FINOPBNSEQ1 FY24August 03, 2023

Fino Payments Bank Limited

10,362words
88turns
11analyst exchanges
4executives
Management on call
Rishi Gupta
MANAGING DIRECTOR AND CHIEF
Ketan Merchant
CHIEF FINANCIAL OFFICER
Anup Agarwal
FINANCIAL CONTROLLER – FINO PAYMENTS BANK LIMITED
Rajat Gupta
GO INDIA ADVISORS
Key numbers — 40 extracted
INR348 crore
lves for FY26. For the quarterly performance, we registered our highest ever quarterly revenue of INR348 crores with 8% sequential growth and 21% year on year. PAT has grown 85% year on year at INR18.7 crores
8%
the quarterly performance, we registered our highest ever quarterly revenue of INR348 crores with 8% sequential growth and 21% year on year. PAT has grown 85% year on year at INR18.7 crores with EBI
21%
, we registered our highest ever quarterly revenue of INR348 crores with 8% sequential growth and 21% year on year. PAT has grown 85% year on year at INR18.7 crores with EBITDA at INR40.5 crores whic
85%
quarterly revenue of INR348 crores with 8% sequential growth and 21% year on year. PAT has grown 85% year on year at INR18.7 crores with EBITDA at INR40.5 crores which grew 72% on an year-on-year ba
INR18.7 crore
INR348 crores with 8% sequential growth and 21% year on year. PAT has grown 85% year on year at INR18.7 crores with EBITDA at INR40.5 crores which grew 72% on an year-on-year basis. Our total throughput cros
INR40.5 crore
tial growth and 21% year on year. PAT has grown 85% year on year at INR18.7 crores with EBITDA at INR40.5 crores which grew 72% on an year-on-year basis. Our total throughput crossed INR75,000 crores for the f
72%
n year. PAT has grown 85% year on year at INR18.7 crores with EBITDA at INR40.5 crores which grew 72% on an year-on-year basis. Our total throughput crossed INR75,000 crores for the first time in the
INR75,000 crore
th EBITDA at INR40.5 crores which grew 72% on an year-on-year basis. Our total throughput crossed INR75,000 crores for the first time in the quarter, growing 25% y-o-y and the total number of transactions also c
25%
r basis. Our total throughput crossed INR75,000 crores for the first time in the quarter, growing 25% y-o-y and the total number of transactions also crossed INR40 crores which grew by over 62% y-o
INR40 crore
he first time in the quarter, growing 25% y-o-y and the total number of transactions also crossed INR40 crores which grew by over 62% y-o-y basis. Our distribution network continues to grow, and we have now
62%
owing 25% y-o-y and the total number of transactions also crossed INR40 crores which grew by over 62% y-o-y basis. Our distribution network continues to grow, and we have now built a merchant base
14.4 lakh
basis. Our distribution network continues to grow, and we have now built a merchant base of over 14.4 lakhs. Our growth of high margin products consisting of CASA and CMS now constitute 29% of the overa
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Guidance — 20 items
Rishi Gupta
opening
“My opening remarks this time will be a bit longer because of the strategic initiative we have announced, so please bear with me.”
Rishi Gupta
opening
“We are happy to announce that this quarter's performance is a step in the direction to achieve the aspirations we have set for ourselves for FY26.”
Rishi Gupta
opening
“Our own channel contributed to 65% of the overall revenue, much in line with our range bound guidance.”
Rishi Gupta
opening
“In line with that approach, let me share that our technology upgradation of following the core as well as review of our existing core banking platform is on track to deliver a much superior technology platform to cater to the business growth and future product offerings.”
Rishi Gupta
opening
“I know some of you have questions apprehensions on how Fino or how Fino's SFB will be different from other SFBs in the market.”
Rishi Gupta
opening
“It will be enhancement of license thus enabling us to become a payments bank plus plus model which means ability to raise higher amount of liability deposits and also offering lending products.”
Rishi Gupta
opening
“The third approach will be on our Asset Lite approach.”
