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    Fino Payments

    FINOPB
    Financial Services·30 Jan 2025
    Management Summary

    Fino Payments Bank delivered a strong Q3 FY25, with revenue and PBT growing 25% YoY, driven by robust digital services and CASA growth. The bank's digital throughput now accounts for 50% of its total, and its cost-to-income ratio improved. While the remittance business faced headwinds from new regulations, the bank continues to invest heavily in technology and is on track to meet its FY25 financial goals, with SFB license progress noted.

    Highlights

    5

    • Q3 FY25 revenue grew 25% YoY to INR 461 crores, aligning with guidance.

    • Profit Before Tax (PBT) for Q3 FY25 saw a robust 25% YoY growth, reaching INR 28.5 crores.

    • Digital throughput now accounts for 50% of the overall throughput, demonstrating successful digital shift.

    • CASA income for Q3 FY25 increased 51% YoY to INR 112 crores, with average deposits growing 39% YoY to INR 1,890 crores.

    • The cost-to-income ratio improved to 25.9% in Q3 FY25 from 27% in the same period last year, reflecting operational efficiencies.

    Concerns

    3

    • The transaction business, primarily remittances, degrew due to new regulations effective November 1, 2024, impacting revenue by approximately 5%.

    • Merchant network additions have slowed down, with management being more selective to avoid cannibalization and focus on productivity.

    • The take rate for the CMS business is becoming increasingly competitive and is expected to remain range-bound.

    What Changed2

    vs Q4 FY25

    Guidance items7 → 5 (-2)Q&A highlights8 → 6 (-2)

    Key financials

    Single quarter

    06 metrics
    1. 01Revenue₹461 Cr+25%YoY
    2. 02PBT₹28.5 Cr+25%YoY
    3. 03PAT₹23 Cr
    4. 04EBITDA₹60 Cr+19%YoY
    5. 05Cost-to-Income Ratio25.9%

    Segment breakdown

    • Digital Payment Services₹109.7 Cr37.3%
    • CASA Income₹112 Cr38.1%
    • CMS Revenue₹40.7 Cr13.8%
    • AePS Revenue₹31.6 Cr10.7%
    Donut· Share of Revenue

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Capex

    Capex disclosed

    Guidance & targets

    5
    CategoryTargetPriority
    Revenue
    FY25 Revenue Growth
    25%
    		High
    Digital Business
    Digital Payment Business Growth
    More than 20%
    		Medium
    SFB License
    Go-live timeline post in-principle approval
    Within 1 year
    		High
    Core Banking Platform
    Core Banking Platform Go-Live
    Next 3-4 months
    		High
    Remittance Business
    Remittance Business Volume Drop
    35-40% drop, never reach original levels
    		High

    Core Banking Platform Go-Live

    Next 3-4 months
    CurrentTesting in progress
    TargetCommercial operations

    Why it matters

    Successful migration is key for enhanced agility, efficiency, and security, supporting higher transaction volumes and product launches.

    We expect in the next 3 to 4 months, we should be going live on this product.

    How to verify

    guidance_and_targets[metric='Core Banking Platform Go-Live']

    Risks & concerns

    4
    RiskSeverity

    Remittance business volume decline due to new regulations

    New RBI regulations led to an immediate 35-40% drop in remittance volumes, with a permanent 20-25% reduction expected from previous levels. — Management acknowledged

    high

    Increased competition in CMS take rates

    The take rate for CMS is becoming increasingly competitive and is likely to remain range-bound, potentially impacting margins. — Management acknowledged

    medium

    Digital business fraud and cyber issues

    The bank follows a risk-calibrated approach in digital business due to paramount fraud and cyber issues, which can influence growth pace. — Management acknowledged

    medium

    Slowing merchant network growth

    The growth in merchant network additions has slowed as the ecosystem evolves and the bank focuses on quality and productivity over sheer numbers to avoid cannibalization. — Management acknowledged

    low

    Q&A highlights

    6

    “So all these amounts, which are quoted, are in the technology space. Within the technology space, I think Rishi alluded to a point of Hollow-The-Core and CBS migration, which we are doing. In addition to that, over a period of time, whether we mentioned about UPI switch or all the other initiatives, which we've done over the last couple of years for bringing the technology this thing. So these are all capex expenses, which I was referring to. And these would be treated as depreciation depending upon the kind of speed, which is typically a hardware will get depreciated over a 5-year period and a software will get depreciated over a 3-year period.”

