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BPCL, ICICI Group and Blackstone-backed Fino Payments Bank kicks off IPO plans; first ever in niche segment

Fino Payments Bank turned profitable at the operating level in FY2019-20, within three years of starting the operations in June 2017. It is eligible to convert to a small finance bank in 2021.

March 06, 2021 / 12:11 PM IST

Mumbai-based Fino Payments Bank, which recorded a third straight quarterly profit in second quarter of FY21, has engaged advisors and kicked off plans to raise around Rs 1,000 crore to Rs 1,200 crore via an initial public offer in 2021, sources with knowledge of the matter told Moneycontrol. The move comes on the back of an unprecedented surge in digital transactions post the outbreak of COVID-19.

The firm is backed by numerous marquee investors including BPCL, ICICI Group, Blackstone, IFC, Intel Capital and LIC and if the listing plans fructify, it would be first ever on the bourses by a domestic payments bank. It counts Airtel Payments Bank, Indian Post Payments Bank, Paytm Payment Bank, Jio Payments Bank & NSDL Payment Bank as its rivals.

“The IPO kick-off happened recently. Fino Payments Bank has engaged investment banks Axis Capital, Nomura, ICICI Securities and CLSA as advisors for the IPO. The DRHP filing is likely to be done on a fast-track basis,” said one of the persons cited above.

“It is likely to be a combination of primary and secondary issue of shares to facilitate part exit for the investors and also to mop up growth capital,” added a second person.

“Fino Payments Bank is placed uniquely as compared to its peers due to its profitability. It has a strong rural focus, a massive network &  thousands of customer touchpoints,” a third person told Moneycontrol.

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The firm had nearly 3 lakh banking points of its own by Q2 FY21 end. These include over 8000 outlets of its strategic partner BPCL. In addition, it has 2.5 lakh points through its partners making the total network at around 5.5 lakh. The firm plans to increase the network to 10 lakh outlets over the next 3 years.

All the three persons spoke to Moneycontrol on condition of anonymity.

Nomura and ICICI Securities declined to comment while CLSA and Axis Capital did not respond to email queries. Moneycontrol has sent reminders and is awaiting the response to an email query mailed to Fino Payments Bank. This article will be updated as soon as we hear from the firm.

“There may be an IPO for the bank, but nothing can be confirmed on that yet,” Fino Payments Bank CEO Rishi Gupta had told Bloomberg Quint on January 28, 2020.  Recently, the RBI included the firm in the category of a scheduled commercial bank, which is likely to boost the latter’s business prospects.

As per the RBI’s norms on ‘on-tap’ licences for Small Finance Banks (SFBs), payments banks can apply for conversion into SFBs after five years of operations and Fino will be eligible for the same in 2021. On conversion, it can access cheaper funds from the banking regulator.

FINO PAYMENTS BANK: THE NUMBERS GAME

The key business drivers for Fino are liability products, Micro ATM, AePS transactions, remittances, payment services partnerships, insurance (life, health including COVID-19, motor) and gold loan referrals for partner bank.

Fino Payments Bank turned profitable at the operating level in FY 2019-20, within three years of starting the operations in June 2017.

It recorded a 144 percent rise in PAT in Q2 FY21 over Q1. This was the third consecutive quarter wherein the firm had registered growing profits achieving a PAT of Rs 1.3 crore in Q4 FY20, Rs 1.9 crore in Q1 FY21 and Rs 4.5 crores in Q2 FY21.

In Q2 FY21, Fino Payment Bank’s network facilitated transactions worth Rs 33,000 crore, registering a 25 per cent growth over Q1 FY21. Compared to the corresponding period last fiscal (Q2 FY20) its business grew by over 40 percent,  when transactions worth Rs 23,000 crore were processed.

“A lean variable cost ABC (alternate banking channels) model riding on digital platforms, increasing transactions and high margin products helped us cut costs, increase revenue and achieve an operating profit of Rs 13 crores in Q2 FY21,”  the firm had said.
According to the Ministry of Electronics and Technology, India has a trillion-dollar digital opportunity, while a KPMG report states that the Indian digital payments industry is expected to touch $10.07 trillion by 2026.
Ashwin Mohan
first published: Mar 5, 2021 08:01 pm

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