But there is a catch: the approval is for the payments bank, but the scrip trading in the unlisted market is that of the holding company of the lender.
The company is expected to sweep up funds worth Rs 1,300 crore from the primary market, valuing itself at a little more than Rs 5,200 crore.
The issue is likely to consist of fresh equity issuance worth Rs 300 crore and an offer for sale of 1,56,02,999 equity shares by the existing shareholders and promoter, Fino Paytech.
The unlisted shares of Fino Paytech soared about 20 per cent to Rs 380-400 in the unlisted market within hours of the Sebi nod.
The scrip was trading at Rs 330-340 ahead of the announcement, up substantially from Rs 200 at the start of the year. Last month, the company had floated its right issue at Rs 252 apeice.
Dealers of unlisted markets are advising investors to understand that the IPO-bound lender and the active counter in the unlisted market are two separate entities.
“Fino Paytech is the holding company of Fino Payments Bank, whose IPO has been approved,” said Umesh Paliwal, Co-founder, UnlistedZone. “The big names have invested in Fino Paytech, not the bank.”
Bharat Petroleum (28.9 per cent), ICICI Prudential Life Insurance (11.5 per cent) Blackstone GPV Capital (7.6 per cent), International Finance Corporation (6.7 per cent), ICICI Bank (5.8 per cent) are the key shareholders of the company, which own more than 5 per cent stake.
Intel Capital Corp, Exide Life Insurance (Now part of HDFC Life), LIC of India, Indian Bank and Union Bank are the other key shareholders.
Dealers are expecting the price band of around Rs 620-650 for the IPO of Fino Payments Bank. However, investors must understand that pre-IPO equity shares have a mandatory lock-in period of six months.
“It is a no brainer that holding companies trade at a discount and investors would be awaiting a reverse merger,” said Divyanashu Aggarwal of Delhi-based Growfast Securities.
No one knows the timeline, swap ratio and terms for the reverse merger, he said. “There are better options available, if anyone wants to bet on pre-IPO equity.”
The fintech bank turned profitable in the fourth quarter of FY20 and has consistently enhanced its profitability since. The company will utilise the IPO proceeds from fresh issue to augment its Tier 1 capital base to meet future capital requirements.
Axis Capital, CLSA India, ICICI Securities, and Nomura Financial Advisory Services are the book running lead managers to the issue whereas KFin Technologies has been appointed as registrar.
However, dealers are bullish on the prospects of the holding company, which has been attributed to solid investors and strong presence of financial inclusion, serving the unserved/underserved.
“The company is backed by key strong investors like ICICI group, Blackstone and others, which boosts investor confidence,” said Jasbeen Singh, Founder of Pune based Meera Associates, a firm that deals in unlisted shares.
The company has a strong network marking its pan-India presence and financial inclusion and rapid digitalisation of services are helping brighten its prospects, Singh said.
