Fino Payments Bank Limited reported a 4% year-on-year revenue growth to ₹453.00 crores for Q1, despite facing industry-wide challenges and regulatory headwinds. The bank's EBITDA increased by 16% to ₹62.00 crores, while cash profit grew by 20% to ₹50.50 crores.

Key Highlights

• CASA accounts reached nearly 1.5 crores with approximately 7 lakh new additions in Q1.
• Average deposits rose 34% year-on-year to ₹2,275.00 crores.
• Digital payment services revenue grew 59% year-on-year to ₹106.00 crores.
• Net revenue margin expanded by 250 basis points year-on-year.

Business Transformation and Challenges

Rishi Gupta, Managing Director and CEO, highlighted the bank's strategic shift towards higher-margin products. The traditional cash transaction business, which previously contributed over one-third of revenue, now accounts for only one-fifth. This shift has led to improved net revenue margins.

However, the bank faced significant challenges:

1. Remittance Business Decline: Regulatory changes introduced in November led to a sharp 60% industry-wide slowdown in remittance business.

2. Mule Account Concerns: Enhanced regulatory scrutiny and a rise in fraudulent accounts led to a cautious approach in account additions and transaction volumes.

3. Regulatory Compliance: The bank adopted a risk-calibrated growth strategy to ensure full compliance with new regulations, particularly in the remittance and digital payments sectors.

Digital Growth and Future Outlook

Despite challenges, Fino Payments Bank's digital segment showed strong growth:

• Digital throughput crossed ₹67,800.00 crores, accounting for 55% of total throughput.
• UPI transactions rose by 39% year-on-year to 97.9 crores.
• The bank maintained a UPI market share of around 1.5%.

Gupta mentioned ongoing efforts to introduce new payment products and partnerships with leading payment aggregators in the second half of the fiscal year.

Small Finance Bank License Application

The bank has formally applied for a small finance bank license and is in ongoing discussions with regulators. Management expressed hope of starting lending operations within one year of receiving in-principle approval, if granted.

Technology Investments

Fino Payments Bank is in the final phase of core banking system migration, expected to be completed before the end of the calendar year. The bank is also investing in AI tools to enhance customer experience, improve fraud and risk management, and automate manual processes.

Outlook

While not providing specific guidance due to ongoing industry challenges, management expressed confidence in the bank's long-term strategy. They anticipate a more conducive environment for growth in the second half of the fiscal year, with a focus on maintaining elevated margins and bottom-line growth.

Ketan Merchant, CFO, stated, "We expect these enhanced margins to remain range bound around 33%, 34% for the next couple of quarters."

As Fino Payments Bank navigates through regulatory changes and evolving market dynamics, its focus on digital growth, operational efficiency, and potential evolution into a small finance bank positions it for future opportunities in the financial services sector.

Fino Payments Bank has reported a stable performance for the first quarter, demonstrating resilience amid a challenging operating environment. The bank has outlined ambitious growth plans, including applying for a Small Finance Bank (SFB) license and enhancing its digital capabilities.

Financial Highlights

Operational Performance

• Customer Base: Reached 1.5 crore, with over 6.8 lakh new accounts added in the quarter.
• Transaction Volume: Processed over 97 crore transactions, a 39% increase from the previous year.
• Digital Adoption: The bank now has over 53 lakh digitally active customers, a 26% year-over-year increase.

Strategic Initiatives

1. SFB License Application: Fino Payments Bank has announced its intention to apply for a Small Finance Bank license, signaling its ambition to expand its banking services.

2. Core Banking System Upgrades: As part of its long-term digital expansion strategy, the bank plans to implement improvements to its core banking system.

3. UPI Stack Enhancement: The bank is focusing on strengthening its UPI (Unified Payments Interface) platform with new product offerings aimed at improving user experience and boosting digital throughput.

4. Focus on High-Margin Segments: The bank is shifting its revenue mix towards high-margin segments like CASA (Current Account Savings Account) and digital payment services.

Management Commentary

Rishi Gupta, MD & CEO of Fino Payments Bank, stated, "Our momentum in digital and liabilities business strategically positions us for long-term sustainable growth despite the evolving environment. The Bank is enhancing its UPI stack with new product offerings aimed at boosting digital throughput, improving user experience, and strengthening platform-level monetisation opportunities. Our Small Finance Bank application is being evaluated by the regulator."

Ketan Merchant, CFO, added, "While topline growth was modest at 4% YoY, our EBITDA grew 16% YoY, supported by a favorable shift in revenue mix towards high-margin segments like CASA and digital payment services. Our net revenue margins increased by 2.5%, indicating our enhanced focus on the bottom line."

Outlook

Despite the challenging operating environment and increased regulatory focus in the payment banking industry, Fino Payments Bank's strategic initiatives and focus on digital growth position it well for future expansion. The potential transition to a Small Finance Bank, if approved, could open up new avenues for growth and diversification of services.

As the bank continues to navigate the evolving financial landscape, its emphasis on digital adoption, customer base expansion, and operational efficiency will be crucial in driving sustainable growth and profitability in the coming quarters.