Tuesday 17 November 2015

Wirecard (WDI GY) ... GI Retail and a rapidly shrinking market share

Tuesday 17th November 2015

Were one to buy or invest into a business, paying up to say €340 million, or c. 49 x run rate EBITDA, then on that multiple there's a few criteria of investment one may look to tick off. In this list would be a fast growing underlying market. One would also seek the presence of a high barrier(s) to entry or, absent this, at least some sort of first mover advantage. There's no denying that the Indian payments market is growing rapidly.   

Financials of Wirecard's acquisition of GI Retail Group
Source: Wirecard

Data, data, payments data

The World's major central banks generally provide what seems like an endless amount of economic and financial data. The Reserve Bank of India (RBI) is no exception.

Below is the section from the RBI's November 2015 bulletin pertaining to transaction values and volumes by a range of payment and settlement systems. This data is published monthly and goes back many, many years.  

Indian Payment and Settlement Systems data July-September 2015
Source: Reserve Bank of India - November 2015 Bulletin
The data can be found at this link here
Historic data can be found here

The data that is of interest is that found along the Immediate Payment Service and Prepaid Payment Instruments (PPIs) rows. 

This data shows that in September 2015 there were:
  • 17.7 million Immediate Payment Service transactions.
  • 120.7 billion Indian Rupees worth of Immediate Payment Service transactions.
  • 58.0 million Prepaid Payment Instruments (PPIs) based transactions.
  • 40.8 billion Indian Rupees worth of Prepaid Payment Instruments (PPIs) based transactions.

At a rate of c. 71 EUR:INR this equates to:
  • €1.696 billion worth of Immediate Payment Service transactions.
  • €0.573 billion worth of Prepaid Payment Instruments (PPIs) based transactions.
  • €2.269 billion in total.

Commission fees in the payments space typically range from 1% to 1.5%. Indeed, Suvidhaa's commission rate was reportedly c. 1.37% as highlighted in my prior post: Suvidhaa vs. GI Retail.

Further, Dan McCrum's latest feature, Rupee do, from his House of Wirecard series, shows how GI Retail's Hermes i-Tickets business appeared to earn gross commission of c. €1.6 million on total sales of c. €185 million in the year to 31 March 2014. This is a c. 0.9% rate of commission, which is somewhat lower than the typical 1% to 1.5% range. Hermes' commission was also seemingly principally related to airline and railway ticket bookings and less so to money transfers.

However, what Wirecard says is that the GI Retail Group as a whole achieved revenue as follows:
  • FY13/14 (31/03) 1,109.2 million INR or €15.8 million in revenue.
  • FY14/15 (31/03) 2,677.6 million INR or €38.3 million in revenue.

and is projected to achieve
  • FY2015 (31/12) €45 million in revenue.
  • FY2016 (31/12) €75 million in revenue.  

Presumably all this revenue (achieved and projected) is largely related to payments and money remittance. Indeed Wirecard's CEO, Markus Braun says as much:
"Great Indian (GI) Retail Group has been at the forefront of India's dynamic and early-stage e-commerce and money remittance market for many years. Our investment into one of the region's leading payment groups secures us a strong position in one of the world's most rapidly growing electronic payment markets."
Hence, if commission rates are in the range of 1% to 1.5%, then if we assume GI Retail earns mid-way in this range, receiving 1.25% of total transaction value, then this would imply the following:

  • FY13/14 (31/03) 1,109.2 million INR or €15.8 million in revenue = c. 88.736 billion INR or €1.264 billion in transaction value.
  • FY14/15 (31/03) 2,677.6 million INR or €38.3 million in revenue = c. 214.208 billion INR or €3.064 billion in transaction value.
  • FY2015 (31/12) €45 million in revenue = c. €3.6 billion in transaction value. 
  • FY2016 (31/12) €75 million in revenue = c. €6.0 billion in transaction value. 

The data goes back a few years

As mentioned above, the RBI Payment and Settlement Systems data goes back some time. Well it goes back to 2013 and a bit before that.

Here is the Payment and Settlement Systems data from the Reserve Bank of India's May 2014 bulletin:
Indian Payment and Settlement data January-March 2014
Source: Reserve Bank of India - May 2014 Bulletin
This shows that in the twelve months to March 2014 there were:
  • 15.3 million Immediate Payment Service transactions.
  • 95.8 billion Indian Rupees worth of Immediate Payment Service transactions.
  • 144.3 million Prepaid Payment Instruments (PPIs) based transactions.
  • 79.05 billion Indian Rupees worth of Prepaid Payment Instruments (PPIs) based transactions.
At a rate of c. 71 EUR:INR this equates to:
  • €1.349 billion worth of Immediate Payment Service transactions.
  • €1.113 billion worth of Prepaid Payment Instruments (PPIs) based transactions.
  • €2.462 billion in total.
As highlighted above, Wirecard's claims for GI Retail's FY13/14 (31/03) revenue should imply it was related to c. €1.264 billion in transaction value.

That would suggest that GI Retail had c. 51.3% share of the combined Immediate Payment Service and Prepaid Payment Instruments transaction business that was up for grabs in the twelve months to March 2014.

That seems quite a lot.

