Fino Payments Bank IPO

RatingAVOIDIssue OfferIssue Opens on Oct 29, 2021Issue Close on Nov 02, 2021Total IPO size (cr) 1,200.30Fresh issue 300.00Offer For Sale (cr) 900.30Price Band (INR) 560 – 577Market Lot 25Face Value (INR) 10Retail Allocation 10%Listing On NSE, BSEObjects of the issue ⮚ Augmenting Bank’s Tier – 1 capital base ⮚ Achieve the benefits of listingIssue Break-up (%)QIB Portion 75NIB Portion 15Retail Portion 10Shareholding (No. of Shares)Pre Issue 78,014,996Post Issue 83,214,302Indicative TimetableFinalisation of Basis of  Allotment 09-11-2021Refunds/Unblocking  ASBA Fund 10-11-2021Credit of equity shares to  DP A/c 11-11-2021Trading commences 12-11-2021

Incorporated in 2017, Fino Payments is a growing fintech company offering a wide portfolio of digital financial products and services in  India. The company offers a diverse range of financial products and services via a pan-India distribution network and proprietary technologies. Since 2017, they have grown their operational presence to cover over 90% of districts as of September 31, 2021.

⮚ Fino Bank operates an asset-light business model that is underpinned by their “phygital” delivery model (i.e., a combination of physical and digital) and relies on their merchant network and other participants.

⮚ The company is looking to target a population of India which has low levels of financial literacy and technology use and typically does not have access to even basic banking services.

⮚ In 2020, the Ministry of Electronics & Information Technology ranked Fino payments third among banks in facilitating digital transactions in India. According to CRISIL, the company also has the largest network of micro-ATMs and the third-highest deposit growth rate in FY' 2021.

⮚ Fino Banks has built a pan-India presence with 724,671 merchants  (own and API) which are typically located in Tier-2 and Tier-3 towns.  They currently have approximately 17,430 active BCs across India.  Additionally, they operate 54 branches and 130 Customer Service  Points (“CSPs”).

⮚ Their retailers also use their existing client connections in their communities to help us cross-sell additional financial products and services like third-party gold loans, insurance, bill payments, and recharges.

Outlook & Valuation:

The revenues of the company have seen consistent growth in the last 3 years. The company's revenue for FY  2021 was at Rs 791 crore VS Rs 691 cr in FY 2020 while profit for the year in the FY 2021 was Rs 20.4 cr Vs loss of Rs 32 cr in 2020.

The company has a brief history while the margins of the company might expand. Fino Payment is a fast-growing fintech company and it is one of its kind company to list on the stock exchanges. If we consider last year's profit then the PE ratio turns out to be around 235 however it has carried forward losses which is a major concern. Its unique DTP  network and new edge business model may garner investors' interest while we have an "AVOID" rating for this on the back of expensive valuation and regulatory risk.

IPO Note

FINO PAYMENTS BANK LIMITED

KEY MANAGERIAL PERSONNEL  

⮚ Rishi Gupta is the Managing Director and CEO of the Bank. He is a founding member of the Bank and he was an employee of Financial Information Network and Operations Pvt Ltd (erstwhile name of their Promoter, Fino  PayTech Ltd). Prior to joining Fino PayTech Ltd, he worked with International Finance Corporation, ICICI Bank  Ltd and Maruti Udyog Ltd.

⮚ Ashish Ahuja is the Chief Operations Officer of the Bank, he joined the Bank with effect on April 1, 2017.

⮚ Ketan Dhirendra Merchant is the Chief Financial Officer of the Bank, he joined the Bank with effect on August 30, 2018.

⮚ Shailesh Pandey is the Chief Sales Officer of the Bank, he joined the Bank on April 1, 2017.

⮚ Vinod Kumar KB is the Chief Information Officer/ Infrastructure and Facilities of the Bank. He joined the Bank with effect from July 18, 2017.

⮚ Bharat Bhanushali is the Head – Business Technology of the Bank, he joined the Bank with effect on April 1,  2017.

⮚ Amit Kumar Jain is the Head of – Business Alliance of the Bank, he joined the Bank with effect on April 1, 2017.

⮚ Anand Bhatia is the Chief Marketing Officer of the Bank and he joined the Bank with effect from February 5,  2018.

⮚ Pratima Pinto Thomas is the Head- Human Resources of the Bank and she joined the Bank with effect from May  27, 2019.

⮚ Basavraj Loni is Company Secretary and Compliance Officer of the Bank, he has been associated with Fino since  November 1, 2017, and was transferred to the Bank as Head – Legal and Secretarial with effect from May 6,  2020.

COMPETITIVE STRENGTHS

⮚ Unique DTP (Distribution, Technology, Partnership) network helps in better customer servicing.

⮚ A technology-focused business model with an advanced digital platform

⮚ Customer centricity and innovation at the core of business

⮚ Asset light and scalable business model

⮚ Operational experience and expertise

⮚ The socially inclusive model with positive social impact

⮚ Highly experienced and committed leadership team, supported by marquee investor base in our promoter and  shareholder

KEY CONCERNS

⮚ The company has a limited operating history as a payments bank.

⮚ The company is engaged in fee and commission-based operations, and their financial performance could be impacted if they are unable to collect revenue from these sources.

⮚ The company relies heavily on their information technology platforms, and any flaw or failure in such systems, as well as a data breach, could have a negative impact on its business.  

⮚ The company has introduced new products and services and will continue to do so, but they cannot guarantee that such products and services will be successful today or in the future.

⮚ In the financial years 2019 and 2020, the company made losses.

IPO Note

FINO PAYMENTS BANK LIMITED

COMPARISON WITH LISTED INDUSTRY PEERS

There are no listed companies in India that engage in a business similar to that of the Company. Accordingly, it is not possible to provide an industry comparison in relation to the Company.

FINANCIALS (RESTATED CONSOLIDATED)

Particulars (Rs. In Millions) FY 2021 FY 2020 FY 2019Equity Share Capital 445.80 445.80 445.80Other Equity 1,059.67 854.9 1,175.29Net Worth 1,505.47 1,300.70 1,621.09Total Borrowings 1,807.98 1,107.90 829.03Revenue from Operations 7,910.27 6,913.97 3,711.21Expenses 7,705.53 7,234.33 4,335.05Net Profit for the year 204.74 (320.36) (623.84)Margin (%) (16.8) (4.6) 2.6