Expensive valuations to keep Fino Payments Bank under pressure

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Shares of Fino Payments Bank made a disappointing debut on Friday. Shares of the bank opened for trading at a 5.66% discount over the issue price of Rs 577 per share. The stock opened at Rs 544.35 apiece on the National Stock Exchange (NSE) and at Rs 548 on the BSE. In noon trades the stock took a further beating and was trading at Rs 520 despite benchmark indices advancing around 0.90%.

“Fino Payments Bank may continue to remain under pressure post listing because of valuations concerns, competition, and regulatory challenges however Fino Payment is a fast-growing fintech company and it is one of its kind company to list on the stock exchanges whereas Its unique DTP (Distribution, Technology, and Partnerships) network and new edge business model provide it an edge. Aggressive investors can look to buy it at 10-20% correction from here for the long term,” said Parth Nyati, Founder of Tradingo.

On the contrary, suggest Saurabh Joshi of Marwadi Shares and Finance is of the opinion that investors should hold the shares despite tepid listing. “The company listed at Rs 544 per share with a market cap of Rs 4,547 crore implying a valuation of 10.02 times Price-to-book. There are no listed entities in India whose business portfolio is comparable with that of Fino Payment Banks. Any dip in the stock price should be used as an opportunity for long term investors to invest in the stock,” Joshi added.

Fino Payments Bank is a growing fintech company offering a diverse range of financial products and services that are primarily digital and have a payments focus. It offers such products and services to target markets via a pan-India distribution network and proprietary technologies. The bank has grown its operational presence to cover over 90% of districts end September 2021.

The payment business operates an asset-light business model that principally relies on fee and commission-based income generated from merchant networks and strategic commercial relationships. Each merchant serves the banking and financial needs of its community, which in turn form the backbone of assisted-digital ecosystem, referred to as “phygital” delivery model (i.e., a combination of physical and digital). The use of analytics on the data enhances the merchant’s ability to cross sell the third-party products offered by the bank to existing customers, thereby increasing potential revenue and opportunity to further customize products and services offering.

The bank reported a net profit of Rs 3.13 crore on a net total income of Rs 203.19 crore in quarter ended June 2021.