Concall AI

Fino Payments Bank Limited — Q1 FY26 earnings call

Call held 31 Jul 2025

Management summary

Fino Payments Bank reported a resilient Q1 FY26 with 4% YoY revenue growth and significant margin expansion, driven by its growing CASA and digital payments segments. Despite headwinds from regulatory scrutiny, mule accounts, and a sharp decline in the remittance business, the bank maintained strong profitability. Management emphasized a cautious, risk-calibrated approach and expects growth to pick up from Q2 FY26, with ongoing investments in technology and a focus on sustainable expansion.

Highlights

Revenue of ₹453 crores, up 4% Y-o-Y, demonstrating resilience amidst headwinds.
EBITDA of ₹62 crores, up 16% Y-o-Y, and cash profit of ₹50.5 crores, up 20% Y-o-Y, indicating strong operational efficiency.
CASA and digital payments, categorized as 'growing business', contributed 57% of total revenue in Q1 FY26 and grew 40% Y-o-Y.
Net revenue margin expanded by 250 basis points year-on-year due to a strategic shift towards higher-margin ownership businesses.
Average daily CASA balances for the quarter rose 34% year-on-year to ₹2,275 crores, reflecting strong customer engagement.

Concerns

Muted government benefit disbursements and national elections impacted new customer additions, liability build-up, and transaction business.
Sharp rise in 'mule accounts' led to heightened regulatory scrutiny, impacting account additions and transaction volumes.
Remittance business saw an industry-wide slowdown of almost 60% due to regulatory changes introduced in November '24.
Digital payments segment faced headwinds due to enhanced due diligence on merchant onboarding, impacting throughput growth.
PAT for the quarter stood at ₹18 crores, showing a year-on-year dip due to becoming a full tax-paying entity from Q2 FY25.

Key financials

01 Revenue ₹453 Cr +4%YoY
02 EBITDA ₹62 Cr +16%YoY
03 Cash Profit ₹50.5 Cr +20%YoY
04 PAT ₹18 Cr
05 Net Revenue Margin Expansion 250 bps
06 Cost-to-Income Ratio 25%

What they filed

Q1 FY27: revenue up 18.0%, net profit down 177.8% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	48	49	53	61	60 +25%	63 +29%	64 +21%	72 +18%
Expenses	404	407	438	400	351	344	306	285
EBITDA	-357	-358	-385	-339	-291 +18%	-281 +22%	-242 +37%	-213 +37%
Margin	-747%	-725%	-729%	-557%	-484%	-447%	-377%	-295%
Other income	408	412	441	392	340	328	275	235
Interest	25	26	26	28	28	29	29	35
Depreciation	0	0	0	0	0	0	0	0
Profit before tax	26	28	30	25	21 −19%	17 −39%	4 −87%	-14 −156%
Tax rate	18%	19%	19%	28%	28%	30%	-73%	0%
Net profit	21	23	24	18	15 −29%	12 −48%	7 −71%	-14 −178%
EPS	2.54	2.78	2.88	2.13	1.84	1.47	0.85	-1.65

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Segment	Revenue	Revenue Growth
Growing Business (CASA & Digital Payments)	—	40%
CASA	₹154 Cr	30%
Digital Payment Services	₹106 Cr	59%
CMS (Cash Management Services)	₹34 Cr	—
AePS	₹30 Cr	3%
Micro-ATM	₹13 Cr	—

Capital allocation

high confidence

Capex ₹37 Cr
- Technology and infra cost, including depreciation ₹37 Cr
- Core banking system implementation
On your technology expenses, I'll just give you some data out here. Typically, after including depreciation, our quarter 1, and I'm assuming depreciation is around INR17 crores plus and technology and infra cost is INR20 crores. So INR37 crores is the broadly technology and depreciation cost. Your point on capex, I think we've said it in the earlier call as well, we've planned our capex in a manner, Rishi also alluded towards core banking system getting implemented over the next couple of quarters. So there is an element of when core banking system gets implemented, that will come as a capex cost.

Guidance & targets

Customer Acquisition

Customer addition numbers Customer Acquisition · Q2 onwards · Medium confidence Improve

We expect this to we expect the customer addition numbers to improve in quarter 2 onwards.

— Rishi Gupta

Operating Costs

Technology operation cost Operating Costs · Next couple of quarters · High confidence Largely in this range

We expect this cost -- technology operation cost largely in this range over the next couple of quarters.

