Fino Payments Bank Limited — Q2 FY26 earnings call

Call held 30 Oct 2025

Management summary

Fino Payments Bank navigated Q2 FY26 amidst a challenging regulatory environment, demonstrating resilience through robust CASA growth and significant margin expansion, with EBITDA up 8% YoY. While digital payment revenues saw moderation due to regulatory tightening, the bank maintained a low cost of funds and progressed on its SFB transition roadmap, expecting improved profitability in H2 FY26.

Highlights

  • CASA accounts grew by 9.1 lakh in Q2 FY26, demonstrating strong customer acquisition.

  • Deposits grew 36% YoY to INR2,306 crores, reflecting increased customer trust and a strong deposit base.

  • CASA revenue increased 21% YoY to INR159.4 crores, now contributing 40% of total revenues with a healthy 54% margin.

  • EBITDA for Q2 FY26 grew 8% YoY to INR61.6 crores, with EBITDA margin expanding by 284 bps YoY to 15.4%, driven by improved product mix and cost control.

  • Cost of funds maintained at a low 1.9%, positioning the bank for efficient liability management.

Concerns

  • Overall revenue declined 12% YoY to INR400 crores in Q2 FY26 due to regulatory tightening and ecosystem challenges.

  • Digital Payment Services revenue declined 20% YoY to INR63.4 crores due to enhanced regulatory scrutiny.

  • PAT for Q2 FY26 declined 27% YoY to INR15.4 crores, impacted by higher depreciation and tax provisioning.

  • Remittance revenue declined 61% YoY to INR39.5 crores, reflecting industry adjustments post-regulatory shifts.

Key financials

2 periods

Headline

  • Revenue
    ₹400 Cr
    YoY -12%
  • Net Revenue
    ₹148.6 Cr
    YoY +4%
  • EBITDA
    ₹61.6 Cr
    YoY +8%
  • EBITDA Margin
    15.4%
  • PAT
    ₹15.4 Cr
    YoY -27%
  • Deposits
    ₹2,306 Cr
    YoY +36%
  • Cost of Funds
    1.9%
  • CASA Revenue
    ₹159.4 Cr
    YoY +21%
  • CASA Margin
    54%
  • Renewal Income
    ₹62 Cr
    YoY +36%

H1

  • FY26 Capex
    ₹70 Cr

What they filed

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

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue48 49 53 61 60 +25%63 +29%64 +21%72 +18%
EBITDA-357 -358 -385 -339 -291 +18%-281 +22%-242 +37%-213 +37%
Net profit21 23 24 18 15 −29%12 −48%7 −71%-14 −178%
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

Share of Revenue
₹410.9 Cr Total
  • CASA ₹159.4 Cr 38.8%
  • Remittance, Micro-ATM and AEPS (Combined) ₹78.6 Cr 19.1%
  • Digital Payment Services ₹63.4 Cr 15.4%
  • Remittance ₹39.5 Cr 9.6%
  • Micro ATM and AEPS ₹39.1 Cr 9.5%
  • CMS Business ₹30.9 Cr 7.5%

Capital allocation

high confidence
  • Capex Capex disclosed
    • Technology investments for strengthening core platforms, expanding transaction capacity, and improving digital interfaces ₹70 Cr
    The bank has continued to invest in technology with a capex of around INR70 crores in H1 FY '26. This is aimed at strengthening core platforms, expand transaction capacity and improve digital interferences to support scale, efficiency and customer experience.

Guidance & targets

Profitability

  • H2 Profitability Profitability · H2 FY26 · Medium confidence better than H1
    we expect H2 profitability better than H1.

    — Rishi Gupta

  • NIM (post SFB) Profitability · post SFB transition · Medium confidence 2x current NIM
    I would say, 2x of what is currently in our NIM can be easily looked at from an SFB point of view.

    — Rishi Gupta

Volume

  • Digital Throughput Volume · Q3 FY26 and Q4 FY26 · Medium confidence gradual pickup
    we expect a gradual pickup by end of quarter 3 FY '26 and follow through in quarter 4 FY '26.

    — Rishi Gupta

Technology

  • Core Banking System Migration Technology · by end of calendar year 2025 · Medium confidence complete
    Our core banking system migration is in its final stages, and we are keen to migrate within this calendar year, as mentioned in the last quarterly earnings call.