Rishi Gupta
opening
“But in our case, it will be very different with few branches and lot of merchants oblique BC points.”
Rishi Gupta
opening
“These BC points will help in generating liability as well as will be the consumer of credit plus help us on lending as well.”
Rishi Gupta
opening
“Low cost of funds, that is higher CASA balance, our cost of funds will be 200-250 basis points lower than competition.”
Risks & concerns — 2 flagged
Meaning lending based on transaction history with lot of data analysis thus reducing the credit risk and building operational efficiencies in lending.
— Rishi Gupta
So, we don't expect that to be a challenge because we are already meeting the five-year criteria of a promoter under payments bank.
— Rishi Gupta
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Q&A — 11 exchanges
Q
So, my question is, as we see from the PPT, the contribution of BC model to total revenues is roughly around 10%. So, I just wanted to know how will you offset this revenue once you become an SFB and you are no longer allowed to do this. That was the question.
Ketan Merchant
You are right and couple of points on the statistics side as well. Over last couple of years our BC model has not been growing. Since the time we became bank, we are focusing on a B2C model and our kind of a customer base. To answer your specific point, I would like to put two, three thoughts out here. One is as Rishi said, it is around a 24-month journey wherein we convert into SFB. Second aspect which is very important and which Rishi alluded earlier in his opening comments as well is that there are lot of payment related initiatives which can be done currently which are not being because of
Q
Hi, sir. Thank you for the opportunity. So, sir, my question is around the reverse merger. So, what all the assets are holding in the holding company and apart from the FINO shares, any valuation exercise we have done and what will be the timeline for this reverse merger to be completed?
Ketan Merchant
Hi, Dixit. Ketan here. Let me just put a perspective to that. What our board has agreed upon is look at avenues of consolidation. So that could be anything. Consolidation can be happening through a merger, through a reverse merger, so various kinds of options which we will evaluate. At current stage, have we reached a stage where we know we fixed upon an option, are we looking at an inter kind of a company between the holdco and the opco? The answer is essentially no. Our understanding is that the bank is a primary franchise of the group as a whole. So, keeping that in the context, all the opt
Q
Sir, I think it's good to hear that we are now actually going on the path of becoming SFB and all. So I just want to understand how we are going to add up more digital partners in this journey because I think our as you have mentioned on the television also you are going to be like SFB++ which is more digitally I would say penetrated and all and how do we see things actually you know moving ahead for us from these partnerships and all because I think we really don't have done there any kind of large lending so far in that meaningful manner. So how do we see panning out for us as a thought proc
Rishi Gupta
So Utkarsh on the digital part as we mentioned earlier, 24% of our transactions now are coming on the digital platform. It is largely a UPI platform which is being used for digital transactions. We continue to grow that ecosystem. About 2 years back it was less than 1% now it is more than 24%. We have already started to invest quite a bit on the FinoPay app as well where you could see the FinoPay app offers as many solutions as any other bank app is there. Thirdly, what we are planning to do is we are trying to do partnerships with a lot of B2B players. So, one player we mentioned is Hubble, t
Q
Hi. Thank you for the opportunity. First of all, congratulations, Rishi. Congratulations, Ketan. Very well done. Thank you. My question is that we are focusing on high margin on network business. And this is one of the fastest growing that I understand the portfolio, CASA and CMS. But overall, gross margins are down 100 basis points year-on-year, and 150 basis points quarter-on-quarter. How do we explain this?
Rishi Gupta
So, this is more with regard to, while Ketan will get into more details, but from my own, this is just a product mix change which is there, which has happened. One item in case of CASA because the chip costs has gone up substantially in the last six months to one year, may be more than a year now. So that has also impacted to some extent our CASA margin, that is the only impact on the CASA margin because of the increase in the chip cost. Apart from that, it is largely a product mix issue which is there between the overall business, Ketan. Gautam, thanks. I think one point which Rishi essential
Q
Yes, hi Rishi and Ketan. Congrats on a great set of numbers. So just two questions. One again on the corporate restructuring bid. So, what will happen to the microfinance business we have under the parent?
