FINOPB - Fino Payments Bank Limited Share Price

Management's outlook for Fino Payments Bank Limited is optimistic, reflecting a transformational year in FY '25 marked by robust growth and strategic advancements. Key highlights include a revenue growth of 25% year-over-year, achieving INR 1,847 crores, with an EBITDA increase of 22% to INR 234 crores and a profit before tax (PBT) rise of 26% to INR 108 crores. After becoming a tax-paying entity, the profit after tax (PAT) reached INR 92.5 crores, a 7% increase.

Management indicated a significant growth trajectory, projecting that digital revenue, contributing 21% to the overall revenue, is expected to exceed 25% in FY '26. Fino's customer base reached an all-time high of 1.43 crores, including 53 lakh digitally active users, contributing to an average deposit growth of 37% year-on-year, with peak deposits surpassing INR 2,500 crores. The bank's CASA revenue grew by 43% to INR 544 crores.

Forward-looking points provided by management include:

1. Strategic core TAM strategy focusing on transaction accounts and monetization, with continued emphasis on building a robust liability franchise.
2. An aggressive push towards enhancing digital capabilities, with plans to launch the Sound Box and offline QR code solutions to deepen lending in FY '26.
3. A goal of achieving INR 300 crores in monthly loan referrals, up from INR 200 crores in FY '25, positioning this as a significant revenue contributor.
4. Anticipation of operational readiness for the transition to a small finance bank (SFB), with ongoing technology upgrades to support scalability and compliance, expected to incur INR 90 crores to INR 100 crores in capex.

Overall, management remains confident in its strategic direction to deliver sustainable long-term value, while navigating regulatory environments and evolving market dynamics.

Major Questions and Answers from the Earnings Call:

1. Priyesh: What are your key differentiators in terms of technology, service efficiency, and UPI infrastructure amid intensifying competition?

Rishi Gupta: Our differentiation lies in targeting the mass market, especially those earning INR 3-4 lakhs annually. Customers can easily deposit cash into their Fino accounts at convenient locations, enabling UPI use without the hassle seen at other banks. We create UPI handles automatically upon account opening, making it seamless for customers to transition to digital. Our in-house UPI switch further strengthens our B2B capabilities, ensuring low technical declines and effective transactions.

2. Dev Shah: What operational and regulatory challenges do you foresee during the transition to a small finance bank (SFB)? How scalable is the loan referral model?

Rishi Gupta: Transitioning to an SFB entails adapting to guidelines like limited Business Correspondent models. Our focus on building liability products has already shown 37% growth in that sector. As for loan referral, we've seen a growth from INR 30 crores to INR 200 crores in FY "˜25, and are targeting INR 300 crores. As we scale this to INR 100 crores monthly, it will become a significant revenue contributor while also enhancing our customer understanding.

3. Kushagra Goel: Do you have guidance for FY '26 regarding growth and margins? Additionally, can you elaborate on the Gullak CASA product?

Ketan Merchant: Currently, we're not issuing formal guidance, but we aim to maintain momentum with around 31.5% gross margin. Digital and CASA growth remains strong. The Gullak product, launched recently, offers a no-minimum balance account encouraging savings and balance building, aiming to enhance customer engagement and contribute to CASA growth.

4. Harsh Sheth: Have you seen changes in CASA customer retention patterns recently? What improvements do you expect from tech investments?

Rishi Gupta: Yes, our renewal rates have increased from less than 50% to over 65% due to UPI transactions driving engagement. Technology is central to our strategy, increasing our transaction capabilities and customer service efficiency. These tech investments of INR 150 crores are expected to yield significant operational efficiency and contribute to future profitability.

5. Prateek Giri: If the digital engagement growth continues, do you foresee challenges with your existing brands? What about PBT margin targets?

Rishi Gupta: While regulatory changes in remittance have shifted some transactions, the entrenched merchant network mitigates risks to CASA numbers. As for PBT margins, achieving a 10% target remains feasible post-SFB transition, but we'll need to manage costs carefully, especially in light of rising IT expenses.

This summary captures key questions and detailed management responses regarding Fino Payments Bank's performance and outlook as discussed in the earnings call.