‘Fino Bank’s shares suffered due to Paytm IPO debacle’

It has partnered with Suryoday Small Finance Bank to offer an automatic route to start a fixed deposit if a customer’s savings bank account exceeds ₹2 lakh. It has tied up with KreditBee (Finnovation Tech Solutions Pvt. Ltd) for consumer loans, MyShubhLife for merchant loans, Fisdom (Finwizard Technology Pvt. Ltd) for mutual funds, and IIFL Finance Ltd for gold loans. Fino has also been working with ICICI Bank Ltd for gold loans since long.

However, for FDs and digital gold products, the payments bank is awaiting regulatory approval.

With the services of ICICI and IIFL, it disburses gold loans of ₹100 crore in a month. Consumer credit, which is still on pilot, Fino received 27,000 applications for ticket sizes of ₹1,500-5,000. The average ticket size of merchant loan is ₹20,000-30,000.

“These are all lead generation segments, where we make 1-1.5% commission and of that we give 60-70% to merchants,” said Fino Payments Bank chief executive Rishi Gupta.

On being a late entrant in segments targeted by its rivals, Gupta said: “You cannot start everything together. First, I wanted to establish payments and liabilities. A year ago, digital transactions were hardly 1% of my volume, but today it is at 10%. Our growth in digital is far higher than in physical. I realized these are all relevant products for my customer (rural) segment. Our model is that we don’t want to do anything on loss. These products are bottom-line driven businesses.”

The parent, Fino Paytech, was set up 2006 as a remittance and business correspondent business. Fino Payments Bank, which started operations in 2017, used the Fino network to offer banking services such as savings bank accounts and cash withdrawals.

In 2019, Fino Bank had a team of 4,000 employees and posted ₹60 crore in losses. Following a drastic reduction in employee count to 2,800, it reported a revenue of ₹791 crore and a profit of ₹20.4 crore in FY21.

“Our customer acquisition cost is almost zero, we take a certain fee on machine and marketing from every merchant as an on-boarding cost. The merchant earns commission on every transaction,” Gupta said. “On the customer side, we are at 6,000 CASA (current account-savings-account) every day. It’s not a free account. We charge between ₹150-450 per account annually, of which we give ₹30-50 to the merchant.”

Fino Bank had 3.4 million customers and deposits worth ₹301.62 crore as of September 2021.

On 12 November, the shares of Fino Payments Bank made a tepid debut on the bourses with the stock listing at a 5% discount to the issue price of ₹577. It had raised ₹1,200.29 crore through its public issue, which comprised a fresh issue of ₹300 crore and an offer for sale of ₹900.29 crore by the promoter.

Fino Bank’s share ended the day’s trade at ₹390 on Monday.

“I thought our listing would go up, but looks like after the PaytmIPO debacle we are also suffering because somewhere we got clubbed into the same payments category,” Gupta said on the muted response on listing day.

According to Gupta, Fino has not been able to create its own identity. “We are strong in our consumer category. Now should we create a brand from the point of view of investor or consumer?,” he wondered.

“Some of the models in this ecosystem will only survive when they keep putting more money. Our model is not like that. We don’t on-board merchants and customers for free. Fino’s story will take at least two to three quarters for people to understand. We are a company with consistent performance, we do not have extreme highs and lows, we keep doing what we do, and it will be bigger and better,” Gupta added.

Since the Reserve Bank of India (RBI) announced on-tap licensing for small finance banks, Fino has been considering the option. However, though it will be eligible to apply for the licence in June 2022, Gupta is evaluating whether he wants to go for an small finance bank or a digital bank licence.

Its H1FY22 revenue stood at ₹448.39 crore with ₹11 crore in profit.