— Ketan Merchant
Operating costs Operating Costs · Coming quarters of this financial year · High confidence Similar in the range as quarter 1

We believe operating costs will remain similar in the range as quarter 1 for the coming quarters of this financial year.

— Ketan Merchant

Growth Outlook

Growth environment Growth Outlook · Second half of FY '26 · Medium confidence More conducive

However, we believe the second half of FY '26 will offer a more conducive environment for growth, and we are well positioned to respond with agility and resilience.

— Rishi Gupta

Margins

Net revenue margin Margins · Next couple of quarters · High confidence Range bound around 33%, 34%

We anticipate these enhanced margins to remain range bound around 33%, 34% from here on for next couple of quarters.

— Ketan Merchant

CASA

CASA numbers CASA · Q2 onwards · Medium confidence Start looking up

I believe looking at the July numbers, we should definitely look at a much higher number in quarter 2. And that is why I said that we expect that the CASA numbers will start looking up from quarter 2 onwards because of both the government disbursements as well as from the mule accounts, the solutions and everything which we have put together.

— Rishi Gupta

Product Launch

New payment products Product Launch · H2 FY '26 · High confidence Couple of products

However, we plan to introduce additional features through UPI platform aimed at improving customer experience, strengthening risk controls and supporting future monetization opportunities. We have taken a cautious approach on introducing new payment products in line with the regulatory landscape and expect to introduce a couple of payment products in H2 FY '26.

— Rishi Gupta

Partnerships

New partnerships and payment products Partnerships · H2 FY '26 · Medium confidence Launch with some

We are also in active discussions with some of the leading payment aggregators to build new partnerships and payment products, hopeful of launching with some of them in H2 FY '26.

— Rishi Gupta

Lending Business

Starting lending business Lending Business · Within one year · Medium confidence Within one year of in-principle approval

We are quite hopeful of starting the lending business within one year of the in-principle approval.

— Rishi Gupta

New Products

New products on CASA and digital payment side New Products · Next 3 to 6 months · High confidence Launch

And we are also launching new products on the CASA side as well as on the digital payment side, which will augment our digital payments business right now from only acquiring business to some other lines of businesses also in the next 3 to 6 months.

— Rishi Gupta

Technology

Core banking system migration Technology · Next earnings call · Medium confidence Migrated

Our technology stack, hopefully, when we meet next time over the earnings call, we would love to have got migrated by then, which will open up doors for us to do new products much faster, more efficiently.

— Rishi Gupta
AI tools implementation Technology · This quarter · High confidence Lined up for implementation

Some of the Al tools also are lined up for implementation in this quarter as such.

— Rishi Gupta

SFB License

SFB application outcome SFB License · Next 3 to 6 months · Low confidence Something happening

And the SFB application also, hopefully, if everything goes well and the regulator is kind and God is kind, we might see something happening in the next 3 to 6 months is what we expect.

— Ketan Merchant

What to watch in Q2 FY26

CASA customer addition numbers

Next quarter

Current Moderated in Q1 FY26

Target Improvement in Q2 onwards

Why it matters

CASA is a key growing business segment and driver of revenue and profitability.

We expect the customer addition numbers to improve in quarter 2 onwards.

Risks & concerns

Heightened regulatory scrutiny and digital fraud (mule accounts)
high

Sharp rise in mule accounts led to increased regulatory scrutiny, impacting account additions and transaction volumes, and necessitating strengthened onboarding protocols.

Management acknowledged
Industry-wide slowdown in remittance business
high

Regulatory changes in November '24 led to an almost 60% decline in remittance volumes, with some business shifting to non-compliant channels.

Management acknowledged
Muted government benefit disbursements
medium

Impacted new customer additions, liability build-up, and transaction business in Q1 FY26.

Management acknowledged
Headwinds in digital payments due to enhanced due diligence
medium

Regulatory proposals for enhanced due diligence on merchant onboarding are impacting throughput growth in the digital segment.

Management acknowledged
Competitive pressure in Cash Management Services (CMS)
medium

CMS saw active competitive pressure, leading to reduced take rates in some instances.

Management acknowledged
Inflationary pressures and higher compliance-related costs
medium

Contributed to a marginal increase in the cost-to-income ratio, though expected to remain range-bound.

Management acknowledged
Uncertainty around MDR and P2M incentives
medium

Lack of clarity on policy framework for MDR and P2M incentives could impact future margins, though not factored into current financial model.

