Category: Personal Finance

Buy HCL Technologies With A Target Price of INR 1,430: Motilal Oswal

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Motilal Oswal’s take on HCL Technologies

The brokerage has said in its research report that “We expect the robust performance in HCL’s Services business, especially the ER&D vertical, to continue as the demand environment remains favorable. We also draw comfort from improving management commentary on continued growth momentum in the IT Services business. Sustainable demand momentum for Cloud and Digital Engineering benefits HCLT, given its large presence within IMS and ER&D and continued investments in capabilities. Strong headcount additions and deal wins reflect the management’s confidence in the sustainable growth momentum.”

According to Motilal Oswal “We continue to see potential in HCLT’s Products and Platforms business. While the recent departure of the head of Products has elevated concerns on business recovery. However, we don’t see a meaningful risk of a further hit from this event, our sensitivity analysis (Exhibit 7) suggests a limited impact on EPS even in a bear case (4% decline in revenue for the Products and Platforms business in FY23E would lead to a 2.6% drag on our EPS estimate).”

The brokerage has also claimed that “On a combined basis, HCLT should deliver USD revenue growth of 13.1% over FY21-23E. We expect the EBIT margin to stabilize at 20% in FY23E, which should help it deliver 14.3% PAT CAGR over FY21-23E. The company has been constantly improving its shareholder payouts. It has recently announced a dividend payout policy, which implies a distribution of at least 75% of net income over a five-year period. The management has revised its quarterly dividends to INR10/share (from INR6/share) for FY22. The quarterly DPS has been continuously moving up to INR10/share in 2QFY22 v/s INR1/share (adjusted for the stock split) in FY19.”

“The 75% payout ratio would be the highest in the past 15 years. We see this commitment as a strategic shift to focus on organic growth and limit inorganic

investments to bolt-on and capability-based acquisitions (v/s large revenue accretive acquisitions)” the brokerage further said in its research report.

What should investors do?

What should investors do?

Motilal Oswal in its research report has said that “Given its deep capabilities in IMS and strategic partnerships, investments in Cloud, and Digital capabilities, we expect HCLT to emerge stronger on the back of an expected increase in enterprise demand for these services. The stock is currently trading ~20.1x FY23E EPS, which offers a margin of safety. Our TP is based on 25x FY23E EPS. We maintain our Buy rating as we expect traction in the Services business in 2HFY22E and FY23E, driven by higher IMS/Cloud-focused deals.”

Disclaimer

Disclaimer

The above stock has been picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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Shares of PB Fintech likely to see limited upside in near term, says JM Financial, BFSI News, ET BFSI

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PB Fintech, the parent company of PolicyBazaar, made a positive stock market debut with a 17.35% gain on Monday. The listing pop came as a positive surprise to many experts and analysts, however, JM Financial Services expects limited scope for further gains in the stock.

The brokerage has set a price target of Rs 1,270, which implies a near 5 per cent downside from the current market price. “We initiate coverage with a ‘hold’ rating, solely due to premium valuations with significant upside risks in our ‘bull’ scenario that can drive share price to over Rs 2,200 by December 2024,” it said.

Though the brokerage firm sees limited near-term upside against CMP post the strong listing, they reckon there is a likely path for PB Fintech to grow to a valuation of $13.5 billion over the next couple of years against $7.3 billion currently. This is only if few incremental levers fall into place, which are unlikely in the very near-term, the brokerage said.

These levers consist of digital penetration reaching 5.5 per cent against 4.5 per cent.

Shares of PB Fintech likely to see limited upside in near term, says JM Financial

“Policybazaar is the dominant market leader in a large and growing industry with strong tailwinds such as increasing digital penetration, rising disposable income and insurance awareness. We do believe Policybazaar will be in the driving seat in enhancing insurance penetration in India,” JM Financial said

The brokerage firm is of the strong opinion that the company should continue deepening scale moats in light of new-found competition emerging from insurers’ direct channels and cross-sell by fin-tech players like PhonePe and Paytm.

JM Financial expects PB Fintech, PolicyBazaar’s parent, to grow revenues by 31 per cent annually over the next 10 years.

“While we expect slight market share loss in online distribution due to insurers’ investment in direct channel and newer competition, this loss will be aptly compensated by the company’s growth in physical distribution” it added.