Ketan Merchant
Renish, hi, Ketan here. Technically, this is an agenda or the headache of the really HoldCo. And HoldCo, when they have initiated this conversation on corporate restructuring, they are well within, aware of the regulation that there cannot be an NBFC and a bank coexisting within the same group. So, I'm sure that at a HoldCo level, there is some solution which is coming out on the NBFC, MFI. Got it. And let's say when as a company we want to apply for SFB license, we will be applying through the existing entity or from the parent? We will be applying through the bank, payments bank. Okay, we wi
Q
Hi, thank you. Congratulations on a good set of numbers. I have two questions. First is on the CASA book. Can you give an update against the INR1,200 crores of CASA deposits that you had last quarter, which included customers and merchants? What is it as of June? And if you can help me understand the, you've given the renewal income of it, can you give me the new subscription revenue part of it as well. Now my main question with the CASA book is that, if I go with your FY „28 aspiration of about 27.5 million CASA accounts, if I project it in my future and if I use the same rate to project my d
Ketan Merchant
Yes, Shreya, thanks. I've been writing what you just said. Let me just go in sequentially. In terms of our deposit balances, on an average, and I'll say both average and period, so that, it is a very, it gives the right kind of a perspective. On a sequential basis, between March and June, on a period end basis, our deposits are largely flat. However, if you saw on the average deposit size, the average deposit between these two quarters have increased by around 13%. And that's the point which I essentially made. Now, your question remaining on deposit, how are we growing? I again take you back
Q
Thanks for taking my question. So, I wanted to understand what is your target of maintaining your cost to income ratio? Although, I find it to be low even for a payments bank, but after getting into an SFB, given you may not be able to do BC banking, or you have to get an agency for collection and employees will also increase. So, what's your target on cost to income? And my second question was, current average balance in your CASA account is around 1,200 and aspiration is up to 2,500 for FY '28. So how does the INR2 lakh balance limit removal help you given that you will still be a rural focu
Ketan Merchant
Hi Deepika, Ketan here. Let me just take the first question first in terms of cost-income ratio. You are right, 25%, 26% for a retail bank is lower. However, I think, just go back to the genesis of Fino, we have always maintained that we will be an asset-light model. The way it essentially works is, rather than branches of brick-and-mortar, as Rishi said in his points, we operate through these touch points. So that is something which will continue. If I just go back to my opening statements, I just said that our model is structured in a manner and we have seen that testimony of last 12 quarter
Q
Yes, hi. Just wanted to understand as to how saturated, in your opinion, is the AEPS market opportunity and going forward, do you feel that there's room for AEPS to grow beyond rural areas to places where instead of maybe building an ATM distribution, AEPS is a better go. So, has it saturated to a point where even as for your strategy moving towards UPI is going to be the way forward for even the more rural strata?
Management
So, when we look at the India opportunity, see, India has 1.4 billion population with nearly 800 million people who don't have proper access to financial services and banking. And we have just started the payment bank five years, six years back. So, the opportunity is quite big. And from opportunity point of view, we are just focusing on right now on transactions and now moving to accounts. The monetization piece which will come from the lending is about to start once we convert from a payments bank to an SFB piece. As far as Aadhaar Enabled Payment System, AEPS is concerned, government is mov
Q
Hi, Rishi and Ketan. Congratulations. Just one question. You mentioned about B2B within the payment services. Can you help me understand, would this be margin diluted?
Ketan Merchant
Hi Sachit. Again, as I said, the way we have to look at it is typically our payment services will replace or we will use it more because if we get more than 2 lakhs kind of a thing. There are two aspects which we are looking at it. We have in the past said that our own to our open, we want a skewing towards our own. We have been largely successful to keep it range bound. I can say that the payment services margin would be far-far better than our open banking margin. As regards to the other products, I think it is you know, as in when we are launching our payment services which goes beyond to t
Q
Hi, Rishi. Hi, Ketan. Congratulations on a great set of numbers. My questions are to Ketan. One is we have seen an 11% increase in the opex, is there any major drivers of this? Is there any one-off into this? And second is, how much is our total borrowing as of June '23?