    — Rishi Gupta

  • AI Product Go-Live (First Phase) Technology · Q3 FY26 · High confidence go live
    Our first phase of AI product is also expected to go live in this quarter.

    — Rishi Gupta

Revenue

  • Prepaid Product Monthly Revenue Revenue · steady state · Medium confidence INR1-2 crores
    we expect INR1 crores to INR2 crores revenue coming from that product on a monthly basis when we reach a steady state.

    — Rishi Gupta

  • Payout Product Monthly Revenue Revenue · steady state (post RBI clearance) · Low confidence INR3-5 crores
    The other product is the payout product, where we expected INR3 crores to INR5 crores of revenue coming in the on a steady-state basis. That product is still waiting compliance, RBI clearance.

    — Rishi Gupta

Regulatory

  • SFB License Approval Regulatory · next couple of months · Medium confidence approval
    What we believe is it is in the final stages of approval, and we should hear it in the next couple of months, something should come forward from RBI on that.

    — Rishi Gupta

What to watch in Q3 FY26

Digital Throughput Recovery

Q3 FY26
Current Moderated due to regulatory tightening
Target Gradual pickup

Why it matters

Indicates the effectiveness of recalibrated merchant policies and regulatory clarity, crucial for revenue growth.

we expect a gradual pickup by end of quarter 3 FY '26 and follow through in quarter 4 FY '26.

Risks & concerns

  • Regulatory tightening and ecosystem challenges impacting digital payments

    medium

    Led to moderation in throughput and 20% YoY revenue decline in Digital Payment Services.

    Management acknowledged

  • Contraction in legacy products (remittance, micro-ATM, AEPS)

    medium

    Remittance revenue down 61% YoY, Micro ATM/AEPS down 12% YoY, impacting overall revenue.

    Management acknowledged

  • Non-receipt of UPI incentives

    medium

    INR15-20 crores per annum impact on P&L, no incentives received this year.

    Management acknowledged

  • Delays in core banking system migration

    low

    Vendor (FIS) delivery issues have caused delays, now targeting end of Dec 2025.

    Management acknowledged

  • Competition and pricing pressure in CMS business

    low

    Led to 2 basis points compression in take rate and 24% YoY revenue decline.

    Management acknowledged

Q&A highlights

7 direct
Digital Payment Services revenue decline and merchant quality Direct
It is not only us, it's about the industry as a whole. If we just analyze or if we just classify the digital payment, which is revenue accreting, it is largely B2B. If we look at that kind of an industry, whether it was the regulatory changes coming on account of RMG, the overall fraudulent activities, which was increasing, made us to have an extra risk calibrated approach.

Explains the reason for the significant decline in digital payment revenue, attributing it to industry-wide regulatory changes and increased scrutiny on fraudulent activities, rather than specific merchant losses.

Asked by Kunaal

SFB license approval timeline and benefits Direct
What we believe is it is in the final stages of approval, and we should hear it in the next couple of months, something should come forward from RBI on that.

Asked by Ashish Kumar

Core banking system migration timeline and benefits Direct
And hopefully, before -- by end of December, we should be able to migrate. The plan is to do it much earlier. But repeatedly, we have seen that we have had challenges with FIS on deliveries of some of those items.

Clarifies the revised timeline for core banking migration (by Dec 2025) and acknowledges past delays due to vendor issues, which is crucial for operational efficiency and new product launches.

Asked by Ashish Kumar

Mix of new CASA accounts (Gati vs. Shubh) and margin difference Direct
So out of that 9 lakh accounts, I would say 30%, 35% of them are opened through the normal Shubh- higher subscription account. Another 25% is opened through the Gati.

Asked by Vilina Jain

New digital offerings and their revenue contribution Direct
The prepaid instrument product got launched in the month of August this year, and we expect INR1 crores to INR2 crores revenue coming from that product on a monthly basis when we reach a steady state. The other product is the payout product, where we expected INR3 crores to INR5 crores of revenue coming in the on a steady-state basis. That product is still waiting compliance, RBI clearance.

