(i) Fincare Small Finance bank is a “digital-first” SFB with a focus on unbanked and under-banked customers, especially in rural and semi-urban areas. According to CRISIL, among comparable SFB peers in India, Fincare Small Finance bank has the highest growth rate in advances over FY2018 to FY2020.
(ii) They follow a business model focused on financial inclusion and aim to provide individuals and businesses with affordable financial products and services that meet their needs. The business objective is to enhance access to savings, credit and other financial products for unbanked and underbanked individuals, MSMEs and unorganized entities, especially in rural areas, by leveraging technology and last-mile distribution.
(iii) In FY2020, we had the best adjusted ROA and ROE (adjusted for COVID-19 provisions) among SFBs and, for the nine months ended December 31, 2020 and FY2020, we were one of India’s most profitable SFBs, based on ROE and ROA (Source: CRISIL Report). The Gross Loan Portfolio (“GLP”) grew from₹ 2154 Cr to ₹ 5547 Cr registering a CAGR of 41.05%, from March 31, 2018 to December 31, 2020.
(iii) This growth was driven primarily by growth in borrowers from 1.02 million as of March 31, 2018 to 2.19 million as of December 31, 2020, a CAGR of 31.82%. The ROE was 18.41% for FY2020 and 14.27% (annualized) for the nine months ended December 31, 2020. They had a total of 2.7 million customers (comprising borrowers and depositors) as of December 31, 2020. They follow a business model focused on financial inclusion and aim to provide individuals and businesses with affordable financial products and services that meet their needs. The business objective is to enhance access to savings, credit and other financial products for unbanked and underbanked individuals, MSMEs and unorganized entities, especially in rural areas, by leveraging technology and last-mile distribution. As of December 31, 2020, 92% of the customers were located in rural areas, and 40% were new to credit. We believe that our business model is profitable, sustainable and socially beneficial.
(iv) They have a deep understanding of unbanked and under-banked customers, especially rural customers, with over 14 years of experience in providing microloans. The Bank operated as an NBFC-ND under the name ‘Disha Microfin Limited’ since 2010 and was registered as an NBFC-MFI in 2013. In 2016, upon receipt of the RBI In-Principle Approval, the Bank acquired the micro-finance operations of FFSPL (which started microfinance operations in 2007) and later changed its name to Fincare Small Finance Bank.
NPA Situation
In FY2020, they had a GNPA Ratio (i.e., the ratio of our Gross NPA to Gross Advances) of 0.92% and an NNPA Ratio of 0.41%. Further, they have a strong capital position, healthy balance sheet and prudent provisioning policy, with a provision coverage ratio (“PCR”) of 74.82%, Tier 1 Capital Ratio of 25.22% and Tier II Capital Ratio of 4.68%, in each case as of December 31, 2020. They are in compliance with and meet the regulatory minimum thresholds prescribed by the RBI for all three ratios.
Loan Book Profile
Gross Loan Portfolio consists primarily of micro-loans, comprising 79.50% of the Gross Loan Portfolio as of December 31, 2020. The portfolio clearly inclined more towards micro-loan the domain which is affected most by Covid-19. We have to see in RHP, what is the NPA level of this micro-loan book as on 31.03.2021. The listed share like Ujjivan Small Finance and Suryoday Small Finance Bank are suffering due to high NPA in micro-finance book.
The micro-loan customers typically are women from low income households in rural India, with limited sources of income, savings and credit histories supported by tax returns and statements of previous loan exposures which are generally unsecured. Many micro-loan borrowers are new to credit, with approximately 40% of the customers as of December 31, 2020 being first-time borrowers. This means that limited credit history of borrowers makes it very high chance of NPA in the case situation like Covid.
| Total Available Shares: | 1000 |
| Face Value: | ₹ 10 Per Equity Share |
| Particulars (Cr) | 9MFY2021 | 2020 | 2019 |
| Net Interest Income | 520 | 586 | 330 |
| PAT | 103 | 143 | 101 |
| Gross Loan Portfolio | 5547 | 5341 | 3530 |
| Disbursement | 2782 | 4949 | 3221 |
| ROE | 10% | 18% | 22% |
| ROA | 1.32% | 2.48% | 3.20% |
| GNPA | 3.46% | 0.92% | 1.29% |
| NNPA | 1.88% | 0.41% | 0.34% |
| Net-Worth | 1000 | 660 | 337 |
| Book Value | 159 | 117 | 90 |
| Book Value Calculation of Fincare Small Finance Bank by UnlistedZone | |
| 31.03.2020 | |
| No. of Shares | 63,610,481 |
| Net-Worth | 1007 Cr |
| Book Value | 160 |
| 27.04.2021 (Raised Funds at Rs.170 per share) | |
| No. of shares | 9,982,759 |
| Price | 170 |
| Net-Worth | 169 Cr |
| Total Net-Worth | 1176 |
| Book Value | 164 |
| 04.05.2021 (Issued Bonus Shares) | 2:1 |
| Total Shares | 21.6 Crores |
| Book Value | 54 |
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Umesh Paliwal
The IPO price would be in the range of 110-115….