Fino Payments Bank Ltd IPO

2.    A technology focused business model with an advanced digital platform

Investments in technology are an integral part of Fino’s business and they enable it to provide superior user experience to its customers, besides empowering its merchants to carry out more transactions. Its Bpay app, Fino BPay app, Fino Mitra app and Cash Bazzar initiative creates significant value, with relative ease for customers and merchants alike. Fino’s in-house technology expertise and culture of application-led innovation, provides an attractive value proposition to its stakeholders. Fino has a dedicated business technology team with approximately 101 technical staff as of March 31, 2021, to research, test and develop technology. 

3.    Customer centricity and innovation at the core of business

Fino’s offerings are designed and customized to meet the needs of its customers and its target market, as reflected in its brand commitment of we are “hamesha” (i.e., we are “always”) there for our customers’ banking and financial needs.  Some of the prominent innovations done by Fino include Subscription CASA accounts, Micro-ATMs, AePS IRIS technology, Cash bazzar (Latlong), etc.

4.    An asset light and scalable business model

Fino leverages its relationships with merchants, corporate entities (notably BPCL) and business correspondents to drive customer acquisitions as well as maximize cross-sell potential. Its focus on technology helps the company expand its reach across the country without incurring the relatively higher costs associated with traditional bricks and mortar branch presence. This approach presents opportunities of high operating leverage by allowing Fino to improve gross margins and limit variable costs. 

Focus on operational execution, strategic commercial relationships, drive to offer a broad range of products through each of these distribution channels and its technology infrastructure lend significant scalability to Fino’s business.

5.    Operational experience and expertise

Brand Fino has been in existence for ~14 years and the company benefits from the solid operational experience and expertise provided by the MD & CEO, Mr. Rishi Gupta. Company is leveraging this to better understand how the digitization of its products and services can shape customer behavior into the future and aims to achieve operational excellence consistently. 

6.    A socially inclusive model with positive social impact

Through its operations, Fino focuses on bringing India’s unserved and underserved population into the main stream banking system and accordingly, improving their access to financial products and services. As part of its Business Alliance Initiative, Fino has engaged with two state level rural livelihood missions to grow the number of women acting as merchants and BCs. As a result of such initiative, the number of female merchants has nearly doubled from 18,191 as of March 31, 2020 to approximately 32,084 as of March 31, 2021. 

Since February 2021, Fino has been working with the Uttar Pradesh State Rural Livelihood Mission to train and on-board 10,000 women from self-help groups as BC “Sakhis”, for a period of five years. This initiative aims to improve banking access in rural Uttar Pradesh and enhance the household income of the participating self-help group members. Fino is also working with the Bihar State Rural Livelihood Mission and has on-boarded 831 women as BCs as of June 10, 2021.

7.    Highly experienced and committed leadership team, supported by a marquee investor base

Fino is led by a highly experienced and committed leadership team with a diverse and deep level of expertise, particularly in the financial services and technology industries. This is supplemented by its Board of Directors which includes individuals with a diverse mix of experience in various sectors, including the financial services industry and who benefit from senior level experience in some of India’s most respected organizations.

In addition, the principal shareholders of Fino Paytech Limited, our Promoter and shareholder, include marquee investors such as ICICI Bank Limited, Intel Capital Corporation, International Finance Corporation, HAV3 Holdings (Mauritius) Limited, Blackstone GPV Capital Partners (Mauritius) VI-B FDI Limited and BPCL.

Growth strategy

1.    Leverage market position to capture industry opportunities

Fino stands to benefit from growth in Indian economy and financial services sector, in particular. It is looking to focus on its competitive strengths and leverage its business model. To this end, company will continue expanding its customer base, especially among the underserved sections of the society. Adoption of an innovative approach to Fino’s DTP framework will enable it to grow its distribution network of merchants and BCs, expand and improve its digital offering and foster new and existing strategic commercial relationships. 

2.    Continued Innovation leading to high growth products and diversified revenue streams

Fino is focused on driving innovation aimed at improving its technology platform, developing new products and/ or exploring new distribution methodologies. Going forward, Fino aims to empower customers to access the most suitable products on their own, reduce its operating costs and increase efficiencies. In addition, its open banking platform continues to receive overwhelming response from customers and merchants.

In the future, Fino will target high growth products with high margins within its existing offering, as well as exploring new and/ or improved products, in each case with a focus towards products offered through its “own” channel. Company is actively exploring the potential of tie-ups with third party financial institutions such as Non-Banking Financial Companies (“NBFCs”) for referral credit products designed for customers, where it will earn fees on such referrals. 

3.    Expand and deepen its customer sourcing capabilities

As of March 31, 2021, Fino had an operational presence in over 94% of districts, and during the last three financial years, it acquired 613,734 new merchants across its network. It also formed a number of strategic relationships with businesses/organizations across the country, including with a State Road Transport Corporation. With a goal to acquire more customers, Fino will continue expanding its network and increase adoption of its CASA offering. This is likely to be achieved by ensuring that more merchants are on-boarded, departure rates of existing merchants remain low, continuing to provide merchants with opportunities to cross-sell various products and also ensuring that its merchant commission paid per transaction increases.

4.    Continued focus on use of technology to improve operating leverage

Fino’s focus on and use of technology throughout its business is a significant factor in improving its operating leverage, as it allows the company to improve gross margins and limit variable costs. It plays a key role in Fino’s ability to expand its reach throughout India without incurring the relatively higher costs associated with traditional bricks and mortar branch presence. 

Fino will continue to improve its operating leverage by focusing on deploying technology, particularly in connection with the on-boarding and training of its merchants and also to enhance its “phygital” delivery model.

Risk factors

1.    Fino depends heavily on its IT systems and any weakness, disruption or failure in such systems, or breach of data, could adversely affect its operations and reputation. Fino’s success depends on its ability to innovate, upgrade and respond to new technological advances

2.    Payment Banks in India, are subject to stringent regulatory requirements and prudential norms
and any inability to comply with such laws, regulations and norms may have an adverse effect on Fino’s business

3.    A significant portion of Fino’s merchants are located in Uttar Pradesh, Bihar and Madhya Pradesh, and accordingly any adverse changes in the conditions affecting these regions can adversely affect its business

4.    Any adverse observations from such RBI or other regulators could have an adverse effect on its business

5.    Highly competitive industry