Manipal Payment and Identity Solutions Limited (MPIMANIPAL) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Manipal Payment and Identity Solutions Ltd. Earnings Conference Call. Please note that this call is being recorded. I now have 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 FY27 Earnings Conference Call. We have with us Mr. K. Girishkini, CEO and Executive Director, Mr. Ramanath Pai, Chief Financial Officer, and Mr. Mayank Bhotika, Head Strategic Finance and Treasury. We will begin the call with opening remarks from the management, following which we will have the forum open for an interactive Q&A session. 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 this second quarter, and first half of FI27. Let me start with the numbers. We have started the year on a strong note. In H1 F527, revenue from operations grew 40% year-on-year to 849 crores. Operational EBITDA grew 29% to 255.5 crores. And our profit after tax grew 45% to 158.6% in Q2FI 27. Revenue grew 34% to 430.4% 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. Grew more than 23% in H1, FI27. 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 covers international payment cards, metal cards, tax stamps, and RFID. Grew 92% in the first half. 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 businesses 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-size private banks across Africa. Through our partners, we also added customers in South Asia and the Middle East. In addition to the four new countries we entered in Q1. On our last call, we outlined our plan to set up a personalization bureau in developed markets this year. I am pleased to share that our UK bureau is now operational. It is an important milestone in our international expansion. It brings us closer to our existing customers in the UK and strengthens our ability to win businesses across the UK and Europe. We expect it to start contributing to the revenue in the second half. International businesses was 12.8% of our revenue in the first half compared with 5.4% last year. We continue to win new businesses. In first half, we have added more than 30 new customers. Majority of them were outside India. In metal cards, we are seeing growing demand for premium payment cards, 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 have patented 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 tax stamp are both high margin businesses, and we continue to invest in them to drive growth in India and internationally. We are investing ahead in new geographies and businesses. In first half, the seeding costs for this were about 16.5 crores after tax. As this investment starts to earn, we expect them to support our margins. Ramanath will take you through the numbers in detail. Looking ahead, our pipeline uses good visibility for the second act. In government ID, we are anticipating in state tenders for polycarbonate, driving license and vehicle license cards, 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. Historically, the second half has been stronger for our business. Supported by these opportunities, our growing international footprint and strong execution, we remained confident of closing FY27 in line with our revenue guidance of 30-35% 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 businesses are growing, our international expansion is progressing as planned, and we continue to win new customers in India and abroad. 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 FI27. All comparisons are year-on-year basis, unless stated otherwise. Revenue from operations for Q2FI27 was 430.4 crore, up 33.6%. While for H1FI27, Revenue stood at 849.4 crore, up 40.3%. Revenue from core business was 294 crore in Q2, up 23% from 239 crore. And Rs. 556 crore in H1, also up 23%. Revenue from Our emerging business was 136 crore in Q2, up 63% from Rs.84 crore, and 293 crore in H1, which is up 92%. Emerging contributed 31.7% of our revenue in Q2, against 25.9% a year ago. And 34.5 percent in H1 against 25.2 percent. Operational EBITDA, which excludes other income, was 131.3 crore in Q2, which is up 17.5 percent, with a margin of 30.5 percent. For H1, operational EBITDA was 255.5 crores. up 29.1% with a margin of 30.1%. Margins were impacted by adverse forex movements and elevated import cost due to geopolitical tensions. Depreciation rose 22.4 crore from 11.9 crore in Q2. As our asset base grew with new facilities and equipment including metal card machines. Profit after tax was 80.9 crore in Q2 up 7.7% and 158.6 crore in H1 which is up 45.4%. Pat margin for H1 improved by 67 wages points to 18.7%. Our reported profit carries seeding and development costs for new businesses, geographies, and facilities of about 8.7 crore in Q2 and 16.5 crore in H1 cumulatively after tax. Our top 10 customers contributed just over 52% of H1 FI27 revenue as new customers and our international business continue to widen our base. Networking capital was 96 days at the end of September, again 74 days in a year ago, and 78 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, receivable days are typically higher in the first half of the year and normalized 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. Net proceeds from fresh issue were about 295 crore, primarily year marked for growth capex. As of September 30, 2026, cash and cash equivalents, including current investments in mutual funds, stood at Rs. 459 crore. Including the unutilized IPO proceeds of 295 crores and 62 crores held in escrow account for issue expenses, while borrowings remain negligible. Our annualized ROCE and ROE stood at 38.06% and 31.02% respectively, as of H1FI27. Our planned growth capex is focused on expanding manufacturing capacity, scaling international operations, and strengthening our presence in high-value businesses such as metal cards and tax stamps. These investments are expected to generate attractive returns as the new capacities become operational and utilization levels improve. We also expect the resulting operating leverage to support our margins 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. Anyone who wishes to ask questions may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. 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 1.