    Clarifies the nature and accounting treatment of the significant technology investments made by the bank.

    asked by Amit Mehendale

    3 min read6 chapters

    Detailed Narrative

    01

    Strong Q3 FY25 Performance Driven by Digital and CASA

    Fino Payments Bank reported a robust Q3 FY25, with revenues surging 25% year-on-year to INR 461 crores, aligning with its revised guidance. Profit Before Tax (PBT) also grew by 25% YoY to INR 28.5 crores, and Profit After Tax (PAT) reached INR 23 crores, marking the bank's status as a tax-paying entity since Q2 FY25. For the nine-month period of FY25, revenue grew 26% YoY to INR 1,354 crores, surpassing the 25% guidance, while EBITDA and PBT grew 24% and 29% respectively.

    02

    Accelerated Digital Transformation and UPI Adoption

    The bank's digital transformation efforts have yielded significant results, with digital throughput now constituting 50% of the overall throughput. Digital Payment Services revenue grew nearly fourfold to INR 109.7 crores in Q3 FY25 compared to INR 28.8 crores in Q3 FY24, now representing 24% of the total revenue pie. The bank's UPI market share expanded from 1.22% in December 2023 to 1.61% in December 2024, and its digital user base has grown to nearly 5 million. The bank has also launched new UPI products like UPI Circle and Autopay, and plans to scale up payout services and PPI in the next financial year.

    03

    Robust CASA Growth and Customer Ownership Model

    The CASA business remains a fundamental pillar of the bank's strategy, with CASA income growing 51% YoY to INR 112 crores in Q3 FY25. The bank added over 8.3 lakh new CASA accounts this quarter, bringing the total base to more than 1.34 crore customers, with 70% remaining active. Average deposits saw a remarkable 39% YoY growth, reaching INR 1,890 crores. The renewal annuity income for Q3 FY25 was INR 47.8 crores, a 52% YoY increase, with 65% of new customers becoming digitally active.

    04

    Strategic Technology Investments and Core Banking Migration

    Fino Payments Bank has invested INR 120 crores in technology year-to-date in FY25, a 50% increase over FY24's INR 80 crores. These investments are focused on enhancing digital capabilities, including Hollow-The-Core initiatives and migration to a new core banking platform. Testing for the new core banking platform has commenced, with a go-live expected within the next 3-4 months. The bank also plans to roll out AI initiatives in the next 3-6 months to further strengthen operations and efficiencies.

    05

    Remittance Business Impacted by Regulations

    The API remittance business experienced a significant impact due to new RBI regulations effective November 1, 2024, resulting in an approximate 5% reduction in overall revenue. The regulations led to an immediate 35-40% drop in business volumes. While some recovery is anticipated in the next 2-3 months, management expects a permanent 20-25% dip from previous levels, as many remittance customers have transitioned to CASA accounts, representing a permanent shift in business.

    06

    SFB License Progress and Future Outlook

    Engagement with RBI regarding the Small Finance Bank (SFB) license has increased, and an external committee was formed on January 20, 2025, to review applications. The bank has begun groundwork in terms of people, technology, and distribution, with a plan to go live within one year of receiving in-principle approval. Additionally, the bank has made humble beginnings in referral-based loan products through partnerships with leading NBFCs, aiming to understand the lending ecosystem of its customers and merchants.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.