Last updated: 27 Oct, 2021 | 01:02 pm
Fino Payments Bank Limited (Fino Bank) IPO opens for subscription on 29th October. The company is looking to raise up to Rs 1,200 crore through the public issue. Here are the details:
About the IPO
Fino Bank IPO Date: 29 October - 2 November 2021
Fino Bank IPO Price band: Rs 560 - Rs 577
Issue Size: Rs 1,174 - 1,200 crore (Fresh Issue of Equity shares aggregating up to Rs 300 crore and Offer for sale of 15,602,999 Equity shares)
Post Issue Implied Market Cap: Rs 4,669 – 4,801 crore
Reservation: QIB 75%, Retail - 10%, NII 15%
Employee Discount: NA
Bid lot: 25 shares, and in multiples of 25 shares
Objective of the issue
About Fino Payments Bank
Fino Product Portfolio
Micro-ATMs - Micro-ATMs are handheld terminals that typically require a card to be swiped and depend on mobile phone internet connections. They are mostly used in geographies where it is not practical for banks to locate a physical branch. The bank takes a commission of 0.5% of the transaction amount or Rs 15, whichever is lower.
AePS - For any transactions, AePS uses Aadhaar biometric authentication through fingerprint or demographic information, linked to the Aadhaar database. Commissions are the same as Micro-ATMs.
Remittances - Remittance predominantly refers to domestic transfers by migrant workers who send money from their location to their homes which is often in other states/regions.
CASA - THe bank offers two types of current accounts and six types of savings accounts to its customers.
Debit cards - The bank offers its customer a Rupay debit card and earns by charging customers a one-time issuance fee and annual maintenance charge.
Cash Management Services - It includes cash collection services and cash payment services across traditional physical channels and helps digitize physical cash to clients who manage significant volumes of cash.
There are no listed peers of Fino Bank. However, there are many unlisted peers with whom we can compare the Fino Bank. Some of the peers of Fino Payment bank are Paytm Payments bank, India Post Payments Bank, Airtel Payments Bank and NSDL Payments bank.
Asset Light and Scalable Business model - Fino bank's merchant-led model does not require much capital for network expansion except for referral of third-party loan providers. They are able to service-wide pool of customers because of the well-established technology platform that they are improving every month.
Operational Expertise and experience - FINO, as a brand has over 14 years of experience. It benefits from the experience and expertise of its leaders in this time. They use this experience to understand how the digitization of their products and services can shape customer behavior into the future.
Positive social impact - They have the vision to benefit Indian society by bringing un-served and underserved populations into the mainstream banking system. They aim to improve their access to financial products and services and in turn quality of life.
Leverage their current market position - They have substantial experience of operating in different markets and have a deep understanding of their customer’s needs. It will help them in their future growth plan such as providing CASA deposit accounts in rural and semi-urban areas and providing the entire range of payment and remittances related services across urban, semi-urban, and rural areas.
High Growth products - The company continues to focus on the innovation that will help them create high growth and diversified products. The company intends to target high-growth products with high margins within its existing offering. They also plan to explore new and improved products, in each case with a focus on products offered through their channel.
Expand and deepen the customer sourcing capabilities - Over the last three financial years and in the first quarter of FY22, Fino has acquired 696,513 new merchants across their network. They intend to continue expanding their network to drive deeper penetration and sustainable operations in these regions and communities.
Impact on fee and commission-based activities - The main source of revenue for Fino Bank is revenue from fees and commissions that they charge for its products and services. The charges depend on many factors that include both internal and external factors. If the company is not able to charge because of any factors (competitive factors in particular), it will impact the revenue and also their margins.
Rely on technology for sustainability and growth - The company relies extensively on its IT system and any weakness, disruption, or failure in such systems, or breach of data, could adversely affect its operations and reputation. Further, the company's success depends on its ability to innovate, upgrade and respond to new technological advances.
Regulatory requirements - All the payments banks in India are subject to stringent regulatory requirements and prudential norms. If the company is not able to comply with such regulations and laws, it will affect the operation and hence the cash flow of the company.
Fino Payments Bank has reported a healthy 46% CAGR rise in its total income to Rs 791 crore from FY19 to FY21, aided by higher Non-Interest Income. The bank has also turned profitable in FY21. The bank’s return ratios RoE and RoA stood at 13.3% and 2% respectively as of FY21. These appear to be encouraging.
At the higher end of the price band, Fino Payments Bank IPO is aggressively valued at 235 times FY21 earnings (on a post issue basis). However, given its niche position, the bank could command a steep valuation. The bank generates over 95% of its income through fees and commissions.
Given the company’s strong topline growth, robust outlook due to digital payments opportunity, but steep valuations, investors who wish to take exposure to an upcoming novel fintech space could consider investing in this issue. However, given the aggressive valuations, the issue may not see high listing gains.