Skip forward a year and here is the Payment and Settlement Systems data from the Reserve Bank of India's May 2015 bulletin:

Indian Payment and Settlement data January-March 2015
Source: Reserve Bank of India - May 2015 Bulletin

This shows that in the twelve months to March 2015 there were:
  • 78.4 million Immediate Payment Service transactions.
  • 581.9 billion Indian Rupees worth of Immediate Payment Service transactions.
  • 314.5 million Prepaid Payment Instruments (PPIs) based transactions.
  • 213.4 billion Indian Rupees worth of Prepaid Payment Instruments (PPIs) based transactions.
At a rate of c. 71 EUR:INR this equates to:
  • €8.195 billion worth of Immediate Payment Service transactions.
  • €3.005 billion worth of Prepaid Payment Instruments (PPIs) based transactions.
  • €11.2 billion in total.
As highlighted above, Wirecard's claims for GI Retail's FY14/15 (31/03) revenue should imply it was related to c. €3.064 billion in transaction value.

That would suggest that GI Retail had c. 27.4% share of the combined Immediate Payment Service and Prepaid Payment Instruments transaction business that was up for grabs in the twelve months to March 2015.

That seems quite a lot but is down from the c. 51.3% share it appeared to have a year earlier.

Now, bringing this up to where Wirecard reckons GI Retail will finish the year shows as follows.

The RBI data indicates that transaction value related to Immediate Payment Service and Prepaid Payment Instruments totaled €16.705 billion during the nine months to September 2015.

Transaction value has been increasing by an average €123 million per month during 2015. On that basis, total transaction value related to Immediate Payment Service and Prepaid Payment Instruments would be expected to total €24.266 billion* during the twelve months to December 2015.

Now Wirecard reckons GI Retail's FY2015 (31/12) revenue will be c. €45 million, which should imply it will relate to c. €3.6 billion in transaction value.

That would suggest that GI Retail had c. 14.8% share of the combined Immediate Payment Service and Prepaid Payment Instruments transaction business up for grabs in the twelve months to December 2015.

That still seems high but is down from the c. 27.4% implied to March 2015 and the c. 51.3% implied to March 2014.  

*Total transaction value in the nine months to September 2015 = €16.705 billion.
Total transaction value in September 2015 = €2.275 billion.
On average total transaction value has increased by €123 million each month in the first nine months of 2015. 
Hence, expected total 2015 transaction value = €16.705 billion (9 months to September) + €2.275 billion + €123 million (September + average increase in the month) + €2.275 billion + 2x €123 million (September + 2 x average increase in the month) + €2.275 billion + 3x €123 million (September + 3 x average increase in the month) = €24.266 billion.

Incidentally, as a corollary, if Wirecard expects GI Retail's revenue to rise to €75 million in 2016, then for GI Retail to maintain (or grow) its implied 2015 market share, then market growth needs to slow to (or fall below) 67%. This is still strong growth but would be a sharp slowdown from 214% growth in 2015 and 351% growth in 2014.

And another thing

As Dan McCrum amusingly^ highlights in his latest feature on Wirecard, Hermes is signed up with India's Yes Bank to provide money transfer services. Now you might think that on the basis of GI Retail's implied market share of c. 51.3% from a few years back, that Hermes/GI Retail was either the only (or one of very few) to be signed up with Yes Bank. You'd be wrong to think that.
^Look for the section on an unusual headline. 

Here is Yes Bank's latest list of Money-Business Correspondents:

Yes Bank's list of Money-Business Correspondents
Source: Yes Bank November 2015
And here is Yes Bank's list of Money- Business Correspondents from August 2013, around the time it would seem (on the basis of above) that Hermes/GI Retail had c. 51.3% of the combined Immediate Payment Service and Prepaid Payment Instruments market.

It was clearly slim pickings for the other twelve members signed up with Yes Bank. Of course Yes Bank is only one of many retail banks in India.

Yes Bank's list of Money-Business Correspondents
Source: Wayback Machine - Yes Bank August 2013 

Just one more thing

Wirecard highlights that:
"The National Payments Corporation of India (NPCI) ranks GI Technology as number one bank's remitter among 123 members as of 6th October 2015."
And here is the NPCI's website showing GI Technology with c. 3.7 million subscribed users (1 lakh = 100,000).
Prepaid Payments Instrument Issuer subscribed users
Source: National Payments Corporation of India
Strangely the only other subscribed user data is provided for ITZ Cash Card. One can see why one may reckon that Wirecard views GI Technology as being the number one bank's remitter.

But this may not have always been the case.

According to the NPCI, in December 2014, GI Technology had c. 1.4 million subscribed users while Oxigen Services had 50% more or c. 2.1 million subscribed users.
Prepaid Payments Instrument Issuer subscribed users
Source: Wayback Machine - National Payments Corporation of India December 2014
And prior to this, in May 2014, GI Technology had c. 0.5 million subscribed users while Oxigen Services had c. 0.9 million subscribed users. These numbers are indeed odd, when at the same time, going on Wirecard's claims for GI Retail revenue and the RBI data, it would appear that GI Retail had c. 51.3% market share.

