IPO Note - Fino Payments Bank Ltd By Swastika Investmart
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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.
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