NPST - Technology Provider for UPI Tech

[avneesh]

Established in 2013 Network People Services Technologies Limited (NPST) is a Fintech Company focusing on Digital Payment Solutions like UPI, IMPS, Mobile Banking & Wallets to Banks and Payment Companies.
NPST is an authorised Merchant Payment Service Provider, approved by NPCI, providing payment solution to aggregators, merchants and users across various segments. NPST operate as “NPCI Approved Merchant PSP” digitizing Merchant acquiring space under the brand name of "TimePay”.

Currently, the company is providing its services under two verticals i.e. Technology Service Provider (TSP) and Third Party Payment Application Provider (TPAP).

Technology Service Provider (TSP) (For Banks & Financial Institutes)

1. Switch Products IMPS | UPI | Mobile Banking Solution (Revenue model: Licensed model)
2. Super App – integrated Mobile App for Banking services (Revenue model: Pay per transaction)
3. Qynx – Merchant switch (Revenue model: Subscription): Qynx is a Digital Merchant platform for banks that provides a complete suite of services and products to manage and operate Merchants of various sizes and categories. The solution provides an end-to-end product stack to digitise your merchant network and increase revenue potential through digital offerings. A must-have product for banks & fintech to create merchant stickiness to acquire new business.
4. ODR

Third Party Payment Application provider (TPAP) (For Payment Aggregator and Merchants)

1. EVOK - UPI (API) engine (Revenue model: Pay per transaction): TimePay Evok is an API based Payment platform empowering business with flexibility of real-time UPI transactions and innovative payment channel integrated with reconciliation module. Delivering UPI payment solution being one of the approved TPAP.
2. UPI plug-in
3. Payout solution
4. Merchant ODR

Notes on Timepay app: this is actually called the payee business, where we give the APIs to our merchants or payment aggregators, where the sponsor bank is Cosmos. As part of this ecosystem, it is mandatory that we have a PSP application in the market. So, it was a mandate piece due to which we actually brought that application in market. We never promoted. We never pushed it, because our focus was always this API business, the merchant business.

API business (EVOK): when we give the API, we give it to payment aggregators and payment gateway on the bank platform. So, we play a technology API role in this particular segment. And those who are authorised to acquire merchants in market, or those who are merchants in market, those who need collection technology on UPI, or they need collection API, where they can collect funds for the services and the goods they sell in market. Or, re-sell those things, like payment aggregators and payment gateways.

So, these are the guys who take services from us. In order to do that, in order to manage the platform, right from the compliance, the reconsideration, the technology fees, the infrastructure, and the support system, the operations, there is a whole gamut of business that has to be built around it. And there is a cost around it. So, for that, we charge our payment aggregators and merchants on a SaaS model.

And I would say that those who are in merchant aggregation business, there are 30 odd accounts that we have in this particular segment, including something like PayG, EaseBuzz, or we are already in the final stage with Cashfree. So, these are the guys who would be using our services.

They have processed 4200 crore volume via their API in this quarter. It is only 0.1% of the total API business.

How NPST helps banks as TSP? We provide the interoperability switch between NPCI and bank. Okay, so every bank who wants to be on the UPI ecosystem, they need a partner like us. Because this is not the engine which is part of their core banking. This is a separate engine altogether which connects the bank’s core banking with the NPCI ecosystem and only then they participate in the UPI applications such as you transacting on a Canara Bank account on a Google Pay app. So, you need a processing engine in Canara Bank to connect to NPCI, only then Canara Bank will be in Google Pay app.

Revenue Split: Two third portion is from Evok business and one-third is from other business.

New area of growth:

1. When we acquire new bank accounts for example in UPI Switch, so whenever we have a new business around UPI Switch that is where our contribution to this particular percentage you mentioned will increase so State Bank of Mauritius India Limited is one, one account around UPI Switch we have acquired.
2. Qynx which is a merchant acquiring platform.
3. If they can acquire e-commerce or gaming customers then their revenue may increase with API business.