And finally

Here is the iCashCard website, "India's number one domestic (Immediate Payment Service - IMPS) remittance instrument":

iCashCard website and click option for Agent Login
Source: www.icashcard.in
If you click on the "Agent Login" option (highlighted above) it takes you here:

iCashCard Agent Login site
Source: http://agent.icashcard.in/login
And if you click on the "Want to become retailer click here to apply provide us details. We will reach you shortly" option, it takes you here:

GetMyTrip application/enquiry form
Source: www.getmytrip.com
Why does an application to become a retailer for the iCashCard payments business ("India's number one domestic remittance instrument") take you to the Hermes' travel agency site, Get My Trip? This is altogether very odd.

I increased my short in Wirecard.

Disclaimer: The information, discussions or topics referred to on this blog should in no way be considered “advice” to buy or sell anything. The information which may be referred to is freely available in the public domain and where required the source of information is referenced to for verification. While every effort has been made to ensure the veracity of any information contained within this blog, the author accepts no responsibility for the accuracy of any information contained within this blog or for the sources of information which may be referred to. Readers are responsible for their own actions and interpretation of the information contained within this blog.

Friday 6 November 2015

Atkins (ATK LN) ... as night follows day

Friday 6th November 2015

Coming up to two years ago I sold short in Weir Group (WEIR, mkt cap £2.4bn), at 2,094p/shr.
Demand driven short

I quickly covered the short about a month or so later at around 2,300p/shr. I closed in the midst of a sharp run up in Weir's price, driven by spurious bid speculation and a short squeeze; short interest at the time was 12%. The market then was also fairly unforgiving for shorts, still being juiced by QE, statements of "whatever it takes" and all that.

Weir's shares peaked at 2,848p and loitered above 2,500p through to September 2014. 

It's a pity I didn't review my bearish view on Weir in H2 2014. The shares have since collapsed to 1,136p.

Weir share price
Source: Bloomberg
The rationale behind my short was pretty straightforward. For months, Weir's customers had been broadcasting an enormous contraction in their collective capex plans in the years ahead. Hence, it was obvious to me, that as night follows day, that Weir's revenue and margins would come under pressure following that contraction in demand from its principal customers. And yet for some reason, consensus earnings expectations remained absurdly optimistic.   

In early 2014, I'd calculated that Weir's top 13 customers* accounted for 32% of its revenue and from those customers' capex guidance, they were about to cut their combined annual capex by 14% over the next three years. At the same time, consensus* estimates projected Weir's revenue to grow 19% over the same period. Go figure!
*data from Bloomberg   

Weir consensus revenue growth projections
from January 2014 as compared to current consensus
Source: Bloomberg
Weir consensus EBITDA margin projections
from January 2014 as compared to current consensus
Source: Bloomberg

That was then 

Now I reckon the same bearish argument could be made for Atkins (ATK, mkt cap £1.4bn), the design, engineering and project management consultancy business.

According to Bloomberg estimates (BBE), Atkin's top 12 quoted customers^ account for 16% of its revenue. Further, BBE suggest that these customers are set to cut their combined annual capex each year by 15% in 2015, 4% in 2016 and a further 2% in 2017. This is a total capex cut of 21% through to 2017 from 2014 levels.

By comparison, BBE forecasts that Atkins is set to grow its revenues by 5%, 3% and 4% in 2016, 2017 and 2018 respectively (Atkins has a March year end). This is total growth of 13% through to 2018 (March year end) from 2015 levels.

Further, consensus expects Atkin's EBITDA margin to rapidly increase from 7.7% in 2014, to 9.4% by 2018.

I find all this very unlikely. So I sold short a few Atkins.

^Bloomberg estimate of Atkin's revenue by customer - Airbus (4.3%), Apache (2.0%), Statoil (2.0%), CNOOC (1.6%), Chevron (1.4%), ENI (1.3%), Boeing (0.9%), Royal Dutch (0.9%), Rolls Royce (0.7%), BP (0.6%), National Grid (0.4%), Alstom (0.2%)

Atkins consensus revenue growth and EBITDA margin forecasts
as compared to consensus capex plans by top 12^ (see above) quoted customers
Source: Bloomberg

Incidentally, Atkins trades on a forward P/E of 12.5x and a forward EV/EBITDA rating of 6.9x when as one can see, historically the shares have traded somewhat lower.

Atkins forward P/E and EV/EBITDA rating
Source: Bloomberg
Atkins share price
Source: Bloomberg

And another thing

As night follows day ... I found the following charts reasonably compelling.

Atkins share price as compared to Apache Corp (2.0% of ATK revenue*)
Source: Bloomberg, *Bloomberg SPLC 
Atkins share price as compared to Statoil (2.0% of ATK revenue*)
Source: Bloomberg, *Bloomberg SPLC
Atkins share price as compared to Chevron (1.4% of ATK revenue*)
Source: Bloomberg, *Bloomberg SPLC
Atkins share price as compared to ENI (1.3% of ATK revenue*)
Source: Bloomberg, *Bloomberg SPLC
Atkins share price as compared to Rolls Royce (0.7% of revenue*)
Source: Bloomberg, *Bloomberg SPLC
I'm short Atkins.

Disclaimer: The information, discussions or topics referred to on this blog should in no way be considered “advice” to buy or sell anything. The information which may be referred to is freely available in the public domain and where required the source of information is referenced to for verification. While every effort has been made to ensure the veracity of any information contained within this blog, the author accepts no responsibility for the accuracy of any information contained within this blog or for the sources of information which may be referred to. Readers are responsible for their own actions and interpretation of the information contained within this blog. 