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2 Construction Sector Stocks To Buy For Potential Upside Of Upto To 29%: IDBI Capital

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Ashoka Buildcon: Buy for a target price of Rs. 135

IDBI Capital maintains its ‘Buy’ rating on the scrip of Ashoka Buildcon for a target price of Rs. 135 while the stock last closed the trading session at a price of Rs. 104.55, implying potential investors in the stock can make decent gains of 29%.

• Q2FY22 Snapshot: The construction and contracting firm reported Q2FY22 revenue at Rs.9 billion, +5% YoY / -9% QoQ. The decline in revenue sequentially is attributed to delayed initiated of the projects owing to heavy monsoon. EBITDA margin came in at 11.5 percent, while EBITDA at Rs. 1 billion during the review period saw a decline both QoQ and YoY. Profit after tax has been reported at Rs. 0.9bn (-9% YoY / -6% QoQ). The company has guided for EBITDA margin of 12-12.5% and revenue growth of 20% YoY for FY22E.

• Order inflow robust: “H1FY22 Order book at Rs120bn (equals 3x TTM Revenue) with Roads at 61%, power T&D 16%, EPC building at 16% and Railway at

7%”, says the report. During the review period, the company bagged orders worth Rs 18.7 billion. YTDFY22 total order inflow stood at Rs. 33.5 billion.

• Trigger for future stock performance: “Catalyst for stock performance is conclusion of ACL asset sale,

execution momentum and orders win. ACL stake sale is key event to watch and will remove overhang on stock performance and provide CF for future growth to ASBL.Stock at 5x FY24E EPS is trading at -1 STD of its historical average”, adds the brokerage report.

PNC Infratech: Buy for a target price of Rs. 406

PNC Infratech: Buy for a target price of Rs. 406

Brokerage firm has retained its previous ‘Buy’ call on the scrip of PNC Infratech for the target price of Rs. 406. This means potential investors in the stock can gain returns to the tune of 27.5% considering the stock’s current price of Rs. 318.35.

• Q2FY22 snapshot: The company’s revenue jumped by 53% YoY at Rs.16 billion. EBITDA was up 56% at Rs2.2bn with EBITDA margin of 13.7% vs 13.5% YoY. Q2FY22 PAT stood at Rs1.3bn (+95% YoY / +45% QoQ). Increase in PAT is on the back of lower tax rate at 26% versus 36%.

The company has guided for revenue growth of 20-25% with EBITDA margin of approximately 13.5-13.75%.

• Nearly 3/4th of the company’s order book is accounted by the Road sector: “H1FY22 Order book at Rs132bn (equals 2x TTM Revenue) comprises of roads at 72% and water and Irrigation projects at 28%. Q2FY22 order inflow stood at Rs27bn”, mentions the report. The company focuses to realize an order inflow of Rs. 80 billion in FY22 (HAM: EPC at 50:50). Further ahead, the company is planning to make a bid for NHAI projects amounting to Rs. 250 billion and also sees opportunities under the Jal Jeevan Mission.

The company maintains ‘BUY’ rating, while the stock trades closer to its historical average at 12x, 2 years forward EPS. “PNCL remains our top pick in the construction with order book visibility, lean balance sheet for the growth and key beneficiary of capital expenditure in road construction in India”, adds the brokerage.

Disclaimer:

Disclaimer:

The above stocks have been picked from the brokerage report of IDBI Capital. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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Former RBI DG says central bank’s concerns on crypto stem from money laundering, valuation concerns, BFSI News, ET BFSI

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Former RBI Deputy Governor N S Vishwanathan on Wednesday said money laundering and lack of clarity on valuations are the primary concerns of central banks in being circumspect about the introduction of cryptocurrencies. If the government goes ahead and allows cryptocurrencies, bankers need to be wary and not confuse persons’ wealth with the amount of crypto assets they hold even if they do not use it as collateral for lending, Vishwanathan said.

The comments come amid a heated debate over whether to allow private cryptocurrencies into the country, which has seen the RBI being vocal about its concerns, while the government seems to be more amenable.

RBI Governor Shaktikanta Das had on Tuesday reiterated his concerns over cryptocurrencies, saying there are ‘far deeper issues’ involved in virtual currencies that could pose a threat to the country’s economic and financial stability. The government is likely to introduce a bill on cryptocurrencies during the winter session of Parliament, beginning November 29.

Vishwanathan said world over, central banks are concerned with cryptocurrencies and wondered what makes governments more supportive of it.

“The central bank’s concerns come from two fundamental areas. One, of course, is that crypto-assets are seen as a possible source of money laundering, number two is that the valuations,” he said, speaking at the 8th SBI Banking and Economic Conclave.

