IPO Note - Fino Payments Bank Ltd By Choice Broking
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Salient features of the IPO:
* Fino Payments Bank Limited (FPBL) is a fintech company with primary focus to offers financials products & services to unserved and underserved population of Indian society.
* FPBL started operations as payment bank in 2017 after getting inprinciple approval from the RBI to set up a payment bank
Competitive Strengths
* Strong distribution-technology-partnership framework
* A technology focused business model with an advance digital platform
* Customer centricity and innovation at the core of business
* An assets light and scalable business model
* Socially inclusive model with positive social impact
Valuation: At the higher price band of Rs577, the issue is valued at P/BV of 9.9x to its post issue BVPS.
Below are few key observations of the issue:
* Fino Payments Bank Limited (FPBL) started payment banking operations in Jun 2017 after receiving in-principal approval to set up a payment bank. The company offers a diverse range of financial products and services that are primarily digital in nature and have a payment focus. FPBL targets unserved & underserved population which typically does not have access to basic banking services. In order to cater the banking requirements of target population, FPBL has grown its operational presence to 90% of the district as of Sep 30’ 2021.
* FPBL operates an assets light model that relies on the merchant network. The company provides its digital financial services to target community through merchant network which is referred as ‘phygital’ delivery model by the company due to combination of digital and physical. As of Aug 31’ 2021, the company has 7,77,010 merchants (own & API) which are typically located in Tier 2 and Tier 3 cities. As the company adopts assets light model, all on-boarding cost are handled by merchants including acquisition costs related to the micro-ATMs and AePS devices. Besides the company has 17,430 active BC agents providing services on the behalf of other banks.
* Through the merchant network, the company provides financial services such as CASA accounts, debit card transactions, facilitating domestic remittances, open banking functionality (via API), withdrawing and depositing cash (via micro-ATM or AePS), BC banking and CMS.
* As per the RBI’s payment banks guidelines, FPBL cannot provide credit. The company generates revenue by charging fee & commission on products & services. In Q1FY22, fees & commissions accounted for 97% of the total income. Business is variable in nature with high revenue & variable cost linked to volume of transactions.
* Owing to its deeper presence across geographies, the company holds 55% share in micro ATMs and AePS. FPBL has opened 3.23 mn CASA a/c and has set 0.26 mn micro-ATM devices.
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