Details specific new product launches (prepaid instrument, payout product, Soundbox QR) and their expected revenue potential, showing the bank's efforts to diversify and grow beyond traditional offerings.

Asked by Kunaal

Impact of regulatory actions on payment industry monetization and UPI incentives Direct
One is government of India used to issue incentive for UPI, which in our case used to be about INR15 crores, INR20 crores per annum. So that has affected us in this year. So in this year, we have not received anything for this year in this year.

Highlights a significant financial impact from the discontinuation of UPI incentives (INR15-20 crores annually), which directly affects the bank's P&L and future revenue streams from UPI transactions.

Asked by Saikiran

Merchant blocking and risk-calibrated approach in Digital business Direct
So there is no system challenge or any error, so to say. The droppage in merchants is a normal course, which is there in every quarter, every month, we do that. And it's been going on from the time the Digital Payments business has started. You onboard the merchant, and then you start some transactions, then there are issues which might come up with LEA or there could be some chargeback issues.

Clarifies that merchant 'droppage' is a normal part of business due to risk management and compliance, rather than a system error or large-scale merchant exit, reassuring investors about the bank's control mechanisms.

Asked by Bhavik Shah

2 min read 6 chapters

Detailed narrative

Q2 FY26 Performance Overview

Fino Payments Bank reported Q2 FY26 revenue of INR400 crores, a 12% YoY decline, primarily due to regulatory tightening affecting digital payments and contraction in legacy products. Despite this, EBITDA grew 8% YoY to INR61.6 crores, with EBITDA margin expanding by 284 bps YoY to 15.4%, driven by a favorable product mix and disciplined cost control. PAT, however, decreased 27% YoY to INR15.4 crores due to higher depreciation and tax provisioning, while H1 FY26 PAT stood at INR33.1 crores, also down 27% YoY.

CASA and Deposit Franchise Strength

The bank demonstrated strong growth in its CASA segment, adding 9.1 lakh new accounts in Q2 FY26, bringing total liability accounts to 1.59 crores. Deposits grew 36% YoY to INR2,306 crores, with the cost of funds maintained at a low 1.9%. CASA revenue increased 21% YoY to INR159.4 crores, now contributing 40% of total revenues, and maintaining a healthy margin of 54%. Renewal income also grew 36% YoY to INR62 crores, indicating strong customer stickiness and engagement.

Digital Payments and Regulatory Impact

Digital Payment Services revenue declined 20% YoY to INR63.4 crores in Q2 FY26, impacted by regulatory tightening and increased scrutiny on fraudulent activities, which led to a risk-calibrated approach to merchant onboarding. Legacy transaction businesses like remittance and Micro ATM/AEPS also saw declines of 61% and 12% YoY, respectively, contributing to the overall revenue moderation. Management expects a gradual pickup in digital throughput by Q3 FY26 and Q4 FY26 as the environment normalizes.

SFB Transition and Future Outlook

The bank is actively preparing for its Small Finance Bank (SFB) transition, with management expecting RBI approval within the next couple of months. This transition is anticipated to significantly enhance the bank's ability to offer a wider suite of financial solutions and improve Net Interest Margin (NIM) by potentially 2x the current levels. The bank is strategically aligning its systems, people, and processes to be operationally ready for the SFB opportunity, with a dedicated team working on the planning.

New Product Launches and Technology Initiatives

Fino Payments Bank launched a prepaid instrument product in August, expecting INR1-2 crores in monthly revenue at steady state. A payout product, with an expected monthly revenue of INR3-5 crores, is awaiting RBI clearance. The bank also launched Soundbox QR in August/September to deepen merchant engagement and support future lending. The core banking system migration is in its final stages, targeted for completion by end of December 2025, and the first phase of an AI product is expected to go live in Q3 FY26.

Cost Management and Profitability

The bank maintained operating efficiency, with H1 FY26 operating expenses growing only 5% YoY to INR177.3 crores, despite compliance and inflationary measures. The improved product mix, with higher-margin CASA contributing more, helped expand EBITDA margins. The cost-income ratio for H1 FY26 was 29.8%, up from 25.6% in H1 FY25, partly due to higher depreciation from previous capacity expansion and reduced transaction income. The bank continues to focus on profitability and cost control.

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