He said we should not confuse cryptocurrencies with dematerialisation, where there is an underlying asset, which comes up in a digital form.

The career central banker added that we do not know what defines a value of a crypto asset, and the limited understanding is demand-supply forces govern the value.

The value of bitcoin, probably the most popular among the crypto assets, “gyrated” to USD 10,000 and swings between USD 7-17,000 per coin, he noted.

Vishwanathan said a person’s crypto holdings should not determine the wealth because the constant volatilities in the value can make a rich person seem poor or vice-versa.

Bankers should be extra careful and should not look at the crypto holdings while assessing a wealth of a potential borrower and should not lend against such assets, he added.

Earlier, Vishwanathan said, central banks prefer central bank digital currencies (CBDC) over the private and unregulated crypto assets and added that the introduction of the CBDC will help foreign trade.

The former DG said the activity of big tech companies like Google in aspects like deposit mobilisation for lenders is not so high that the RBI needs to be concerned about.

SBI Chairman Dinesh Kumar Khara said our experiences with the past will ensure an orderly exit from the present stimulus given by the RBI.

Replying to a question on whether banks are overcharging for forex commissions to small exporters, Khara said the market forces can ensure that no one is over-charged, while Swaminathan J, a managing director of SBI, said any enterprise works on cross-subsidisation, where it earns higher from a particular revenue stream and less from another.

Swaminathan added that various fee and commission streams have closed down with time, and banks will take an appropriate call on this particular one and case of regulatory action.



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UBS revises GDP forecast to 9.5% from 8.9% for FY22, BFSI News, ET BFSI

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Mumbai, Nov 17 (PTI) Citing faster-than-expected recovery, rising consumer confidence and the resultant spending spike, Swiss brokerage UBS Securities has revised upwards its growth forecast for the current fiscal to 9.5 per cent from 8.9 per cent in September. The brokerage also sees the economy clipping at 7.7 per cent in FY23 but moderating to 6 per cent in FY24, as it expects the benefit of the low-interest rate regime to end by the end of FY23, and it sees the central bank hiking policy rates by 50 bps in the second half of the next fiscal.

The Reserve Bank also forecasts 9.5 per cent GDP growth this fiscal while the average projection ranges from 8.5 to 10 per cent. The government projection is around 10 per cent.

The GDP grew 20.1 per cent in the June quarter of FY22.

In its September review, UBS said on a seasonally adjusted sequential basis, the real GDP declined by 12.4 per cent in the June quarter against the -26 per cent in the same period last year.

Therefore, we maintain the base case estimate of GDP growth at 8.9 per cent in FY22 compared to the consensus of 9.2 per cent against the deeper 7.3 per cent contraction in FY21, UBS Securities said.

The economy is bouncing back on progressive reopening, and the recovery from the second wave has been more pronounced than what we anticipated, Tanvee Gupta Jain, the chief economist at UBS Securities India said on Wednesday. Therefore pencilled in a higher-than-expected GDP run this fiscal.

Without giving an exact number, she said the economy will grow by 9-10 per cent in Q3 and 6-6.5 per cent in Q4 this fiscal, leading to higher overall full-year growth.

Gupta-Jain told reporters in a concall that she sees real GDP clipping at 9.5 per cent this fiscal, up from 8.9 per cent forecast earlier, 7.7 per cent in FY23 — which is more optimistic than the consensus 7.4 per cent for the year, but the growth momentum will moderate to 6 per cent in FY24 as the output gap will remain negative amidst the global growth engine slowing down.

Their optimism comes from their internal UBS India Activity Indicator data, which suggest economic activity has improved sequentially by an average of 16.8 per cent in the September quarter after contracting 11 per cent in the June quarter. Even for October, the indicator was up 3.1 per cent month-on-month on the festive demand bounce.

The brokerage bases the more-than-consensus growth optimism on the following: though consumption growth may moderate measures to boost public Capex and early signs of a recovery in the residential real estate sector may offset some of the adverse impacts.

Similarly, exports could also moderate next year from the very high rates this year due to a shift from goods to service consumption at the global level as the pandemic recedes.

They also see a potential credit accelerator effect in the country aiding the recovery. The baseline assumption is that activity continues to normalise, and remaining mobility restrictions are gradually removed.

Downside risks to the outlook include the following: a mutant virus that is resistant to vaccines is the biggest downside risk, as it may leave the government no choice but to begin new mobility restrictions, another could be a more than the expected spike in inflation and the resultant hike in repo rates to the tune of 75 bps next fiscal. If both materialise, then FY23 growth will be much lower at 5 per cent, she said.

