Andreas Eriksson | 2023-07-03 08:00
Commercial agreement with IDFC Bank
Indian IDFC Bank, with over 800 branches, 600 rural business correspondent centres and over 20,000 employees spead across India, has entered into a commercial agreement with Digital Cash telecom to facilitate offline UPI payments. This collaboration comes after IDFC Bank’s participation in a pilot program overseen by the Regulatory Bank of India (RBI), where both Digital Cash and Digital Cash telecom were tested with real customers and real transactions. While the RBI’s official statement has not been disclosed, the fact that the pilot program is expanded to include P2P payments and now the agreement with IDFC Bank, are positive confirmations of Crunchfish’s offering. It is also worth noting that HDFC Bank, during the early stages of the pilot, announced the availability of the Digital Cash service to its customers on its website. This suggests that a firm deal with HDFC may not be too far off either.
India alone offering immense potential
With a population of 1.4 billion, Indians are the most frequent users of direct payments. Over 74 billion transactions were made in 2022 alone, and the figure is still growing. In the light of the subpar internet connectivity throughout the country, especially in the rural parts of the country, there’s clear demand for a solutions that ensures availability of payments.
At the same time, we keep an extra eye on the financing situation, as no further information about the MOU with Socio, regarding the purchase of 3 million shares, has been communicated. Crunchfish is also exploring other options and we do not rule out a rights issue soon. Cash after Q1’23 amounted to SEK 19m, leaving about another six months of runway.
Strong outlook to drive revaluation
Despite the lack of details regarding the upfront payment from IDFC, revenue model for Crunchfish, and the number of customers included in the agreement, it represents a significant advancement and serves as validation for a successful pilot and the readiness of Crunchfish Digital Cash. With the upcoming implementation of a real Proof-of-Concept, this development has the potential to inspire other banks to follow suit. While we await more clarity on the IDFC deal, we anticipate an eventful second half of 2023, where we expect additional firm agreements. Our Base case estimates that DC will reach 100 million users by 2026, resulting in annual sales of nearly SEK 300 million based on a license fee of SEK 3 per user. Based on that we maintain our fair value range of SEK 48-63 per share and believe that a successful rollout would have potential to drive a further revaluation of the share.
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