Extra Notes:

1. Launched 6 products in the Global Fintech Fest. Got a lot of inquiries. Going into POC stage with some customers.
2. They got State Bank of Mauritius India Limited order in this quarter. It’s a big order that will have an impact across TSP as well as API business.
3. Launched “Super App Canara ai1” with 100 Lakh+ User Base
4. Processing 390 Lakh+ Daily UPI Transactions as TSP for Banks

Results:

Risks:

1. Business is a little complicated to understand.
2. HDFC and SBI already have their partners. They control the real volumes in the market.
3. Government banks might be the only probable customers for their super app business.
4. Technology might become obsolete with time. NPCI keeps on introducing new tech.
5. Overpriced at 85 PE.

Investment Rationale:

1. Technology business growing with the UPI volumes.
2. They have an aspiration to achieve the top five digital transaction volumes in India in the next 5 years.
3. Currently they are handling 0.1% of the API volume. They have ample room for growth.
4. Management has relevant industry experience.

It would be great if people from the industry could share more insights on this API business (EVOK). As far as I can understand this is an actual area of growth for them.

Disclosure: Not invested
Current Market Cap: 1300 cr.

[hamir_asher]

Attached is the concall transcript which has lot of details of what the company is doing and where it sees itself in the near future.
NPST_30102023112515_NSEIntimationTranscript.pdf (1.5 MB)

[r8b8]

My notes from latest concall i.e half yearly ended 30th September, 2023

• Believes coming decade or even beyond belongs to payment technology.

• Currently working, executing about four bank orders, which we got somewhere in Q4 last year and Q1 & Q2 this year, which we see having a good impact on the organization maybe two quarters later.

• Focus is on horizontal as well as vertical growth. Targeting certain business segments which are non-existent in our existing set of APIs.

• Our vertical growth is well-planned. Funnel looks good for now. We see impact coming in maybe two quarters later, considering the sales cycle.

• Invested heavily last quarter on Global Fintech Fest, got a great insight on the industry, also got a lot of inquiries coming in from various segments in the market for the product that we built.

• Earlier acquired Bank of Maharashtra order. This time, we got State Bank of Mauritius India Limited order as well. Will have an impact across TSP as well as API business.

• Business has two segments. One is the technology partner role that NPST
  plays with banks. Second is technology partner role that NPST plays with FinTech. When it
  comes to the value creation, our first business, where we work with banks, that
  is extremely important because that’s where we are actual owners of the processing engine, When you own a processing engine, you get the flexibility to push your business. When it
  comes to P&L, I think you should be looking at the API business because there we have a larger
  market to target.

• Revenue split is one third and two third, between TSP and API business.

• Volumes of processed UPI transactions will increase with:

  1. As and when we acquire new bank accounts. So should incerase with State Bank of Mauritius India Limited order win.
  2. Traffic on our existing banks increase.

• Aspire to continue the same growth trend for the next year as well.

• Currently processing 0.1% of total API volume, target is to have at least 20x market share from here on.

• NPST is currently processing 4 crores UPI transactions per day. Growth should follow the UPI growth trend which we are expecting to grow from 10 billion to 30 billion transactions per month in next two years.

• Currently processing 1.4 million monthly merchant transactions on Evok. Targeting 2.5x from here onwards for FY ‘25.

• Shifting from SME to main board ~ August 2024.

• Confident on achieving at least 14% to 15% revenue growth on a quarter-on-quarter basis for next five years.

• No seasonality in the bussiness as of now because the payment requirement is year round.

Disclosure: Invested.

[Bijender_Goyat]

I download their Timepay app in mobile.But not opening. It is similar app to Google pay, phone pay but not working like these.

[abhikjha]

Thanks for the detailed write up. Who are it’s competitors? Is NPCI a competitor? Also, any idea who’s got HDFC, SBI and ICICI?

[r8b8]

@abhikjha

Is NPCI a competitor?

No. You can go through the concall to understand where they sit between the whole ecosystem.

@abhikjha

any idea who’s got HDFC, SBI and ICICI?

