The issue garnered mixed responses from brokerages as they weighed the company’s asset-light model and long-term growth prospects against its high valuations, which they see as a key risk for the issue.
Considering the TTM as of June 2021, adjusted BVPS of Rs 54.52 on the post-issue basis, the company is going to list at a Price to book value P/B of 10.58, with a market cap of more than Rs 4,8015 crore, said Marwadi Shares and Finance.
“The company has an asset-light and scalable business model, with operational experience and expertise. It has a unique DTP framework that enables it to serve the target market efficiently,” said the brokerage, giving it a ‘subscribe’ rating
The three-day IPO of Fino Payments Bank will kick off on Friday, October 29 and will run till Tuesday, November 2.
The payments bank, with no listed comparable peers, is eyeing to raise Rs 300 crore via the sale of fresh equity shares, whereas its promoter Fino Paytech will offload 1,56,02,999 equity shares worth Rs 900.29 crore.
The IPO is valued at 31.9x FY21 book value, which analysts find to be stretched. Fino Payments Bank generates over 95 per cent of its income through fees and commissions, and the future growth is primarily dependent on incremental wallet share digital payment opportunities in the country, said Reliance Securities.
“Digital payments are expected to cross Rs 3,500 trillion in FY25E and it is poised to see a healthy business opportunity in subsequent years in the backdrop of strong digital platform and resources built in the last couple of years,” the brokerage added but did not give any rating on the issue. The brokerage, however, added that current valuations do not leave much on the table for investors.
Fino Payments Bank has fixed retail quota at 10 per cent of the net offer. QIB quota is fixed at 75 per cent while the quota for NII investors is reserved at 15 per cent. The IPO includes a reservation of Rs 3 crore worth of shares for the company’s employees.
Fino Payments Bank is expected to list on November 12. The fintech bank turned profitable in the fourth quarter of FY20 and has consistently enhanced its profitability since.
Brokerage firm Religare Broking said, “Fino Bank operates an asset-light business model which is a merchant-led distribution model and requires minimal capital expenditure as the onboarding and setup costs are borne by the merchant. This helps in improving operating leverage and enabling expansion.”
Their focus will remain on innovating products, improving technology platforms, expanding geographical footprint and deeper penetration in the regions where they are currently present, enabling them to earn better revenues and profits, it added. Religare has a positive view on the company.
The company has appointed Axis Capital, CLSA India, ICICI Securities and Nomura Financial Advisory and Securities (India) to manage the issue.