Management acknowledged
Competition from public sector banks on zero balance accounts
medium

Public sector banks aggressively offering zero balance accounts could impact Fino's customer acquisition and fee income, though management believes the impact will be limited.

Analyst downplayed

Q&A highlights

4 direct

Impact of mule accounts on merchant additions and CASA slowdown Direct

So, both of them are actually related in a way. And mule accounts are largely accounts which are opened or are sold for fraudulent purposes. And specifically in some districts, some geographies, this is more prevalent. So, this has resulted in some of our active CASA merchants declined by about 5% to 8% as such. Basis that decline, you would see that there is a little slowdown on the CASA number because the merchant in those geographies where there were high mule accounts, which were getting generated, have been closed and to control the mule account management. So, in line with that, the CASA slowdown has happened.

Clarifies the direct link between mule account issues, merchant closures, and the slowdown in CASA additions, explaining a key headwind for the quarter.

Asked by Shreya Shivani

Reasons for sharp decline in remittance business and potential for revival Direct

So on the remittance business, there are a couple of things which have happened in the last one year. Most -- I would say I will break this into 2 big significant events which happened. One event was in November -- from November 1, 2024, RBI came out with new guidelines for bank-led domestic money transfer, in which, some new checks and balances and some new process was enhanced so that some controls can be put on misuse of remittance, which was happening previously. So that resulted in the bank-led DMT becoming more difficult and tedious compared to some of the other options which were which were available and which can get implemented. So one was that factor. Secondly, once the new guidelines came into effect, some of the other players in the market who may be not regulated or semi-regulated to that extent, started to do remittances through, I would say, non-regulatory or non-compliant way of doing it.

Provides a detailed explanation for the significant decline in the remittance business, attributing it to RBI guidelines and non-compliant market practices, and suggests revival depends on regulatory intervention.

Asked by Anand Dama

Drivers of digital payment business growth and new payment aggregators Partial

So it is a mix of both. I would say the older merchants also, we are looking at gaining share. But large part of the gains come from the new merchant additions or the new payment aggregator or the new payment partner we bring in as such. So it is a mix of both as such. Right now, I don't have that detail. We will connect with you offline to have a discussion on this.

Indicates growth is a mix of existing and new merchants/partners but defers specific details on new payment aggregators, suggesting some information is not publicly disclosed.

Asked by Anand Dama

Breakdown of technology-related costs and future CASA addition run rate Direct

On your technology expenses, I'll just give you some data out here. Typically, after including depreciation, our quarter 1, and I'm assuming depreciation is around INR17 crores plus and technology and infra cost is INR20 crores. So INR37 crores is the broadly technology and depreciation cost. On the CASA, on the cautious approach, you are absolutely right. This is both for the CASA as well as for the digital payment merchant onboarding. I believe looking at the July numbers, we should definitely look at a much higher number in quarter 2.

Quantifies technology-related costs for the quarter and provides an optimistic outlook for CASA additions from Q2, linking it to July numbers and resolution of mule account issues.

Asked by Harsh Sheth

Status of SFB reverse merger and implications Partial

Yes, I can actually say the bank -- yes, you're right at the time of IPO, we had contemplated or we were thinking about the possibility of the reverse merger. As you would recollect, that is subject to 2 things. One is the regulatory approval, which is essentially should come through, and it also depends upon how the holding company wants to function on that. One more aspect which has also worked out, which Rishi also mentioned it off is that we are also exploring our evolution of SFB license for which we've applied across. So as we speak, there are some moving parameters, which are there in regards to any possibility happening and some of these are interconnected as well. So this is something which is being discussed at various levels. And currently, besides this, we do not have any further update on the timelines or on the probability or anything further.

Confirms the reverse merger is still under discussion and linked to SFB license application, but provides no concrete timelines or updates, indicating uncertainty.

Asked by Kriti Tripathi

New growth engines for customer acquisition given declining traditional hook products Direct

We've classified our business into 3 parts; growing, stable and legacy or traditional. Rishi also alluded towards TAM transaction, acquisition, monetization. You are right, these continues to be hook products, which were low-margin products as well, and these are not increasing. However, the answer lies in the question, which I think perhaps Shreya raised earlier, we are increasing our merchant network. We've reached a 19.5 lakh with 43,000 or 44,000 plus merchants added this quarter as well. So the way acquisition in CASA will happen is while some of these businesses are not picking up, we have a separate set of merchant acquisition team and Rishi also alluded, we have a CASA acquisition team now separate on the field as well.