Thursday 5 November 2015

Wirecard (WDI GY) ... Suvidhaa vs. GI Retail

Thursday 5th November 2015

In my previous post I wrote about Wirecard's acquisition of Great Indian Retail Group

Here are the main details as indicated by Wirecard:
  • Wirecard is set to buy GI Retail for €230 million in cash. 
  • A further payment up to €110 million is possible, linked to the overall financial performance of the acquired businesses in calendar years 2015 to 2017.
  • Consolidated revenue for the acquired businesses is expected to exceed €45 million in calendar year 2015, an increase of more than 50 per cent compared to calendar year 2014. 
  • EBITDA is expected to more than double year on year to exceed €7 million. 
  • Revenue for calendar year 2016 is expected to exceed €75 million and EBITDA after integration costs is expected to be between €15 million to €18 million. 

On this basis, the businesses being acquired under GI Retail appear very attractive. 

Revenue is expected to rise by over 50% in 2015 and increase by a further 67% in 2016. 

The EBITDA margin is expected to be 15.5% in 2015 and rise to somewhere between 20% to 24% in 2016.  

No wonder Wirecard is potentially paying €340 million or c. 7.5x projected 2015 sales or c. 49x forecast 2015 EBITDA to acquire GI Retail. 

In my previous post, I also mentioned a company called Suvidhaa Infoserve Pvt. Ltd. 

Suvidhaa Infoserve Pvt. Ltd

According to Suvidhaa's website, "Suvidhaa is a renowned company in the payment and remittances space." 

Here is the front page to Suvidhaa's website:

Suvidhaa website
Source: www.suvidhaa.com
Suvidhaa says it is a "... leading aggregator of multiple services like utility bill collection, insurance premium, mobile and DTH recharge, travel tickets, money transfer services on a single platform through a network of 80,000 franchises outlets across the country."

About Suvidhaa
Source: www.suvidhaa.com/aboutus
Suvidhaa's website appears somewhat more refined than GI Retail's. For a start it clearly states who the management team is, with detailed biographies for seven members of that team. By contrast, GI Retail's main website mentions nothing of its management. However, GI Technology's website does provide biographies of the group's management.

Further, Suvidhaa's website details the group's investors. These include Norwest Venture Partners, Reliance Venture Asset Management Ltd, International Finance Corporation, and Mitsui & Co. By contrast, GI Retail's website mentions nothing of its financial backers. There is yet another website with details of GI Retail. This is at www.zoomcard.in. It's a rather incomplete site as around half the links do not work including the link that should direct to the group's investors.  

Here is a YouTube video of Suvidhaa's founder and Chairman, Mr Paresh Rajde, seemingly being interviewed on an Indian financial news broadcast.


Here is a YouTube video of GI Retail's Managing Director, Mr Ramu Annamalai Ramsamy, seemingly at a desk in a small cupboard. The video has some editing issues as it's rather jumpy throughout as Mr Ramu Annamalai Ramsamy talks through ICASHCARD.


Customers

  • Suvidhaa claims "3 Crore (30 million) satisfied customers."
  • GI Retail declares to have "... served more than 60 million customers for travel and payment services across our agent network in 2014."
  • GI Technology mentions "GI has fast grown to serve more than 1 crore (10 million) customers in the under banked segment." 

Transactions

  • Suvidhaa claims "1.5 Lakh (150 thousand) transactions daily."
  • GI Retail indicates that "Over the last years we have issued more than 35 million money transfer accounts for financial institutions, including our own ICASH wallet."
  • ICASHCARD YouTube video claims "Every month ICASH wallet is doing close to 1.5 million transactions, helping migrant and marginal workforce to send money safely and instantly." 
  • GI Technology highlights that "We provide more than 200,000 people daily with access to affordable financial services and other related services and through our retail partners offer tens of thousands of retailers the opportunity to earn extra money by driving financial inclusion in India." 

Locations

  • Suvidhaa claims to be present across a network of "80,000 retail outlets."
  • GI Retail suggests that its Hermes newtork has "... more than 90,000 locations across India, more than 9,000 locations on (sic) the Philippines and retail partnerships in Indonesia and Malaysia."
  • GI Technology mentions that "ICASH wallet is also being distributed by other partner networks numbering more than 100,000 agents across India."

On the tale of the tape, Suvidhaa appears to be a remarkably similar business to GI Retail.

Here are Suvidhaa's accounts to 31 March 2014:

Suvidhaa Infoserve Private Limited annual report
Source: www.mca.gov.in
Here is Suvidhaa's balance sheet to 31 March 2014:

Suvidhaa Infoserve Private Limited balance sheet to 31 March 2014
Source: www.mca.gov.in
At the time of posting there is c. 101 Indian Rupees to the pound, Sterling.

According to its balance sheet, Suvidaah's net assets totaled 404,808,529 Indian Rupees (INR) or c. £4 million as at 31 March 2014.

Here is Suvidhaa's P&L to 31 March 2014:

Suvidhaa Infoserve Private Limited P&L to 31 March 2014
Source: www.mca.gov.in 
Suvidhaa Infoserve Private Limited P&L (continued) to 31 March 2014
Source: www.mca.gov.in 
According to its P&L, Suvidhaa reported 31,753,568,481 INR or c. £314 million of gross transaction value in 2014.