The first question is from Iyash Mehta from Baroda BNP Paribas Mutual Funds. Please go ahead.

Hi, good evening. Thanks for the opportunity. Am I audible?

Yeah, we can hear you.

Yeah, hi. Congratulations for a good set of numbers. Just want to understand two quick points. Firstly, on the international card witness. So, while we see that H1, there was increase in your mix of the growth engine, but however, on a QOP basis, there seems to be some decline in the revenue coming from the emerging business. The QOQ, 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 mixed change? And secondly, what is the contract or maybe the order part line for the H2 for the exports cart business or the metal cart business brand? Those are the two questions I would like to basically know.

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 Nigeria, we have added more than 20 customers during H1. And given our UK region, we have been doing good amount of revenue from India. And for the H2, we are confident on the guidance we have given for the international business.

Yeah, yes, on the margin portion. So it is primarily because of the sales mix and the product mix. So even if you say simply our domestic business as well, the mix might change between private to PSU where the margin may change, 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 an 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?

Yeah, so two portion 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, considering the mix which is changing currently, and as we mentioned earlier as well, metal card and tax stamps are our margin equity to businesses. And as we move ahead, as we increase our revenues in those segments, there should be a good margin coming as we move ahead.

And what will be the mix of picks coming from the metal cards and the tag stamps right now in Q2, and what was it like one year back?

See, overall, emerging business was 25% last year.

No, no, not the emerging one. Just the metal cards and the tag stamps with our margin operating.

Yeah, so, yes, as we mentioned, we divide the portfolio into two parts, growth, emerging business and the core business. So, within that individual segment, we do not classify, but as Raman aluded, tax funds and metals are higher margin accredited and growth businesses for us.

Got it. Got it.

Perfect. Thanks.

Thank you.

Before we take the next question, a reminder to participants that you may press star and one to join the question queue. The next question is from Aditya from Vendis Park. Please go ahead.

Hello, my audible. Yeah, we can hear you. Yeah. First of all, congratulations on your good set of numbers. My first, my question is on the emerging segment business. Considering it consists of a 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 phase or something like that. Can you give me some picture on that part of it?

If you see our emerging business, we have international payment cards, metal, tax stamps, and IoT and RFID solutions. In the international payment cards, now we are present across five regions, and we have started our Nigeria operation, and the revenues have been constantly flowing from the 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 one of the large growth markets. And on the metal side, in the domestic market, we are doing multiple variants across all the top issuers today in the country. And with the opening of markets in UK, Nigeria, with the presence in more than 5 regions, and with our patents across the metal card, we are confident to expand this metal card portfolio in our MRE segment. Tax terms, we have one large project in Q1. 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 large segments in terms of growth. RFID, we have been doing good amount of work in retail. Now, we are looking at jewelry, government, and healthcare, and the FMV sector in the RFID movement, and this is growing at a 15% kind of a target in terms of progress.

Okay, my next question is on our core business. How insulated are our margins against this rising import cost? Like, does our contracts with our fellow customers, 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? Just want to know an idea on that part of it.