Explains the shift in customer acquisition strategy from traditional low-margin products to expanding the merchant network and dedicated CASA acquisition teams, indicating a structural change in growth drivers.

Asked by Divyansh Gupta

Impact of public sector banks waiving minimum balance requirements on Fino's fee income and renewal rates Partial

Your point is valid. And definitely, there is a much increased competition coming from public sector banks, what we could see about a year back. And they are also going aggressively in the rural India through BC merchants, and that is something which we are witnessing as such. Right now, for us to say whether that 0 balance waiver, which has been recently announced by the bank will have an impact on that, I'm not too sure because many times I have seen that while announcements are made, but in reality, it may have its own terms and conditions, and they -- it may not be that straight and simple. So let's wait and see maybe in the next 6 months, if this really catches up or if there is anything which suggests that the public sector banks are able to bring a lot of new accounts because of this new 0 balance waiver. We will have to wait and see. But to my mind, it doesn't -- I don't think so.

Acknowledges increased competition from PSBs but downplays the immediate impact of zero balance waivers, suggesting a wait-and-see approach and belief that Fino's unique value proposition will mitigate the effect.

Asked by Shazad Shroff

3 min read 7 chapters

Detailed narrative

Q1 FY26 Financial Performance Overview

Fino Payments Bank reported a resilient Q1 FY26, with revenue growing 4% year-on-year to ₹453 crores. EBITDA increased by 16% year-on-year to ₹62 crores, and cash profit rose 20% year-on-year to ₹50.5 crores. The cost-to-income ratio remained range-bound within 25-26%. However, PAT stood at ₹18 crores, showing a year-on-year dip as the bank became a full tax-paying entity from Q2 FY25.

Strategic Shift and Product Mix Evolution

The bank continued its strategic shift towards higher-margin ownership businesses, with traditional cash transactions now contributing only one-fifth of revenue, down from over one-third in Q1 FY25. This shift led to a significant expansion of the net revenue margin by 250 basis points year-on-year. The business is now calibrated into three segments: growing, stable, and traditional, with a focus on sustainable and compliant growth over short-term acceleration.

Growing Business: CASA and Digital Payments

The growing business, comprising liabilities, CASA, and digital payments, contributed 57% of total revenue in Q1 FY26 and grew 40% year-on-year, with margins at 39%. CASA revenue increased 30% year-on-year to ₹154 crores, with average daily balances rising 34% year-on-year to ₹2,275 crores. Digital payment services revenue grew 59% year-on-year to ₹106 crores, contributing 23% of total revenue, and handled transactions worth approximately ₹68,000 crores, making up 55% of total throughput.

Challenges in Stable and Traditional Businesses

The traditional business, particularly remittances, faced significant headwinds, experiencing an almost 60% industry-wide slowdown due to regulatory changes and competition from non-compliant alternatives. Micro-ATM revenue stood at ₹13 crores, while AePS revenue grew mildly by 3% year-on-year to ₹30 crores. The CMS segment also saw active competitive pressure, though early signs of revival are emerging, and the bank is exploring new sector-specific use cases.

Regulatory Environment and Risk Management

Q1 FY26 was marked by heightened regulatory scrutiny, a sharp rise in 'mule accounts,' and industry-wide efforts to combat digital fraud. Fino Payments Bank proactively strengthened its onboarding protocols, enhanced transaction monitoring systems, and undertook detailed customer risk assessments. These measures, while temporarily impacting account additions and transaction volumes, are deemed essential for building a secure and trusted ecosystem.

Technology Investments and SFB License Update

The bank is investing in enhancing its technology stack, with core banking system migration in its final phase and expected to be completed by the end of the calendar year. Investments are also being made in AI tools for customer experience, fraud management, and cybersecurity. Regarding the Small Finance Bank (SFB) license, the application is formally submitted, and discussions with the regulator are ongoing, with the bank hopeful of starting lending business within one year of in-principle approval.

Outlook and Future Growth Drivers

Management expressed confidence in the long-term strategy, focusing on sustainable growth and bottom-line profitability. They anticipate customer addition numbers and CASA growth to improve from Q2 FY26, driven by government disbursements and resolved mule account issues. The bank plans to introduce new payment products in H2 FY26 and new products on the CASA and digital payment side within the next 3 to 6 months, aiming to recover from the top-line impact of the remittance slowdown.

This is an AI-generated summary of a publicly available earnings call transcript.

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