Total income (revenue) was reportedly 434,888,828 INR or c. £4.3 million, up 79% from 2013.

EBITDA was reportedly a loss of 89,472,779 INR or c. £886,000, an improvement on a 180,498,483 INR or c. £1.8 million loss in 2013.

This compares to GI Retail, which Wirecard suggests is on track for at least €45 million in revenue and greater than €7 million in EBITDA for 2015.

It would seem the businesses aren't so similar after all.

I am still short Wirecard. 

Disclaimer: The information, discussions or topics referred to on this blog should in no way be considered “advice” to buy or sell anything. The information which may be referred to is freely available in the public domain and where required the source of information is referenced to for verification. While every effort has been made to ensure the veracity of any information contained within this blog, the author accepts no responsibility for the accuracy of any information contained within this blog or for the sources of information which may be referred to. Readers are responsible for their own actions and interpretation of the information contained within this blog. 

Tuesday 3 November 2015

Wirecard (WDI GY) ... Great Indian Retail Group

Tuesday 3rd November 2015

Wirecard (WDI GY) is a German listed electronic payment processing company, capitalised at €5.8 billion.

Wirecard share price
Source: Bloomberg
By way of background, the FT's Dan McCrum has produced some impressive analysis within his The House of Wirecard series. 

Wirecard (WDI) trades on 38x 2015 and 30x 2016 consensus* earnings. 
*According to Bloomberg

In 2014, the group reported c. €129 million in operating cash flow, spent c. €75 million in capex and a further expenditure of c. €83 million on acquisitions.

On Tuesday 27th October 2015, WDI announced its latest acquisition having acquired an Indian based payments business, Great Indian (GI) Retail Group. GI Retail was bought for a total cash consideration of €230 million. Seemingly, Wirecard is paying 32.8x GI Retail's forecast 2015 EBITDA.

Further payments of up to €110 million were also reported to be on the table, linked to financial performance in 2015 to 2017.

That seems like a fair chunk of change to pay out. Especially when the Great Indian Retail Group appears to be little more than a travel booking / ticketing agency. GI Retail's operations seem to centre on the employ of a large number of staff, each with a computer terminal, typically sat in the corner of various stores or kiosks, scattered around India and the Philippines.

But before I get to why I reckon this, here below is Wirecard's full press release:
Wirecard AG today announced its acquisition of the payments business of Great Indian (GI) Retail Group.
Wirecard AG today announced its acquisition of the payments business of Great Indian (GI) Retail Group. Founded in 2006, GI Retail Group is one of India’s and South East Asia’s leading electronic payment and retail-assisted e-commerce groups.
Wirecard will acquire 100 percent of the shares from GI Retail and financial investors of companies operating payment services in India, the Philippines, Indonesia and Malaysia under the brands “iCASHCARD”, “Smartshop”, “StarGlobal”, “Commerce Payment” as well as several segment brands. 
Furthermore, Wirecard will also acquire 60 percent of the shares in GI Technology Private Limited (GIT), a licensed Prepaid Payment Instrument (PPI) issuer in India. Wirecard will take over more than 900 staff in offices in Delhi, Chennai, Hyderabad, Bangalore, Mumbai, Kolkata, Lucknow, Manila, Batam and Kuala Lumpur.
Dr. Markus Braun, CEO of Wirecard AG, says “Great Indian (GI) Retail Group has been on the forefront of India’s very dynamic and early-stage e-commerce and money remittance market for many years. Our investment into one of the region’s leading payment groups secures us a strong position in one of the world’s most rapidly growing electronic payment markets.”
The total cash consideration paid to GI Retail and financial investors including a capital increase of GI Technology will amount to EUR 230 million, completely paid for in cash and financed by own capital and by committed bank loans. Further payments of up to a total of EUR 110 million are linked to the overall financial performance of the acquired businesses in calendar years 2015 to 2017. Elements of the agreement are subject to certain closing conditions.
By combining innovative technology and an agent-assisted service delivery model spread across multiple countries, the acquired businesses have built a unique multi-channel platform to efficiently deliver a wide range of commerce offerings and financial services in rural and urban areas.
The acquisition secures Wirecard a stake in one of India’s fastest growing licensed Prepaid Payment Instrument (PPI) issuers as well as a Full Fledged Money Changers (FFMC) license in India, enabling the operation of multi-currency transaction and remittance services.
iCASHCARD, a semi-closed-loop electronic wallet issued by GI Technology, is India’s number one domestic (IMPS) remittance instrument and the leading semi-closed-loop payment instrument on IRCTC, Indian Railways’ website and one of the largest e-commerce sites in Asia-Pacific. Serving over 200.000 people daily, iCASHCARD can be recharged with cash, on a mobile or over the Internet and is accepted at more than 10.000 e-commerce sites in India, such as eBay, AirAsia, Bookmyshow and IRCTC.
Beside of their main growth market in India, the acquired businesses have successfully established operations in other South East Asian countries. A network of more than 100.000 contracted retail agents throughout the region provides top-up services not only for iCASHCARD but in addition a wide range of cash payment, banking correspondence, bill payment and domestic as well as international remittance services.
Consolidated revenues from the acquired businesses are well on track to exceed EUR 45 million in calendar year 2015, an increase of more than 50 percent compared to calendar year 2014, and EBITDA is expected to more than double year-on-year to exceed EUR 7 million. Revenues for calendar year 2016 are expected to exceed EUR 75 million and EBITDA after integration costs is expected to be between EUR 15 million and EUR 18 million.
India constitutes the world‘s 3rd largest Internet user base with an estimated 673 million Indians being online by 2020. Growing from USD 17 billion at present, India's e-commerce industry is likely to grow at a compounded annual growth rate (CAGR) of 35 percent and to cross the USD 100-billion mark by 2020.[1]  Transaction volumes in South East Asia are expected to grow from USD 7 billion in 2013 to USD 34.5 billion by 2018 , largely driven by Indonesia’s rapidly growing e-commerce industry.[2]
According to the World Bank, India continues to be the leading nation in inward remittances pulling in USD 70 billion from its global migrant workforce in 2014. The domestic remittance market in India was estimated to exceed USD 20 billion in 2014 and is benefiting from the advent of cost-effective alternatives to traditional informal channels.
[1] Source: Assocham-Pricewaterhouse Coopers, 2015
[2] Source: Frost & Sullivan, 2014

