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Fino Payments Bank is a fintech company offering a diverse range of financial products and services that are primarily digital and have a payments focus. The 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

Key triggers/Highlights:

* 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 unique 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

What should investors do? 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).

* We assign UNRATED rating to the IPO

Key risk & concerns

* Concentration in few northern states 

* Impact of Covid-19 could impact business adversely

* Stringent regulations to be adhered by payment banks

Company Background

Fino Payments Bank is a fintech company offering a diverse range of financial products and services that are primarily digital and have a payment focus. The bank commenced its business operations in June 2017, post RBI’s approval to carry out business as payments bank. The bank’s products and services include various current and savings accounts (CASA), issuance of debit card and related transactions, facilitating domestic remittances, withdrawing and depositing cash [via micro-ATM or Aadhaar Enabled Payment System (AePS)] and cash management services (CMS). The bank’s merchants also leverage the customer relationships within their respective communities to facilitate cross-selling of other financial products and services such as third party gold loans, insurance, bill payments and recharges. As of June 2021, about 51% of the micro-ATM deployed in the country is from the Fino Payment Bank.

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