And the upsides would be a successful and timely implementation of the recently announced structural reforms boosting growth beyond our baseline forecast, which will also lead to the economy closing the output gap faster.

According to the brokerage, potential growth has slowed to 5.75-6.25 per cent currently compared to over 7 per cent in 2017, due to longer-than-expected disruption caused by the pandemic and balance sheet concerns faced by economic agents.

Beyond FY22, Gupta-Jain believes Capex, especially infrastructure spending, manufacturing and exports will be the next key growth drivers.

On inflation, she expects CPI to decelerate to 4.8 per cent in FY23 from 5.4 per cent in FY22, assuming the RBI gradually starts unwinding its ultra-easy policy as the economic recovery gains momentum. In a base case scenario, she expects a policy rate hike of 50 bps in H2 FY23.

On the fiscal front, she expects the government to remain committed to fiscal consolidation and narrow the deficit to 8.8 per cent in FY23 from 10.1 per cent in FY22.



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12 Reasons Geojit Has A Buy On The Stock Of This Well-Diversified Company

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Investment

oi-Sunil Fernandes

|

Geojit has has a “buy” call on the stock of Tube Investments and believes that investors pay a higher premium for companies that focus on newer technologies.

“Keeping this fact in mind, we have selected a company, which is using its existing cash flows to build new technologies and make itself future-ready. The company has set out a vision to transform itself by looking at expanding the top line and bottom line through an inorganic route. Last year, it acquired CG Power and turned around the business. One can expect more such inorganic growth moves from the company,” the brokerage has said.

Here is the summary of the reasoning for recommending to buy the stock of Tube Investments of India by Geojit Securities.

1) The company did extremely well in the first and second quarter of the current financial year during which the sales of the company increased by 100 percent and net profit by 500 percent.

2) The company will start manufacturing electrical vehicles from April to June 2022. If this product finds customer acceptance, it can re-rate the counter further.

3) Tube Investments of India is the first from India to produce optical lenses for auto cameras. This business has great prospects as in the future all cars will be fitted with Advanced Driver Assistance Systems (ADAS).

4) The company performed well despite its heavy reliance on the Auto sector-which faced a slowdown. This shows that the management knows how to navigate through the tough situation.

5) Tube Investments of India wants to use cash flow from the present business to fund the future higher growth opportunities.

6) Institutional investors like this company and have a stake as high as 41 percent.

7) The company has relied on exports to counter the domestic slowdown, and it will continue to focus on exports as it has a higher margin.

8) The company has two listed subsidiaries CG Power and Shanthi Gears.

9) The company has a bicycle business which is B2C, having a turnover of close to Rs 1,000 crore. This business can be a separate listed entity in the future. This can unlock value for the shareholders.
Auto, as well as infrastructure, should do well as the economy is bouncing back. This should help the company to report smarter top line as well as bottom-line growth.

10) The company margins in the second half would be better than the first half as it will be able to pass on the hike in the input cost now.

11) We believe that company will report its highest ever net profit in the current financial year.

12) Our technical indicators suggest a bullish trend.

Superb Quarterly numbers by Tube Investments of India

Tube Investments of India saw a consolidated Revenue for the quarter was Rs.3,262 Cr as against Rs.1,193 Cr inthe corresponding quarter of the previous year. The profit before tax (before exception)
for the quarter was at 287 Cr as against Rs. 136 Cr in the corresponding quarter of the
previous year.

CG Power and Industrial Solutions Ltd, a subsidiary company, in which the Company holds 52.61% stake, registered a consolidated revenue of Rs.1,454 Cr during the quarter as against Rs. 664 Cr in the corresponding quarter of the previous year. Profit before tax (before exceptional items) for the quarter was Rs.144 Cr as against a loss of Rs.37 Cr in the corresponding quarter of previous year.

12 Reasons Geojit Has A Buy On The Stock Of This Well-Diversified Company



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Buy This Auto Ancillary Stock For An 18% Upside In 1-year

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Robust outlook across segments

“We did an analysis of CY21/22 demand outlook provided by 21 entities, including CV/PV OEMs, non-auto companies and industry associations. The read-through is positive for forging companies. The HCV segment is expected to grow strongly by up to 16% in CY22 in the North America and Europe regions. The CY21 outlook has been moderated due to supply constraints, leading to expectations of robust growth in CY22. In addition, strong growth is expected in India in CY22,” the brokerage has said.

