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Company Background

Fino Payments Bank Limited (“Fino Bank”) was incorporated on June 23, 2007. Fino Bank is a growing fintech company offering a diverse range of financial products and services that are primarily digital and have a payments focus. The Bank offers such products and services to their target market via a pan-India distribution network and proprietary technologies, and 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.

Bank’s products and services includes various Current Accounts and Savings Accounts (“CASA”), issuance of debit card and related transactions, facilitating domestic remittances, open banking functionality (via their Application Programming Interface (“API”)), withdrawing and depositing cash (via micro-ATM or Aadhaar Enabled Payment System “AePS”) and Cash Management Services (“CMS”).

In the financial years 2019, 2020, 2021 and the 3 months ended June 30, 2021, their platform facilitated approximately 15.40 crore, 31.86 crore and 43.50 crore and 12.34 crore transactions, respectively and had gross transaction value of ₹45,684.80 crore, ₹94,452.58 crore, ₹132,930.69 crore and ₹ 39,035.99 crore, respectively

As of June 30, 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”).

Fino Bank is currently a wholly-owned subsidiary of Fino Paytech Ltd, whose principle shareholders include marquee investors such as ICICI Bank Ltd, Intel Capital Corporation, International Finance Corporation, HAV3 Holdings (Mauritius) Ltd, Blackstone GPV Capital Partners (Mauritius) VI-B FDI Ltd and Bharat Petroleum Corporation Ltd.

Fino Bank operates an asset light business model that principally relies on fee and commission based income generated from their merchant network and strategic commercial relationships. Each merchant serves the banking and financial needs of its community, which, in turn forms the backbone of their assisted-digital ecosystem, referred to as their “phygital” delivery model (i.e., a combination of physical and digital). The merchant’s use of technology and their use of analytics on the data that they capture, enhances the merchant’s ability to cross sell the third party products that they also offer, to their existing customers, thereby increasing their potential revenue and opportunity to further customize their products and services offering. Such a merchant-led distribution model requires minimal capital expenditure cost from them because the on-boarding and setup capital expenditure costs are borne by the merchant, and accordingly, allows for operating leverage and efficient expansion in a timely manner.

Fino Bank has a strong leadership position within the Indian fintech industry, for instance they: were ranked 3rd among banks in facilitating digital transactions, as of February 2020 by the Ministry of Electronic & Information Technology; had the largest network of micro-ATMs, as of March, 2021.

Valuation & Recommendation

As of September 30, 2021, Fino Bank has an operational presence in over 90% of districts, and during the last 3 financial years and 3 months ended June 30, 2021, they acquired 696,513 new merchants across their network (including “own” and API channel merchants). In addition, they also had a number of strategic relationships with businesses/organisations across the country; including with a State Road Transport Corporation where they introduced a near field communication (“NFC”) based contactless payments solutions for the mass transit system.

With a goal to acquire more customers, they intend to continue expanding their network to drive deeper penetration and sustainable operations in these regions and communities, focusing on underserved and unserved individuals and micro businesses that have limited or no access to formal banking channel.

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