Fino PayTech, the parent of publicly listed Fino Payments Bank, was one of the underperformers in the unlisted space with shares falling 53% in almost four months to Rs 200, a dealer said on condition of anonymity.
In mid-November 2021, the stock hit an all time high and was trading in the range of Rs 400 to 425 in the unlisted space when its subsidiary Fino Payments Bank made a debut on the bourses.
But since then, both the companies - the parent in unlisted market and subsidiary in the listed market -- have taken a big hit.
Analysts say the correction in the unlisted stock can be attributed to the fall in global and Indian new-age stocks amid rising concerns on valuations. The fall was also due to Fino Payments Bank which failed to perform on the debut day.
Since listing 12 November, the stock of Fino Payments Bank has fallen 55% from its issue price of Rs 577. As the first profitable payment bank, the firm raised around Rs 1200 crore via IPO.
Moneycontrol on 3 March reported quoting its managing director and chief executive officer saying Fino Payments Bank will initiate reverse merger with the holding company by June. The bank was launched in 2017 and will complete five years of business by June 30. As of December 31, Fino PayTech held a 75% equity stake in the subsidiary while public shareholders held the rest, the report said."The management is looking for a reverse merger and hence the performance of both the stocks are interlinked. The fintech space is one of the worst hit sectors since Diwali last year, post a disastrous listing of a big fintech giant. The sentiments have changed quickly which has led to the fall in unlisted fintech stocks too," said Manan Doshi, co-founder of unlistedarena.com, a platform that facilitates investors in pre-IPO shares.
Fino Payments Bank provides services to unpenetrated rural India via a network of 0.81 million merchants. It is a capital light business that largely relies on fees for revenue and has significant operating leverage. However, analysts say that the key risk to the business is increasing competition that may result in higher merchant payouts, which could dent margins. They add that faster adoption of UPI payments via feature phones could impact remittance volumes.
As per norms, since a payments bank cannot undertake lending activities, it is not mandatory for it to have a diversified ownership structure. Therefore, no maximum shareholding limit for promoters is prescribed. However, the promoters should hold at least 40 percent of paid-up equity capital for the first five years from the commencement of business.