According to it, the global passenger vehicle segment is likely to clock double-digit growth in CY22 across regions, owing to the pending order book, improving macros and low channel inventory.

Bharat Forge: Leadership position in automotive segment

Bharat Forge: Leadership position in automotive segment

According to Emkay Global, Bharat Forge’s revenue CAGR is expected at 19% in FY22-24E, led by the cyclical recovery in the underlying Auto and Industrial segments in both domestic and overseas markets. Moreover, nascent segments, such as Defense, Aerospace, Railways, Power electronics and Aluminum components, have the potential to cross US$100mn each in revenues in the medium term.

“Our positive view on BHC is underpinned by its leadership position in automotive forgings, focus on diversification, and an expected recovery in the core segments. We have a Buy rating on the stock with a Dec’22 target price of Rs 950, based on 27x P/E for the standalone business on Dec’23E EPS,” the brokerage has said.

Disclaimer

Disclaimer

The above stock has been picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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‘Buy’ This Infra Stock For 28% Return, With A Target Price Of Rs. 420: HDFC Securities

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Target Price

The Current Market Price (CMP) of PNC Infratech is Rs. 329. The brokerage firm, HDFC Securities has estimated a Target Price for the stock at Rs. 420. Hence the stock is expected to give a 28% return, in a Target Period of 1 year.

Stock Outlook
Current Market Price (CMP) Rs. 329
Target Price Rs. 420
1 year return 28.00%

Company performance

Company performance

PNC Infratech (PNC) has reported a strong quarter with revenue/EBITDA/APAT of Rs. 16/2.2/1.4 bn beating HDFC’s estimates. Management has maintained its guidance of ~20% topline growth and 13.5-13.7% EBITDA margin. Aligarh asset proceed is likely to flow in by the end of Nov-21; it will be partly used for funding Rs. 8bn of balance equity requirement in 11 HAM assets. HDFC mentioned, “In the water segment, it has Rs. 32bn worth of projects under JJM, and going forward, it expects to retain 25% of the order book (OB) under projects from this scheme.”

Comments by HDFC Securities

Comments by HDFC Securities

According to HDFC Securities, the company has shown a “Robust performance. The company’s revenue stood at Rs. 16bn (+53%/+29% YoY/QoQ); EBITDA stood at Rs. 2.2bn (+56% YoY, +26% QoQ). PNC expects annual growth of ~20% in FY22 topline, with a margin in the range of 13.5-13.7%. Given a strong OB and a comfortable balance sheet, we maintain BUY with an unchanged TP at Rs. 420 (15x Sep23E).”

About the company

About the company

PNC Infratech (PNC) is an Indian infrastructure construction, development, and management company. The company works across the fields of Highway Construction, BOT-(TOLL)/BOT (Annuity)/OMT/HAM Highway Projects, Airport Runway Project, Industrial Area Development, etc.

Disclaimer

Disclaimer

The above stock has been picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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This Stock To ‘Buy’ For 18% Upside, Target Price Of Rs. 430: HDFC Securities

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Target Price

The Current Market Price (CMP) of Max Healthcare is Rs. 364. The brokerage firm, HDFC Securities has estimated a Target Price for the stock at Rs. 430. Hence the stock is expected to give an 18% return, in a Target Period of 1 year.

Stock Outlook
Current Market Price (CMP) Rs. 364
Target Price Rs. 430
1 year return 18.00%

Company performance

Company performance

Max’s Q2 proforma EBITDA came broadly in line with ~Rs. 3.2-3.3bn, led by the all-time-high ARPOBs and strong volumes on the back of robust traction in non-Covid business. Adjusting for the Covid vaccine (Rs. 0.9bn), the company’s hospital revenue increased ~8% QoQ to Rs. 12.1bn, led by all-time-high ARPOBs (+15% QoQ). On the other hand, Lab revenue came in at Rs. 220mn (-39% QoQ), as Covid business plunged ~80%. However, the non-Covid business grew at a healthy pace (+18% QoQ).

Comments by HDFC Securities

Comments by HDFC Securities

According to HDFC Securities, “Despite the aggressive expansion plans, we expect post-tax RoCEs to stay at ~ 18-23% levels through FY28E. We raise our estimates by ~1% for FY23/24E, to factor in encouraging overall outlook.” The firms added maintaining the buy rating, “With a multitude of short and long term growth catalysts (recovery in international business, improvement in payor mix, and expansion plans), we expect Max EBITDA to grow at ~15% CAGR over FY22-FY28E.”