What is the Global Indian Retail Group?

As stated in Wirecard's release, GI Retail operates under the brands of "iCASHCARD", "Smartshop", "StarGlobal", "Commerce Payment" as well as several segment brands. These all sound very much like what you'd imagine internet payments and processing businesses to be called.  

The company reportedly employs over 900 staff. 

A quick google search brings up the following. 

Google search of GI Retail
Source: Google
Unsurprisingly, clicking on GI Retail takes you to its website. 

GI Retail website
Source: www.giretail.com
So far, so good. Although it's a pretty simple website. It currently has one page, detailing the three companies in the group: Hermes, GI Technology, and GI Hospitalities. The GI Retail site is so minimal, there isn't even (at the time of writing this post) the ability to click through to the individual company sub-sites. So I have placed the links below:


It is perhaps somewhat odd for a company that was acquired for €230 million that the main website for the group is so basic. It also doesn't even indicate who its management are, where its principal address is, or any contact details whatsoever.      

Here is slightly further down the GI Retail website. 

GI Retail website
Source: www.giretail.com
This suggests that "GI Retail Private Limited was established in 2007 to realize the Great Indian Dream of improving the life of every aspiring Indian."

Aside from the honorable but lofty goal, it suggests GI Retail was established in 2007 whereas Wirecard reckons in its press release above that GI Retail was established in 2006. Maybe one is a typo?  

Although, once upon a time, GI Retail was also founded in 2009, not 2006 and not 2007. 

GI Retail prior website
Source: Wayback Machine
Indeed, the Whois information on the giretail.com domain would suggest that the website was created in August 2009, not 2006 and not 2007. 

GI Retail domain creation date
Source: www.tcpiputils.com
Further, India's Ministry of Corporate Affairs website also suggests that the group was incorporated in June 2009.

Date of incorporation of GI Retail Private Limited
Source: Ministry of Corporate Affairs
Whatever the actual date of incorporation, both Hermes and GI Technology, two of the companies under the GI Retail umbrella, appear to have been incorporated in 2005.

Date of incorporation of Hermes
Source: Ministry of Corporate Affairs
Date of incorporation of GT Technology
Source: Ministry of Corporate Affairs
The third company in the group, GI Hospitalities seems to have been incorporated in August 2010.

Date of incorporation of GI Hospitalities
Source: Ministry of Corporate Affairs
Back to the GI Retail website and it claims to employ "nearly 1,000 staff across India and the Philippines." 

GI Retail website
Source: www.giretail.com
This echoes Wirecard's press release of the group having "more than 900 staff in offices in Delhi, Chennai, Hyderabad, Bangalore, Mumbai, Kolkata, Lucknow, Manila, Batam and Kuala Lumpur."

Returning to the Google search of "GI Retail" results from above. As you can see, six results down is the link to the GI Retail PVT Ltd LinkedIn page. 

Here it is. 

LinkedIn corporate page for GI Retail PVT Ltd
Source: www.linkedin.com
It is clearly the relevant LinkedIn profile page for GI Retail. The website details are there. It is based in India. 

According to LinkedIn, GI Retail has between 1-10 employees. Only 1 of those employees is on LinkedIn. This doesn't seem like many employees for the TopCo of a group of companies purchased for €230 million in cash.

The one guy on LinkedIn looks like it's the HR guy.    

GI Retail's one employee on LinkedIn
Source: www.linkedin.com
This also looks like it could be that HR guy. 

GI Retail's HR Assistant Manager
Source: www.naukri.com

As can be seen, he's not currently hiring. 

But he has hired in the past. He says he looks for skills and roles to do with "International Ticketing, Domestic Ticketing, Tour Packages, Inbound Tour, Outbound Tour, IATA, Airticket Sales, B2b Sales, Corporate Sales, Travel Agent, Hotel Contracting."

Some of his recent hires include: Call Center Manager, Call Center Executive, Business Process Outsourcing customer care executive, Net Developer, Corporate Ticketing.

Recent hires
Source: www.naukri.com
What ticketing operators, tour package experience and these other types of hires have to do with electronic payment processing I am uncertain. 

