Fino Payments Bank Limited is a growing fintech company offering a diverse range of financial products and services that are primarily digital and have a payments focus. They offer such products and services to the target market via a pan-India distribution network and proprietary technologies, and since 2017, They have grown up operational presence to cover over 94% of districts as of March 31, 2021. Company operates an asset light business model that principally relies on fee and commission based income generated from the merchant network and strategic commercial relationships. Each merchant serves the banking and financial needs of its community, which in turn forms the backbone of the assisted-digital ecosystem, referred to as the 'phygital' delivery model (i.e., a combination of physical and digital). The merchant's use of technology and the use of analytics on the data that they capture enhances the merchant's ability to cross sell the third party products that they also offer, to the existing customers, thereby increasing the potential revenue and opportunity to further customize the products and services offering. Such a merchant-led distribution model requires minimal capital expenditure cost from them because the on-boarding and setup capital expenditure costs are borne by the merchant, and accordingly, allows for operating leverage and efficient expansion in a timely manner. Through the 'phygital' delivery model the merchants on-board customers and facilitate transactions, ensuring the network grows and the products and services are more accessible to a broader range of customers throughout India, giving them what they believe to be is a significant advantage compared to the competitors. The products and services include various current accounts and savings accounts ('CASA'), issuance of debit card and related transactions, facilitating domestic remittances, open banking functionality (via the Application Programming Interface ('API')), withdrawing and depositing cash (via micro-ATM or Aadhaar Enabled Payment System 'AePS') and cash management services ('CMS'). The merchants also leverage the customer relationships within their respective communities to facilitate the cross-selling other financial products and services such as third party gold loans, insurance, bill payments and recharges. In addition, as a condition of company's RBI License they are not permitted to directly provide credit products and thereby are not exposed to the credit risk associated with underwriting credit products. As per financial performance, Fino Payments Bank Limited has posted total income/net profits of Rs. 371.12 Cr. / Rs. (62.38) Cr. (FY19), Rs. 691.39 Cr. / Rs. (32.04) Cr. (FY20), Rs. 791.02 Cr. / Rs. 20.47 Cr. (FY21) and Rs. 206.24 Cr./ Rs. 3.13 Cr. (Q1 FY22). So company has shown good growth and started generating profit from FY21. Company has posted an average EPS of Rs. (1.39) and average RoNW of (5.38)% for last three fiscals. Issue is priced at a P/BV of 29.29 as per NAV of 19.70 on 30.06.21. As per FY21 earnings and on fully diluted equity post issue, IPO is priced at P/E of around 235 and as per annualised FY22 earnings P/E is around 384. So issue looks very aggressively priced. As per RHP, there are no listed peers. On BRLM's front, One Lead Manager associated with this IPO, and have handled around 68 IPO in last three fiscals. From last 10 IPOs, 2 are opened below issue price and remaining are opened above issue on the day of listing. As of now, four are trading below issue price and other are trading above issue prize. ( As on 26.10.21) As per financials, Fino Payments Bank has shown growth, RoNW is 14.6% and P/E is around 235 as per FY21 earnings, which looks very aggressively priced. Fintech companies have good future and expected to grow at good rate for next couple of years, but we may see high competition as big banks are also exploring new areas for growth. Performance of BRLM is average. So, we are giving NEUTRAL rating to this IPO.
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