Fino Payments Bank IPO: Mixed Rating For The New Investment

After Nykaa garnered a strong investor interest and saw over-subscription on the 1st day, there is another IPO that has hit the primary market. The IPO by payments bank Fino is open for subscription and here is a take on by brokerages and market experts. But before that here’s some of the key notes on the IPO in nut shell:

1. About the company:

The digital financial institution was incorporated in the year 2007 offers a whole lot of services and is a subsidiary of Fino Paytech. The primarily customers targeted and catered by the institution are underserved as well as unserved people of India.

2. IPO details:

The IPO issue is being made for mopping Rs. 1200 crore. The issue includes fresh equity shares worth Rs 300 crore and an offer for sale (OFS) of 15,602,999 equity shares by promoter Fino Paytech. Price band for the issue has been fixed at Rs. 560-577 per share for this issue and Investors will be able to bid for a minimum of 25 equity shares and in multiples of 25 thereafter.

3. Brokerages’ take:

There is one view that subscription should be made in the IPO for a long term view and the positives highlighted are big investors, strong anchor book, positive outlook, profit making start up etc. Nonetheless, key challenges are highly competitive business and possible government’s change in policy.

Angel Broking is also ‘Neutral’ on the IPO and cites in its report “Fino payments bank has posted strong a 46.0% CAGR in total revenues between FY2019-21 and has also turned around its operations and reported profits of 20 crore for the first time in FY2021. At the higher end of the price band the stock would be trading at P/E of 220x FY2021 fully diluted EPS of 2.6 which is expensive. Despite strong growth prospects, we believe that valuations do not justify the premium and hence we have a NEUTRAL recommendation to the IPO”.

Religare Securities has given a subscribe rating with a long-term view on the issue and said the IPO is valued at 21.8x FY21 EV to sales, which is about 20 per cent discount compared to the other two recently-listed unicorns, CarTrade and Zomato, despite generating superior RoE.

“The beauty and personal care market has a large addressable market opportunity, especially in India where millennials tend to prefer buying brands and look for easy buying options such as e-commerce,” it added. “Unique business model and first-movers advantage, Nykaa is likely to get a healthy traction ahead.”

Other listed positives or take aways

After the fund raise via capital issue, the payments bank will not be requiring for quite a few years.It has a strong leadership position in the fintech industry having the largest network of micro ATMs as of March 2021 with a market share of 55 per cent, a robust merchant network of 6.4 lakh and 25.7 lakh bank accounts. Its revenue for FY21 stood at Rs 791 crore that grew at a CAGR of 29 per cent in the last three years and the bank registered a profit of Rs 20.5 crore in FY21.