While the LinkedIn corporate profile for GI Retail PVT Ltd is somewhat minimal, the profile for Hermes is more substantial.  

LinkedIn corporate page for Hermes i Network Private Limited
Source: www.linkedin.com 
This claims somewhere between 201-500 employees. Further, that "Hermes is India's No. 1 Retail Assisted E-Commerce network." And that "Hermes retail points provide services such as money transfer, bill payments for e-commerce and utilities and insurance payments, and many more."

"Hermes retail points ...". Hmmm.

What is Hermes?

www.tourtravelworld.com reckons that Hermes is a travel and ticketing agent. That it has been a member since 2012, based in India. The reported address is the same as the Hermes i Network Private Limited LinkedIn profile address, namely: "No C-9, Thiruvika Industrial Estate, Guindy, Chennai, Tamil Nadu, India - 600032."

TourTravelWorld.com details on Hermes I Tickets Pvt Ltd
Source: www.tourtravelworld.com
Here is the Hermes website, located at www.hermesnetwork.in

Hermes - Destination Future website
Source: www.hermesnetwork.in
It doesn't mention much about travel agents or bookings. It does about "Money transfer, bill payments and so much more." It looks pretty snazzy.

This appears to be a relatively new site, seemingly created in May 2015, registered by Hermes i Tickets. 

Hermesnetwork.in domain creation date
Source: www.tcpiputils.com

Here is another version of the Hermes site just a few months earlier from February 2015. It is/was located at www.hermes-it.in, which if you enter into your browser these days will redirect you to the new site www.hermesnetwork.in.   

Hermes website from February 2015
Source: Wayback Machine
Hermes website from February 2015
Source: Wayback Machine
Back in February 2015 there was very little mention of "Money transfer, bill payments and so much more." What was principally highlighted was the travel side of the business. 

Incidentally, on the the travel side of the business, it would appear that Hermes is the proud owner of its "flagship product" and travel booking site, www.getmytrip.com. This is one of the three brands in its network, highlighted by the drop down tab on the top right of the hermesnetwork.in site. 

www.getmytrip.com
www.getmytrip.com - flagship product
Indeed, in the contact section of the GetMyTrip website, it shares exactly the same main contact telephone number as www.hermesnetwork.in. The contact address is also the same at "No C-9, Thiruvika Industrial Estate, Guindy, Chennai, Tamil Nadu, India - 600032." 

The contact number (+91-1800-108-1080) is reportedly 24-7.

It is in fact the main reported contact number for all of the Hermes, GetMyTrip, ICASHCARD and The Smart Shop businesses. However, when I called it, it appeared to redirect to a very sleepy sounding man who told me that I had the wrong number.

Of course it is very possible that there were some issues in understanding what I was saying as I do not speak Indian, and he spoke very limited sleepy English. For the record, I was asking if I could plan a trip with GetMyTrip. But it makes one wonder, if all the websites are in English then why would they have a poor English speaker answering the 24-7 hotline?

Same telephone contact details on each of the Hermes, GetMyTrip,
ICASHCARD, and The Smart Shop websites
Source: hermesnetwork.in, getmytrip.com, icashcard.in, thesmartshop.in

Maybe the value in GI Retail is all to do with the sorts of partnerships Hermes has taken up with companies such as Maya Group

Here is the home page to Maya Group. Bottom left is the logo for Smart Shop another Hermes related product. 

Maya Group an associate of Smart Shop
Source: www.mayagroup.in

What is The Smart Shop?

"The Smart Shop is the flag ship retail agent format of Hermes I Tickets Private Ltd. It has been conceived and designed to provide comprehensive end-to-end solutions to the common man for travel, money transfer and payment services at a location close to him. TheSmartShop provides the common man various options (based on price, comfort and convenience) to plan his trip, booking of air/bus/train tickets, hotel/ car rental / holiday tour packages booking, to transfer money to any bank branch anywhere in India at any time to do mobile or DTH recharge to make monthly payments for electricity, telephone, utility and credit card bills to sell online non life insurance policy for travel health and motor." 
In other words, The Smart Shop sounds very much like where the common poor man without internet access goes to book a holiday, buy a train ticket, pay a bill, buy some life insurance from some bloke at a kiosk.

Smart Shop - the flagship retail agent format of Hermes I Tickets Private Ltd
Source: www.thesmartshop.in
So how is Maya Group associated with Smart Shop?

Well here are the details of how it works, as well as a handy photo of the lads hard at work at Maya Group and by extension one supposes, The Smart Shop too.  


The lads at Maya Group hard at work
Source: www.mayagroup.in
You can see that those guys are poised, waiting for a lucky common man poor punter to just walk in and sit in that chair to book a holiday, buy a train ticket, pay a bill, buy some life insurance. 

If it wasn't apparent (it wasn't to me) what "S-Commerce" is, as alluded to in the Maya Group website, here is some information courtesy of Maya Group's other partner, Suvidhaa Infoserve PVT. Ltd. Suvidhaa Infoserve provides a helpful demonstration video on youtube. 


The entire 3 minutes 36 seconds is entertaining but if you skip to 2 minutes 7 seconds it explains what "S-Commerce" is.

It would appear that "S-Commerce" is some bloke sat in the corner of an Indian store or kiosk, with a computer doing anything on the internet a common man requests to do with regards to ticket purchasing, bill paying, life insurance etc. 

