I agree with a lot of points put up by you. In fact, I also went through the last AR to know more about Fino 2.0 and didn’t really find anything other than it was a digital journey. I am also seeing references to TAM for the first time.
Now moving to digital developments, UPI adaptor was developed to reduce the cost of operations. I think it’s a good idea to make investments as and when it makes economic sense. The company was in fact following a phygital model. So the current digital transition is something new for them even though they are saying a lot about it. I think the digital investments were required with the growth. So I think it shouldn’t be considered as a huge negative. For me, UPI is a cost center until RBI lets banks levy a charge on it which seems quite remote at least for now.
But as you noted the company has not been very upfront about many key hindrance that it faced in the various business.
For instance, when it comes to BC Banking, company in earlier concalls used to tell about their focus on own channel banking where margins here. But, in the current call they mentioned that they have difficulty making agreements with Banks due to their payment bank license and he SFB license that they are looking for now.
It was loan referral products that I was most positive about. But so far, there has been no progress and Fino is providing very little info on an important business line. The company mentioned that they have issues at the supply side which they have not been able to 2 years. Earlier, they were providing vague answers like looking into the repayment characteristics of borrowers before further expanding the business. The question that needs to be answered now is Will they be able to resolve this supply-side problem when they are applying for SFB license. I think its going to be tough to bring more players when you have such a short period of time in consideration. Then secondly, they didn’t even care to share the revenue from other cross-sell items like insurance.
Regarding the mature products like MATM, AePS and remittance, the company has for some time mentioning in concalls that the period of extra ordinary growth is over.
Source: Concall May 17 22.
But in the current quarter this business has in fact degrown which is a cause of concern.
MATM revenues have come down significantly from 171 crores to 118 crores. AEPS was expected to eat into the share of MATM once more and more accounts get aadhar linked and people get more comfortable with it. However, AEPS revenue increased only from 101 to 127 crores. 25% growth in Aeps when looked at it alone looks great.
On a Quarterly basis, the AEPS revenue has only grown from 28 to 29 crores while MATM has gone down from 41 to 28 crores. One of the reasons for this as per the management is the conversion of off-us customers to on-us customers. It’s true that interchange fees cannot be charged on on-us customer transactions. The company has been mentioning about these OFF- US to ON- US conversions for some time.
The only positive fact is the growth in CMS and CASA business. If the the hook product or the base transaction business starts declining won’t it affect the acquisition as well a few quarters down the line.
The other income increased significantly from 53 to 123 crores on a yearly basis. But the company didn’t care to share any light on this. I think one of the major factors here is the Interest income. Interest income has grown due to an increase in market interest rate as well as an increase in the deposit balance. The increase in interest rate can be considered a cyclical factor. Currently, the cost of deposits for the bank is 1.9 % which is very good. CASA accounts have been so far doing excellent, however, wont the declining hook transaction business put pressure on the growth of CASA business going forward? Will the growth in deposits be able to make up for falling interest rates in the next cycle?
I think from the commentaries it seems like the company is already focussing on the SFB license. I also agree to your point that the company is omitting certain details from the presentations. In a way you are right, but they are relatively a newly listed company and deserves some time to get things in order. I have seen many companies even stopping concalls when the results gets a little bad and tough questions are asked on the concall. I think you can mail them regarding CMS and CASA new subscription income and Go India seems to be their investor relations advisors. Company is currently available at a P/E of 26 which makes it look attractive to me.
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