also into integrated logistics management where we deliver the cost and to into the beneficiaries of the... Our customers. And as we increase that bundled offering services, there is a cost of... Courier cost for this business, and this is exactly goes in line with the business...

32:21 With the... These customers for bundled offerings. So it's a direct cost rather than indirect cost. Okay. Okay. Fine, sir. And last question is about the core business. Last two quarters had seen good growth of over 20%. So this growth is likely to continue in this year, current year? So if you see the... Our core business, a lot of transition has happened on the debit card use cases where we have done lot of transit projects, and there are multiple projects in line for transit. The largest project which we did in Maharashtra, it has been the largest case in which other states are also copying. And credit cards have also been growing, and we are confident too.

33:15 Yes. So just to add in, if you look at it, we've given see, this year our guidance is around 30% to 35% growth for the entire business. And as you would have looked at it, we are on cost to that. And we have also given guidance that between FY '27 to '29, we believe there is a 25% CAGR growth, which the company can achieve. Now if you look at the emerging portfolio that has kind of grown from 25% to 35%. So individually, we will not be able to give a specific guidance on each of the portfolios. But overall, if you look at it, the company is in a decent growth trajectory as move forward.

34:01 Okay, fine. Great, sir. Thank you very much. Thank you. The next question is from Nihar Acharya from India SME Investments. Dilip. First of all, congratulations on the good numbers. Really impressive work there. I have questions on two fronts. First is on the supply side. What does our current utilization look like given that we will also be expanding to the international markets? So can you just explain that a bit? And second is on the international business. You mentioned that we are going aggressive in The UK and Nigerian markets.

34:51 So what are the expected timelines from the business that will come from UK? And, you know, on the personalization euro fund in Nigeria, can you please touch upon those things? Yeah. So on the capacity utilization, currently, again, we split it into three segments here. Our plastic card business or the capacity is roughly around 80% today. Metal card is hardly 55 to 60%, and tax sense is around the 70 to 75%. Again, as we move ahead, as the business grows, we have also earmarked a significant amount for increase in the CapEx for the next two to three years. So roughly, we are investing around the 240 crores, which is which is earmarked from IPO process into assets. So capacity increase is not a challenge here. So, however, a current... With the current capacity, the utilization is around between 75 to 80%.

35:55 Yeah. In the Nigeria operations, we have a a a delivering cards to customers in Nigeria. And UK, as I mentioned, we will be referring back in the second of the year. Okay. Cool. Thank you, sir. Thank you. The next question is from Deepak Agarwal from Param Capital.

36:54 Yes. A couple of more questions from my side. So one is, can you help us understand so in terms of the global card market, if I look at, say, calendar year 'twenty four to calendar year 'twenty five. So as I understand, it's a INR 400 crore global card market. So how it has moved in last one year in terms of year to year? And how are we looking to roughly about, say, 12, 12.5 crore cards, 3%, 3.5% of the global market. Where can we reach in next couple of years of this? So if I have to see the overall global market, after China, US is the largest market with more than 650,000,000 issuance.

37:43 And we are now present in Nigeria, UK, India, which contributes to almost one fourth of the overall global market. And the idea is to look at expanding and growing in this market. So so, Deepa ji, if you look at the... See, basically, we have to understand two things. When we say 400 crore cards, let's say, getting issued every year, typically average validity of the card is, let's say, around four to five years, which means around four to five x of the cards are in circulation. And so this is like and let's say, typically around 70% to 75% cards get renewed and there is incremental demand. So from an overall perspective around the world, cards are going between 2% to 4% year on year.

38:36 2% to 4% year on year on the PVC cards. For metals, there is a Growth of around 15% kind of a growth on an annualized basis globally. Got it. Got it. Got And the legal stamp business, right? So in terms of like as of now, how big the business is, if you can talk about any broader numbers and in terms of the potential in India versus who actually is using it as of now and any RFPs and all by any states for this kind of product? If you see in India, each and every state procures these tax revenue stands it's a significant opportunity which is there in the market. And only people who are having high school security for this have this have upgraded in this market.

39:41 Global market, it is being used in tobacco. It's used in pharma. It's used in alcohol. And there are clear requirements coming up from Africa, US. Multiple markets, there are opportunities, and these are all a long term contract. You want to a single player in a multiyear in nature kind of a contract. Got it. Yeah. Yeah. Thank you so much. I'm done. Thank you. Next question is from Sakshi Chhabra from Swan Investment. Please go ahead. Hi. I just had one question. I want to know that in terms of imports, is all our raw material imported or is some of it procured domestically?

40:43 Yeah. So roughly between 75 to 80% of the materials are imported today, and the balance we procured it domestically. And we also procure all our raw materials from multiple region, like Europe, Singapore, and China. So to... Really from Indian markets, we have a power vendors from multiple. Okay. And is this increase in the pricing pertaining to just the currency depreciation, or is it also because of the crude movement? Yeah. It is a a combination of two, currency as well as the crude. And what would be your outlook on that going forward?

41:33 Yes. So Sakshi, see, basically, as we kind of mentioned, you would have seen on a sequential basis, there was some margin expansion at the EBITDA level also because simply because the rupee didn't depreciate it to the extent what it was, let's say, in Q1 or last year. So obviously, if the rupee doesn't depreciate, it value accretive for us. And second, in terms of our outlook, I mean, it is difficult for any... It's anybody's guess given the geopolitical scenario currently. But as things normalize, we we should... It it should be an upward trajectory at our end. Okay. Alright. Yeah. Thank you and all the best.

42:22 Thank you very much. That was the last question in queue. I would now like to hand the conference over to the management team for closing comments. Yes. Thank you all for joining online and being part of the call, Prahlia and Dhar. Thank you. Thank you very much. On behalf of Manipal Payment and Identity Solutions, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.