Ketan Merchant
Yes. Hi Deepak. Yes, you're right. On a sequential basis, we have seen 11%. I mentioned the numbers earlier as well, that it's an account of, you know, our Q4 was 62.7, we have a 69.6. Couple of points which we have to be cognizant out here is, in the Indian sector, April dovetails the growth in terms of the employee emoluments as well. So, of these 10.9%, if I can just say around, 5.5%, 6%, if not more is on account of the employee emoluments which we have started from 1, April onwards. There is one more aspect which has come out here and I mentioned it in my earlier comments as well that AEP
Q
Thank you everyone for joining us. I know it's a busy week as far as analyst calls are concerned, earnings calls are concerned. But let me reiterate the fact that we had a good quarter, and we continue to stay focused on our 20% growth target. Our DDD strategy on Distribution Data and Digital will become the cornerstone as far as the SFB transition is concerned. As we mentioned, SFB transition, first step we have taken by taking the board approval, now we'll be applying to RBI and then build-up the model and the technology over the next two years and then the SFB operations will start subject
Management
Thank you very much.
Speaking time
Ketan Merchant
18
Rishi Gupta
16
Moderator
13
Utkarsh Maheshwari
7
Renish
7
Management
5
Shreya Shivani
3
Dipika M
3
Vishrut Bubna
3
Sachit Motwani
3
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Opening remarks
Rajat Gupta
Yes, hi. Thank you, Leba. Good afternoon, everyone, and welcome to Fino Payments Bank earnings call to discuss the Q1 FY24 results. We have on the call with us today, Mr. Rishi Gupta, Managing Director and Chief Executive Officer, Mr. Ketan Merchant, Chief Financial Officer, and Mr. Anup Agarwal, Head, Investor Relations. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risk that the company faces. I now request the MD, Mr. Rishi Gupta, to take us through the company's business outlook and financial highlights, subsequent to which we'll open the floor for Q&A. Thank you and over to you, sir.
Rishi Gupta
Thank you, Rajat. Good afternoon, ladies and gentlemen. Thank you for joining us today for Fino Payments Bank earnings call. My opening remarks this time will be a bit longer because of the strategic initiative we have announced, so please bear with me. FY23 was a great year for us, and FY24 has started on a very positive note. Our TAM strategy, which is transaction, acquisition, and monetization, is delivering good results. We are happy to announce that this quarter's performance is a step in the direction to achieve the aspirations we have set for ourselves for FY26. For the quarterly performance, we registered our highest ever quarterly revenue of INR348 crores with 8% sequential growth and 21% year on year. PAT has grown 85% year on year at INR18.7 crores with EBITDA at INR40.5 crores which grew 72% on an year-on-year basis. Our total throughput crossed INR75,000 crores for the first time in the quarter, growing 25% y-o-y and the total number of transactions also crossed INR40 cror
Ketan Merchant
Thanks, Rishi. Good afternoon, ladies and gentlemen, and thank you for joining our earnings call today. As Rishi mentioned, this quarter's performance showcases that we are in right direction towards achieving our stated guidance of FY‟26 and will continue to grow at 20% Y- o-Y focusing on our acquisition strategy. As we mentioned earlier, our business model is such that with 20% annualized growth in revenue, operating leverage playing on, our bottom-line growth percentage is typically in the range of 2 or 2.5x of revenue growth. Our profitability across past 12 quarters clearly demonstrate this strategic model approach is working to the core. Now let me start talking about the Q1 numbers. Our Q1 FY24 revenue is at INR348 crores which saw a Y-o-Y increase of 21%. EBITDA has grown by 72% Y-o-Y to INR41 crores, and our PAT increased to 85% Y-o-Y to 18.7 crores. Our Cost to Income ratio Q1 FY24 continues to remain at around 26% and we are confident that over a medium to long term we will
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