So, overall, we have multiple set of customers, PSU, private, fintech, cooperative bank, etc. In case of PSU, it will be largely driven by RFP process, where the contract will be a long-term contract between 2 to 3 years, in some cases 5 years, and the pricing will be fixed for the 10 years. 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 cooperative banks or printage, we can go back to the customers and we can renegotiate the pricing.

So, usually our contracts are multi-year in nature, and when we are pricing the contract, we ensure, we plug in or factor in all these kind of variances happening in the contract.

Thank you. That's it from my side.

Thank you. Participants who wish to ask questions, please press star and 1. Next question is from Deepak Agarwal from Param Capital. Please go ahead.

Yeah. Hi, team. Am I audible?

Yeah. Deepak, we can hear you.

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?

Yeah, 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. 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 this share stabilizing?

So, Deepanji, on the international missions, 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, if you look at it, a lot of these businesses are actually going global. So, to really give you, for example, let's say metals is obviously a global offering for us. So is, let's say, PVC cards. And even in fact, 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 the direction is most of the businesses which are seeded domestically is now getting international traction and which is leading to growth for us globally.

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. 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 onward in terms of the EBITDA to revenue growth?

Yeah. 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-exceptive. So as we get increased revenues from these two segments, there will be definitely a margin increase or uplift possibility as we move it. However, any factors which is outside our purview, like forex movements or for that matter, global geopolitical tensions, we'll have to normalize that. But directionally, if we are on the right move, to increase our ramachage.

Yeah. And just to add to Ramla, see, if you look at it, as you kind of mentioned, the export mix is increasing, which basically becomes a natural hedge to the imports. And if the rupee doesn't slide to the extent of the rupee definition, which we've seen last year, then obviously that gives us, I mean, it becomes margin accredited for us. That's one. And second, broadly, The overall idea is that, as we said, we are trying to get into markets and businesses which are further margin-accredited. So, where you see, because there's a revenue-based increase and there's a better fixed-cost absorption. So, with these two factors, we believe, along with, let's say, the sales mix changing, overall, we are looking for better margins, This provided geopolitical and the rupee is in control.

Got it. My last question was on this depreciation. So, if you look versus our relative peers for hard depreciation on the kind of thick asset we run, that seems to be on the higher side, which is a good thing because you are depreciating it much faster. Typically, I think the net block is closer to about 380 crores, and on that, roughly this quarter we did 22 crores. So we are almost, in three years, we are writing off the asset. So, your thoughts of, if I look at Q2, last year was about 12 crore, now we are at 22, year on year. So, this space 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. So, how should we compare it?

Thank you for that question, Deepakji. So, we cannot comment on the competitors, but definitely on our balance sheet. See, last year we have invested roughly around 135 crores in assets. This year, till H1, we have invested around 58 crores. So overall asset base is increasing. And as we mentioned earlier as well, as a policy, we had taken a strategy that 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 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. And overall, the life of the assets will be between, again, depending on the machine, between 7, 10 and 15 years.

In a way, so your cash fat is much higher, right? So it will be actually closer to 100 crore fat already, if I look at the cash fat. Thank you so much. Thank you. I'll come back.

Thank you. Before we take the next question, a reminder to participants that you may press star and one to ask questions. The next question is from Sunil Jain from Nirmal Bank Securities. Please go ahead.

Yeah, thank you very much for the opportunity and congratulations on good number. Sir, my question relates to customers' additions in the international market. You said that Nigeria, you added around 20 customers in H1. Can you talk about the situation in UK and US? 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 say 2 years back. And with the credentials we have with the largest customer, we are in good connect with all the tier 1, tier 2 and the fintechs. And if you see UK as a market, there are more than 200 fintechs in the market. And with our metal card patent, we are very kind of very confident to enter into 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 from the UK region, and US also, if you see, it is a very, very large metal card market. More than 30-40 million cards are issued on metal. And we have our sales teams even in the US region, and yeah, we hope to see some revenues coming in the year, even from this region.

