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Fino Payments Bank gearing up for a Rs 1,000 crore IPO

Mumbai based Fino Payments Bank is eyeing to float an initial public offering soon, making it the first-of-its-kind to be listed on the domestic bourses. According to some reports in media, the bank is gearing up to raise Rs 1,000 crore through the primary issues, planning a Dalal Street debut in next six months.

Rishi Gupta, managing director and chief executive of the company, told media that there may be an IPO soon, but nothing can be confirmed yet. He said that such plans take time to develop and materialize.

According to some anonymous sources from the company, the Fino Payments Bank would largely consist of secondary share sale, giving partial exit to its existing investors. The company will raise a smaller amount for itself via sale of fresh shares. The company is likely to appoint investment bankers soon.

Fino Payments Bank is a wholly owned subsidiary of Fino Paytech, securing the license from Reserve Bank of India to carry out the payment bank business in 2017.

It has five active peers in the country including Paytm Payments Bank, Airtel Payments Bank, India Post Payments Bank, Jio Payments Bank and NSDL Payments Bank.

Financial Performance
Fino Payments Bank has turned profitable at the operating level in FY 2019-20 on the back of lowered expenses. The company generated a revenue of Rs 64 crore and profit after tax (PAT) of Rs 7.67 crore in the fiscal, compared to revenue of Rs 53 crore and net loss of Rs 9.22 crore in the preceding year.

In the first three quarters, the payments bank has been making decent profits. The company clocked a PAT of Rs 4.5 crore in the quarter ended on September 30, 2020, compared to Rs 1.9 crore in the preceding quarter. The company is yet to announce its result for the full financial year.

The company has lowered its debt from Rs 328 crore to Rs 240 crore and is trading at a price-to-book value (P/BV) of Rs 22.

Business Profile
As a payments bank with a physical presence, it offers products including micro-ATM services, Aadhaar-enabled payment system (AePS) transactions, remittances, payment services partnerships, business correspondent banking, current and savings accounts, cash management services and third-party products like insurance and gold loan referrals for partner banks and insurance companies.

During the September quarter, the company facilitated transactions worth Rs 33,000 crore, of which domestic remittances contributed 25%, micro ATM/AePS withdrawals comprised 38% and payment services formed 11%.

As of September, it had 5.5 lakh banking points, including 2.5 lakh points through its banking partners and 8,000 Bharat Petroleum Corp.’s outlets. It looks to increase its banking network to 10 lakh such points in three years, the company said in a Nov. 25 press release

Key Stakeholders
Incorporated in 2006 to develop banking technology solutions, Fino Paytech is an associate subsidiary of the state-owned Bharat Petroleum, which holds 28.9% stake in the company. ICICI Prudential Life Insurance Company owns 11.5%, International Finance Corporation owns 6.7% stake, ICICI Bank owns 5.8 per cent stake in the Company.

Private equity firms Blackstone and HAV3 Holdingsalso hold 7.6% stake each in the company, while Exide Life Insurance Company holds 2.85% stake.

Other State entities like LIC of India and Indian Bank hold 2.3 percent each. Union Bank of India owns 4.6 per cent stake in the company, after the merger of state owned PSB Corporation Bank.

Other business
Besides Fino Payments, it also runs a non-deposit NBFC firm Fino Finance that specialises in giving microloans to women in rural areas based on the joint liability. The company acts as a life insurance holding point for its stakeholders.

The company business has not remained unblemished during the second wave of pandemic. So far, it has registered lower transactions in the first quarter of the ongoing fiscal. However, the management is hopeful of turnaround once the infection rates would plunge. The management has shown optimism on vaccination.

Small Finance Bank plans
Fino Payments Bank has completed three years of its operation and is considering conversion into a small finance bank, under the guidelines of the central bank. However, the company management recently said that it is in no hurry to be converted into a small finance bank.

Fino Payments Bank has raised its deposit limit to Rs 2 lakh per customers, with 75% of the deposits in the government securities and/or treasury bills with maturity up to one year. From the remaining 25%, the payments banks can also invest in certificates of deposits.

Payment Banks have been demanding to up the deposit limit to Rs 5 lakh per customers, while an internal working group constituted by the banking regulator recommended lowering the existing five-year threshold for setting up a small finance bank. Both fares well for Fino Payments Bank.

However, Fino Payments Bank would be more keen to ride the IPO tide as a fintech firm, rather than a small finance bank. Fintech firms get a better valuation on the bourses, while listing of recent small finance banks has been tepid.

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