In my understanding it is https://www.mindgate.solutions/

Source: How Mindgate Is Powering India’s Digital Payment Engine | Blog
Source: 1 million digital transactions processed by SBI UPI switch within 1 hour - Mindgate Solutions Private Limited

[avneesh]

@Bijender_Goyat

I download their Timepay app in mobile.But not opening. It is similar app to Google pay, phone pay but not working like these.

As per the Q2 concall:

As part of this ecosystem, it is mandatory that we should be having a PSP application in market. So, it was a mandate piece due to which we actually brought that application in market. We never promoted.
We never pushed it, because our focus was always this API business, the merchant business.

So, right now, the app is at a CUG stage. So, you may not find much traction. Neither the organization is talking a lot about it. So, when we have a plan, when we have a concrete way ahead, that is the only time when we will push it further. And you will come to know about it.

[Vivek_Chadha]

Any comments on the valuations?

Unluckily missed it around 800 (due to fund shortage)

PE and P/S is at peak, any comments?

[avneesh]

@Vivek_Chadha

Any comments on the valuations?

It’s extremely hard to comment on valuations. As it would require to predict the future.
But we can break down the future into three possible scenarios:

1. QoQ growth goes negative but YoY retains: Stock will go for time correction
2. QoQ and YoY both go negative: Depending on management commentary, the stock will go for derating or correction.
3. General market correction (high chances in the small-cap): Stock will go for correction along with the market.

Chances of #1 and #2 are low as management has stated in concall that they are confident of achieving 14 to 15% revenue growth on a QoQ basis for the next five years (the market is trusting this statement for now). The PE of 90 might look expensive but if they are able to grow at the same pace then earnings will compensate for the increase in price.

My personal advice is you may take a position at this moment only if you have extra funds to average it in the future.

[Lokesh_Taneja]

@abhikjha

Also, any idea who’s got HDFC, SBI and ICICI?

Competitors- Mindgate (40-45%), Olive Crypto, FSS, FIS, Kia, all 6 players together handle 95-96% volume

Source: https://youtu.be/aLGFNSajWT0?t=1666

[Bavneet]

Thank you for sharing the video link…super helpful in getting clarity around the business model

[mishraanoopam]

Found this: https://nitter.net/ankitbahuguna84/status/1730273122073637108#m
Any source for 20% month on month growth in Evok?

[Mayur_Dvivedi]

Hi

In one of the previous management interactions they mentioned they have 2nd largest market share in the area they operate and that the first player is not listed. Any idea as to which this largest player is?

[Investorscientist]

Mindgate i suppose as listed in the thread above

[Investorscientist]

NPST_25012024140636_NSEIntimationTranscriptOfEGM.pdf (1.9 MB)

[Debojit_Kangsa_Banik]

How will NPST gain market share? If mindgate is the market leader, banks n nbfc will likely to partner with the market leader.
What value addition will NPST provide to gain market share? Lower cost?

[Debojit_Kangsa_Banik]

Crisp interview with management describing all product lines in brief

Emerging Digital Payment Solutions Company with 8% Market Share UPI - NPST Limited

[Investorscientist]

NPST works with smaller PSU and other smaller banks where the people are slowly graduating to UPI transactions. Additionally they have made good inroads into BOM, Bank of Boroda and some NBFCs. Listen to their last 3 concalls you can judge the growth story. Additionally even if they are not market leader still the sector growth is good.

[aadhar.aggarwal]

I am just not sure how will they get additional banks to work with them. Almost all banks would already have tied up with someone for their UPI Switch. Some of them have also tied up with NPST. Why would a bank leave its existing UPI Switch provider and come to NPST?

In my opinion they can protect the business that they already have. And they will get the underlying growth in the banks already using them. But what’s the plan to pull away banks from competitors? Please suggest

[Debojit_Kangsa_Banik]

Just pinning down my thoughts, will delete if found unnecessary

• EVOK business is quite fascinating, need to understand who are the competitions in that space. Mindgate seems to be doing the same in their merchant mgmt platform. Link
• Why can’t CRED or any other player expose their APIs externally?
• They mentioned their vision is their moat, as they are able to understand this market space well.
• UPI launched in France, if we believe UPI will go international in long term, then they have huge scope to grow. Imagine what if they can tie with a big bank in future.