Fino Payments Bank IPO - Information Note

_{Data Source: IPO Filings}
 

Here are some of the characteristics of the Fino Payments Bank model

i) Fino Payments Bank is a fully digital bank, which offers its products and services digitally on an all India basis.

ii) It offers CASA, micro ATMs, Aadhar-enabled ATMs and CMS or cash management services to clients.

iii) Despite being small in size, it achieves scale through the distribution, technology and partnership (DTP) framework.

iv) Fino has a pan-India presence across 724,671 merchants predominantly in Tier-2 and Tier-3 cities plus over 17,430 business correspondents.

v) Fino also reaches out to customers via its 54 branches and 130 customer service points or CSPs.

vi) While Fino Payments Bank is fully owned by Fino PayTech, the parent company has equity investments from Blackstone, ICICI Bank, Intel Capital and BPCL.
 

Structure of the Fino Payments Bank IPO

The Fino Payments Bank IPO will be a combination of a fresh issue and an offer for sale. Here is a gist of the IPO offer of the company.

a) The fresh issue component will entail the issue of 52 lakh shares and at the peak price band of Rs.577 per share, the fresh issue amount will be Rs.300 crore. 

b) The OFS component will comprise of the issue of 156.03 lakh shares and at the peak price band of Rs.577, the OFS value would be Rs.900 crore resulting in a total IPO issue size of Rs.1,200 crore.

c) The holding company, Fino PayTech, which owns 100% in Fino Payments Bank will see its total stake diluted to 75% post the issue.

Out of their holding of 780 lakh shares, the parent will offer 156 lakh shares resulting in their holdings reducing to 624 lakh shares post the OFS.
 

Financial highlights of the Fino Payments Bank

_{Data Source: Company RHP}

The payments bank has turned around to profits over the last 3 years and shows that the payment bank model can be a viable model.

However, a lot will depend on the ability of the bank to scale up its operations from these levels and also whether banking for the unbanked would really be a profitable proposition in the long run.
 

Check - Fino Payments Bank IPO - 7 Things to Know
 

Investment view on Fino Payments Bank

In a way, Fino Payments Bank will be a convergence play on social banking, consumer demand, rural interface as well as the scaling ability of digital. Here are key points.

a) The DTP model is a distributed model adopted by Fino and that enables the company to grow to higher levels of revenue and profit without too much of outlays.

b) The parent company of Fino Payments Bank has marquee investors like Intel Capital, Blackstone and ICICI Bank onboarded, which is an affirmation of the business model.

c) An asset light business model will ensure that as the top line grows, it will directly contribute to enhancement of ROI and to valuations of the stock; which perhaps is the logic for the 220X pricing of the IPO.

d) Banking at the bottom of the pyramid is not extensively explored as a model but competition can be intense from the unorganized segment.

The current IPO stories are all about betting on future models. From that perspective, Fino Payments Bank is a combination of digital and of social banking.

Some of its peer group would include Paytm Payments Bank, Airtel Payments Bank, India Post Payments Bank, NSDL Payment Bank etc.

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