About the company

About the company

Max Healthcare has hospitals across locations like Delhi / NCR, Punjab, Uttarakhand, Maharashtra. The healthcare company has major departments in their hospitals namely Cancer Care / Oncology, Cardiac Sciences, Liver Transplant and Biliary Sciences, Orthopaedics & Joint Replacement, Neurosciences, Gastroenterology, Hepatology & Endoscopy, Thoracic Surgery, Laparoscopic / Minimal Access Surgery, etc.

Disclaimer

Disclaimer

The above stock has been picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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APIs help India build one of the finest digital financial systems, BFSI News, ET BFSI

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APIs or application programming interfaces are these little pieces of code at the endpoint of a software that allows other software to connect and communicate with it. They have brought a revolution to the Indian banking and finance industry – one that many other countries are trying to learn from – and they could do the same in healthcare and other fields.

In many cases, organisations charge a fee for their API connections, and that brings substantial revenues. In other cases, they offer APIs free, in the expectation it will help create an ecosystem that will eventually benefit everyone, including them. So profound is their influence that many now talk in terms of the `API economy’.

The government initiative called IndiaStack, which is a set of public APIs, is the finest example of this. Its Aadhaar Auth API launched in 2010 is what allows a vast number of third-party service providers today to connect to the Aadhaar database and authenticate you when you provide your biometric inputs. Its eSign API allows service providers to enable an Aadhaar holder to electronically sign a form or document anywhere and on any device. Its UPI API, in combination with a virtual payment address, enables bank account holders to send and receive money instantly from their smartphones without the need to enter bank account information or net banking user id and password. Even third party service providers can use these APIs, which is how the likes of Google Pay and PhonePe made transfers so delightful.

Sharad Sharma, co-founder of iSpirt Foundation, which has been central to building India-Stack, notes that a shared API that Aadhaar created that allows you to do KYC of an individual in a presence less but trusted manner suddenly unlocks the platform’s ability to serve the customer virtually. No other country in the world, he says, has built such a comprehensive suite of open APIs for digital financial services.

Older banks are saddled with older IT infrastructures, and cannot move very fast. So they are opening up more of their systems through APIs so that newer digital players – call them fintechs or neobanks, who have cloud-based architectures based on what are called containers and microservices – can quickly offer a variety of new services to new segments of people that older banks cannot.

“Banks have opened their APIs so that different fintechs can utilise them,” says Akash Jain, principal analyst at Gartner. Neobanks don’t have a banking license. They partner with traditional banks, and API integrations with these banks are core to their operations.

Next-gen shift

Shashank Mehta, head of RazorpayX, the B2B neobank of payments solutions company Razorpay, says the country is now seeing a next-gen shift, where apart from money movement, APIs are being used to help businesses interact with money better. Digital-native businesses, for instance, can’t afford to manage their money manually – so RazorpayX offers an easy-to-use bank account, a one-click payroll solution, and a corporate card to run ads on social media and for other purchases.

Neobank Zolve provides working professionals and students who are bound for the US with a host of financial facilities they would need, like bank accounts in the US, high-limit credit and debit cards, all without the need for a US social security number or credit history.

At the root of these are the neobanks’ connections with traditional banks. The latter also takes the big burden of compliance with RBI regulations off the backs of fintechs.

That foundational role is what players like Digio do as well. Digio enables authentication services – Aadhaar eSign and eKYC, digital signatures – for fintechs. Digio does the heavy-lifting involved in, for instance, the constant changes in KYC regulations. They have a battery of legal consultants to ensure systems are compliant. “People wanted a solution which could abstract out the technology, maintenance, as well as the compliance factor. That’s where we put out these APIs that allow any business entity to connect and pretty much create a complete digital KYC, signing and recurring payments workflow,” says Sanket Nayak, co-founder of Digio.

Zerodha too opened up its core capability of executing trades, and it does not even charge those who use its APIs. “That was a philosophical call,” says Kailash Nadh, CTO. He says technologists were not coming forward to build securities tech because of legal barriers, red tape and compliance requirements involved in a broking license.

Today, there are entire businesses built on top of Zerodha’s APIs. Smallcase, with over 2 million customers, offers tailor-made baskets of stocks people can trade in; Sensibull enables options trading; Quicko pulls people’s transactions to do taxation. An entire ecosystem is getting created that will also benefit Zerodha. For one, its demat account is an option for Smallcase customers.



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