So my question is this: Is GI Retail, which thus far appears to be largely a travel booking agent, employing a large group of blokes with desktops sat in various stores and kiosks scattered around India and the Philippines really worth €230 million? And how is this majorly different from a chain of internet cafes?

Incidentally, here is seemingly what The Smart Shop advertises as the job spec to hire its employees, highlighting the associated commission rates the hire can expect to earn with each item sold to the common man.

It's a nice touch that it will cost the lucky applicant what looks like a non-refundable 54,000 Rupees or c. £530 just to apply, or about one month's expected salary.

Job advert for a Smart Shop Distributor
Source: www.onlineagents.in

What about the digital presence?

While these businesses may be very much people driven, where some of the employees even pay an initial non-refundable charge to apply for a job, surely there is also a solid, and large accompanying digital presence?

Here is the Google Play page for the Get My Trip app.

The Get My Trip app
Source: Google Play
And here is where it shows that it has received 79 reviews and installed no greater than 5,000 times. It would appear there is not much of a digital presence among the common man.

The Get My Trip app reviews and installs
Source: Google Play
Here is the Google Play page for The Smart Shop app.

The Smart Shop app
Source: Google Play
And here is where it shows it has received 359 reviews and installed no greater than 50,000 times. Again this does not strike me as especially demonstrative of a major digital presence.

The Smart Shop app reviews and installs
Source: Google Play

What is GI Technology?

The other main business under GI Retail seems to be GI Technology Private Ltd.  

This would appear to be its corporate profile page on LinkedIn. 

LindkedIn corporate page for GI Technology Pvt Ltd
Source: www.linkedIn.com
Very little detail is provided. Not even the website address. 44 employees seem to be on LinkedIn. 

Here is the lower section of the front page of GI Technology's website. As it highlights, Hermes is one of its partners, as is Suvidhaa, the other "S-Commerce" partner with Maya Group, above. 

GI Technology partners and products
Source: www.gitechnology,in
iCASHCARD is GI Technology's product. It was mentioned in Wirecard's press release at the beginning of this post.

On its website, GI Technology's indicates that it is "... the issuer of iCASH, India's leading prepayment instrument (PPI) further to a licence granted to GIT by the Reserve Bank of India (RBI) on 29 October 2009."

But what sort of licence was this? It seems to be just a payment card licence. 

What GI Technology doesn't appear to have is a "Payment Bank" Licence, of which 11 were issued by the Reserve Bank of India on 19 August 2015. 

GI Technology did apply for a Payment Bank licence, along with 40 others. 

Applicants for Payment Bank Licence
Source: www.rbi.org.in
 But only 11 appear to have been issued a licence. And GI Technology doesn't seem to be one. 

Applicants granted in principle a Payment Bank Licence
Source: www.rbi.org.in

And another thing

These types of kiosk based, travel, ticketing, money transfer businesses seem to be two a Rupee in India. Here's 19 others for starters.
  1. Suvidhaa Infoserve Pvt. Ltd
  2. Oxigen Services Pvt. Ltd
  3. Eko India Financial Services Ltd
  4. Payworld (Sugal and Damani)
  5. Reliance Money Infrastructure Ltd
  6. Easy Bill Ltd (Hero Group)
  7. Multilink MOS Utility Pvt. Ltd
  8. Paypoint India Network Pvt. Ltd
  9. ITZ Cash Ltd
  10. Beam Money Pvt. Ltd
  11. Seed Financial Services Pvt. Ltd
  12. mPurse Services Pvt. Ltd (Infotel Group)
  13. FIA Technology Services Pvt. Ltd
  14. Spice Digital Ltd
  15. EZspend Prepaid Payment Solutions Pvt. Ltd
  16. Sollet Soft Solutions Pvt. Ltd
  17. Muthoot Finance Ltd
  18. Mannapuram Finance Ltd
  19. BASIX Sub-K iTransactions Ltd
As for digital presence, here is a randomly searched for ticketing app in India.

A quick search threw out the "Ticket Booking and Recharge" app.

According to Google Play:

  • This app has 6,829 reviews as compared to The Smart Shop app's 359 reviews. 
  • This app has 500,000 to 1,000,000 installs as compared to The Smart Shop app's 10,000 to 50,000 installs. 

Note also the other similar ticket booking apps recommended below.

According to Google Play:

  • The offical IRCTC Connect has 131,111 reviews and 5,000,000 to 10,000,000 installs. 
  • Indian Rail IRCTC & Train PNR has 14,404 reviews and 500,000 to 1,000,000 installs.

A competing ticket booking app - Ticket Booking and Recharge
Source: Google Play
Reviews of Ticket Booking and Recharge
Source: Google Play
Installs of competing ticket booking app and other similar recommended apps
Source: Google Play
I reckon GI Retail is an altogether strange acquisition for €230 million.

I am short Wirecard.

Disclaimer: The information, discussions or topics referred to on this blog should in no way be considered “advice” to buy or sell anything. The information which may be referred to is freely available in the public domain and where required the source of information is referenced to for verification. While every effort has been made to ensure the veracity of any information contained within this blog, the author accepts no responsibility for the accuracy of any information contained within this blog or for the sources of information which may be referred to. Readers are responsible for their own actions and interpretation of the information contained within this blog.