The IPO of Fino Payments Bank, a fintech company offering a diverse range of financial products and services that are primarily digital and have a payments focus, opened on October 29. The issue closes on November 2. Shares are being offered at ₹560 to ₹577, to raise about ₹1200 crore. Here are more details.
About Fino
Fino Payments Bank commenced its business operations in June 2017 post RBI’s approval to carry out business as payments bank. Key products of the bank include CASA account, debit cards, domestic remittances, micro-ATM facility among others. As of June 2021, the bank has 724671 merchants and 17430 BCs. The bank has an operational presence in 90% of districts.
Business
As of August 2021, about 51% of micro-ATM deployed in the country is from Fino Payments Bank followed by SBM Bank at 12% & SBI at 8%.
Fino had largest network with 7.2 lakh banking touchpoints, followed by Airtel Payments Bank (5 lakhs) & India Post Payments Bank (1.4 lakhs).
The framework of distribution, technology and partnership (DTP) enables it to serve target market efficiently and improve on three key challenges – scale, service and sustainability.
For period between April, 2021 and August, 2021, the bank has second largest debit card outstanding at 28.8 lakh.
The bank incurs minimal capital expenditure costs in connection with onboarding merchants, because the on-boarding & setup capital expenditure costs are borne by the merchant.
Substantial experience & deep customer understanding positions the company to seize significant opportunities. According to Crisil, target addressable market, as of March 31, 2021 is ~₹0.85 trillion by revenue.
Revenue model
Fino Payments Bank’s product and service offering includes liabilities products and other banking products that generate fee and commission based income and cater to the needs of target customer market.
Income is derived primarily from its product and service offering in FY19, FY20, FY21 and Q1FY22 was ₹351.96 crore, ₹673.27 crore, ₹770.77 crore and ₹200.19 crore, respectively. This income includes miscellaneous income derived from sources such as intercompany BPCL fleet cards, certain UPI transactions, and interchange income on NACH.
The revenue models for Fino’s products are as follows:
Micro-ATMs: Fino generates interchange commission for every transaction that is conducted through micro-ATMs on its system. This commission is ~0.5% of the transaction amount or ₹15, whichever is lower.
Aadhaar Enabled Payment System (AePS): Fino generates interchange commission for every AePS transaction that is conducted through its system. This commission is ~0.5% of the transaction amount or ₹15, whichever is lower.
Remittances (money transfer): Fino earns a commission for every domestic remittance transaction facilitated. The revenue it earns through domestic remittance is based on a percentage of transaction value after accounting for costs and depends upon whether the remittance is carried out through its own channel or on the API channel.
CASA: Fino earns revenue on CASA accounts by charging: 1) an annual subscription fee on Shubh Savings Account, Jan Savings Account and Bhavishya Savings Account; 2) fees where the customer is unable to maintain the MAB on Pratham Savings Account & Pragati current account; 3) for fund transfers made from CASA accounts (i.e., account to account transfers and IMPS); 4) for cash transactions such as cash deposits and cash withdrawals; and 5) other miscellaneous fees in connection with certain SMS alerts and physical account statements.
Cash Management Services (CMS): Fino earns revenue from CMS on a commission basis according to throughput volumes.
Third Party Insurance Products: Fino generates revenue in the form of commission on every insurance policy that it cross-sell, the commission varies according to the type of policy.
Bill payments and recharge facilities: Fino generates revenue in the form of commission charged to the service provider.
FASTags: The FASTag can be obtained by the customer from Fino’s merchants for a flat fee of ₹99. The merchant registers the customer’s vehicle and issues the tag by linking it to the customer’s account. Fino also shares in the interchange income of 1.5% for every toll transaction.
Nearfield-based contactless pre-paid card payments: Fino generate revenues by charging the customer a “convenience†fee every time the customer accesses its touch-points over the entire customer life cycle, including at card registration. Fino also generates revenue as the customer recharges, charged as a percentage of the recharge amount.
Third party business loans: Fino generates revenue in the form of commission received from the service provider, which may differ depending on whether the loan is new or being renewed, and also as to the amount being loaned, where for greater amounts it will received a high percentage commission.
Valuations
The bank turned profitable in the fourth quarter of FY20 while RoE for FY21 was at 14.6%. At the upper end of the price band, it is valued at 29x BVPS (post issue) and 5.8x Q1FY22 revenue (annualised).
Considering the TTM as of June 2021, the company’s IPO price gives it a book value P/B of 10.58, with a market cap of more than Rs 4,8015 crore.
| Company | Fino Payments Bank |
| Open Date | Oct 29, 2021 |
| Close Date | Nov 2, 2021 |
| Allotment Date | Nov 9, 2021 |
| Listing Date | Nov 12, 2021 |
| IPO band | ₹560 to ₹577 per equity share |
| Share face value | ₹10 |
| Bid Lot | 25 shares |
| IPO Registar | KFintech Private Limited |
