Stocks of Fino Payments Bank make tentative debut, 6% off listing
MUMBAI: Shares of Fino Payments Bank made a tentative IPO on Friday. The share listed at ??544.35 each, a discount of 5.65% from the issue price of ??577 per share. The ??The initial public offering (IPO) of 1,200.29 crore was subscribed for 2.03 times.
The issue included a new issue by the payment bank and an offer to sell by existing shareholders. The net proceeds of the new issue will be used to increase the bank’s level -1 capital base to meet future capital needs.
Prior to the issue, Vikas Jain, an analyst at Reliance Securities, said the IPO was valued at 31.9 times the FY21 book value, which appears to be stretched. He believes that current valuations leave little on the table for investors over the medium term.
“The bank generates more than 95% of its income in the form of fees and commissions, and future growth mainly depends on the opportunity for digital payment of additional portfolio shares in the country. Since digital payments are expected to intersect. ??$ 3.5 trillion in FY25, registering a high 25-27% CAGR in FY21-25, the bank is poised to see good business opportunities in the coming years against the backdrop of ‘a strong digital platform and resources built over the past two years,’ Jain said.
The bank became profitable in FY21, while its Tier I (CET-1) ratio has deteriorated over the past two years. CET-1 was 56% from FY21. Return on equity (RoE) and return on assets (RoA) were 13.3% and 2%, respectively, from FY21.
Angel One analyst Jyoti Roy said at the high end of the price range the stock would trade at a price / earnings (PE) of 220 times fully diluted earnings per share (EPS) for the year. 2021. ??2.6 which is expensive. “Despite strong growth prospects, we believe valuations do not justify the premium,” she added.
Since there are no listed payment banks, Nirmal Bang analysts drew inspiration from merger and acquisition (M&A) transactions in the unlisted space. “We observe that during the month of September 2021, Kotak Bank sold its 8.6% stake in Airtel Payments Bank to Bharti Enterprises for ??300 crores. This transaction values the payment bank at ??3,501 crore or FY21 P / S of 5.6 times. Fino is valued at a 10% premium over this agreement to fiscal 21 P / S of 6.1 times. After demonstrating its profitability in FY21 and the possibility of further improving RoE through operating leverage, we believe Fino is reasonably valued, ”said Nirmal Bang.
Fino Payments Bank is a wholly owned subsidiary of Fino Paytech Ltd. Major shareholders include renowned investors such as ICICI Bank Ltd, Intel Capital Corp., International Finance Corp., HAV3 Holdings (Mauritius) Ltd, Blackstone GPV Capital Partners (Mauritius) VI -B FDI Ltd and Bharat Petroleum Corp. Ltd.
Never miss a story! Stay connected and informed with Mint. Download our app now !!