So, any breakthrough expected from any of the large bank in next H2?

We will inform us and when we progress.

Okay, fine. Second question relates to the fret cost. The fret cost has increased substantially, almost doubled year on year. Can you talk about this? Why is this happening? And even also, quarter-on-quarter, it has increased substantially.

Yeah, so Nirmansi, this is related to a direct paid cost. So, one of our businesses also into integrated logistics management, where we deliver the cost end-to-end to the beneficiaries of our customers. And as we increase that bundled offering services, there is an attached cost of courier cost for this business. And this is exactly goes in line with the business with these customers for bundled offerings. So it's a direct cost other than an indirect cost.

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 a lot of transit projects, and there are multiple projects in line for transit. The largest project which we did in Maharashtra, it has built a large use case in which other states are also popping. And credit cards have also been growing, and we are confident too.

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 course to that. And we have also given guidance that between FY27 to 29, we believe there is a 25% tagger 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.

Ladies and gentlemen, to ask questions, please press star and 1. The next question is from Nihar Acharya from India SME Investments. Please go ahead.

Hi, Tim. 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 extend that bit? And second is on the international business, you mentioned that we are, you know, going aggressive in the UK and Nigerian markets. So, what are the expected timelines from the business that will come from UK and, you know, on the personalization bureau front 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 expense is around 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 240 crores, which is earmarked from IPO process into assets. So capacity increase is not a challenge here. However, with the current capacity, the utilization is around between 75 to 80%.

In the Nigeria operations, we have started personalizing and delivering cards to customers in Nigeria, and in the UK, as mentioned, we will be showing traction in the second operation.

Okay, good.

Thank you.

Thank you.

Participants who wish to ask questions, please press star and 1. Ladies and gentlemen, to ask a question, please press Start and 1.

The next question is from Deepak Agarwal from Param Capital. Please go ahead.

Yeah, a couple of more questions on my side. So one is, can you help us understand, so, in terms of the global card market, so if I look at, say, calendar year 24 to calendar year 25, so as I understand, it's a 400-pro global card market. So how it has moved in last one year in terms of year to year? And how are we looking? So roughly about, say, 12, 12.5 crore cards, we have 3.5% of the global market. Where can we reach in the 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 million issuance. 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 these markets.

So, Deepuji, if you look at, 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 4 to 5 years, which means around 4 to 5x 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 growing between 2% to 4% year-on-year, 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 analyzed basis globally.

And the liquor 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 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 this tax revenue stand, and it's a significant opportunity which is there in the market highly, and only people who are having high school security funding capabilities are present in this market. Global markets, 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, U.S., multiple markets, there are opportunities, and these are all long-term contacts given to a single player, multi-year in nature, kind of a contract. Thank you.

Thank you so much. I'm done.

Thank you. Before we take the next question, a reminder to participants that you may press star and 1 to ask questions. Next question is from Sakshi Chhabra from Swan Investment. Please go ahead.

Hi, I just had one question. I want you to know that in terms of imports, is all our raw material imported or is some of it procured domestically?

Yeah, so roughly between 75 to 80 percent of the materials are imported today and the balance we procured domestically.

And we also procure all our raw materials from multiple regions, like Europe, Singapore, and China. So, to derive from individual markets, we have vendors from multiple levels.

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 combination of two. Currency as well as the crore move.

Okay. And what would be your outlook on it going forward?

Yeah, 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, 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 is value-accredited for us. And second, in terms of our outlook, I mean, it is difficult for anybody's guests, given the geopolitical scenario currently. But as things normalize, it should be an upward trajectory at our end.

All day. Thank you and all the rest.

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. Well, yeah, and thank you.

Thank you very much. On behalf of Money Mall, Payment, and Identity Solutions, that concludes the conference.

Thank you for joining us, ladies and gentlemen.

You may now disconnect your lines.