Fino Payments Bank IPO Financial Analysis (Subscribe for Long Term)

Key Business Highlights

Incorporated in the year 2007, Fino payments Bank is a growing fintech (digital banking partner) company offering a diverse range of financial products and services that are primarily digital and have a payments focus.
Operates on an asset light business model that principally relies on fee and commission based income generated from merchant network and strategic commercial relationships.
Pan-India presence in 94% of India’s districts with over 6.41L banking outlets, 54 Bank Branches and 143 Customer Service Points (CSPs).
Products and services offered includes various current accounts and savings accounts (“CASA”), issuance of debit card and related transactions, facilitating domestic remittances, open banking functionality (via Application Programming Interface, API), withdrawing and depositing cash (via micro-ATM or Aadhaar Enabled Payment System, AePS) and cash management services, CMS, loans from reputed NBFC partner and varied insurance products from partner FIs.
Offers products through its merchants who on-board customers and facilitate transactions, ensuring the network growth and making the products and services accessible to broader range of consumers.
Marquee investors in Fino payment Bank include ICICI Bank, BPCL, Blackstone, IFC Fino Payments Bank.

Fino Payments IPO Financial Analysis

Commission, exchange and brokerage income contributes majority of revenues of Fino Payments Bank. It increased by 14.5% to Rs 770.77 crore in FY21 from Rs 673.27 crore in FY20. The increase was a result of an increase in transaction throughput from micro-ATM transactions, AePS transactions, CMS, and CASA accounts. The Issuer recorded PAT of Rs 20.47 crore turning profitable (net profitability) in the FY 21. There were net losses of Rs (32.04) crore and Rs (62.38) crore for FY20 and FY19 respectively. Net margins were 2.66%, (4.76%) and (17.72%) for FY 21, FY20 and FY19.

Return on net worth has been 14.6%, (21.90%), (32.30%) for FY21, FY20 and FY19 respectively.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Title	Q1FY22	FY2021	FY2020	FY2019
Total Revenue	206.24	791.03	691.4	371.12
Commission, Brokerage income	200.19	770.77	673.27	351.97
PAT	3.13	20.47	-32.04	-62.38
EBITDA	11.19	79.15	-1.38	-39.84
Total Assets	1020.16	1010.29	624	684.07
EBITDA Margin (%)	5.59%	10.27%	-0.20%	-11.32%
Net profit margin(%)	1.56%	2.66%	-4.76%	-17.72%

Valuation and Peer comparison

The Issue is priced at 360x with an annualized EPS of 0.40 as at the end of Q1FY22 at the upper band price of Rs 577 per share. The issue is exorbitantly priced. Price to book value is 29.29x at NAV of 19.70 as at the end of Q1FY22.

Bharat Pe, Bill Desk, Infibeam Avenues, Instamojo Technologies, Paytm, Mobikwik, Razor Pay are some of the peers of the Issuer among others.

Conclusion and Investment Strategy

India is in the midst of a digital revolution and the masses are adopting the digital payments method. Increased technology adoption can be seen among millennials with rising in the use of smartphones and internet penetration. There is a section of the population that is not covered by large financial institutions and this factor works in the favor of emerging Fintechs and NBFCs. Hence the digital payments providers have headroom for growth in the future.

Fino Payments has a network of 641,892 merchants, 17269 BCs (Business Correspondents), 249849 micro ATMs and 143 CSPs and 54 branches. The Issuer offers various financial products and has demonstrated profitability. These types of companies have to incur capex to build tech infrastructure and enhance their phygital delivery model. The company faces challenges in the form of competition from fast emerging fintechs, NBFCs, and sustainability of margins in the future. Taking into account all the positives and the challenges; one may invest for a long-term perspective.

Reviewer recommends Subscribe for Long Term to the issue.

Review By CA Priyanka Choudhary on 14th Oct 2021

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

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