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00:00We have with us the management of Fino Payments Bank to talk to us about Q4 numbers, what
00:05we can expect going forward.
00:07We have with us Mr. Rishi Gupta.
00:10Hi, good afternoon Mr. Gupta, Harsha.
00:12Good afternoon Harsha, how are you?
00:15Very well sir, how are you doing?
00:17All good, all good.
00:18Okay, quickly on to the numbers itself.
00:21So I want to try and break this down a little bit further.
00:24So 20% revenue growth is what you guided for, you've done that.
00:29Can you expect that going forward as well for the foreseeable future?
00:35For us, Q4 was 24% growth, we crossed 400 crores of our top line, we were at 401 crore.
00:43So looking at the March growth and also the runway which we are seeing in the month of
00:47April, we should expect a higher than 20% growth in FY25 is what our guidance is.
00:54Understood, and you know for better understanding from a viewer perspective, a large chunk of
00:58this comes from other income, when I am just reading the balance sheet P&L just off the
01:03bat and therefore for viewer perspective, give us a breakdown of that.
01:09What is recurring within that, what is non-recurring and what does this other income comprise of
01:13because out of the 401 crore revenue, 360 plus crore is other income.
01:19So this is in the standard format in which you have to declare your results.
01:24So anything other than treasury income is shown under other income, but other income
01:28is our main income.
01:29So whether we include the CASA income, which includes a new to bank or established customers
01:36or CMS income or transaction income.
01:39So all the business incomes form into the other income portion and that is something
01:44which we expect to grow above 20% as we go into the next year.
01:49So other income is the main business income rather than considered in a format of other
01:55income in other companies or other banks.
01:59So understandable, just give us a breakdown of that.
02:04So say how much of that is CASA income for example, how do you go on to build this CASA
02:11income and this CASA book and what is the business model like going to be like going
02:16forward?
02:17How's the cross-sell opportunity looking?
02:20This basically constitutes around three or four main heads, which is the CASA obviously
02:25is 23%, which is another largest head, which we have CASA has three or four elements of
02:31income within that.
02:32The first element is a new to bank customer.
02:35Any new customer who comes into our platform, we charge subscription fees or there's an
02:39annual fees, which is there.
02:41So we open nearly 32 lakh accounts in the year of FY24, total about 1.1 crore accounts
02:48is there, which is there.
02:50On account of that, there is a subscription income, which comes every year, which is called
02:54the renewal income, which has gone up substantially by 75% in FY24.
03:00It's not constituted about 128 crores, over and above that, there is a transaction income,
03:05which we get on CASA and the liability, a liability, which is our focus area.
03:10We have seen a 49% average growth in FY24 as such, our average deposit per customer
03:15has also gone up by 9%.
03:17So CASA constitutes about 23% of our total income.
03:20The next element is the CMS, CMS constitutes about 9%.
03:25So you have large corporates, industries, NBFCs who work in every nook and corner of
03:30the country.
03:31So they have cash management services, which we provide to them.
03:35So income on that constitutes around 9%.
03:37Digital, which is our new focus area, which we started with UPI and now we are growing
03:42on the B2B payments and digital ecosystem, now contributes around 9% of our overall income.
03:49Over and above that, our traditional products, which is your API, remittances, as well as
03:54your DMT product, your cash withdrawal, like APS and micro-ITM, these are our transaction
04:02products, which are like the HOOP products, because of which we see a lot of customers
04:07come and visit our points on a monthly basis.
04:09They constitute around about 35% to 40% of the overall income for us, and about 7% to
04:158% is a treasury income, which is there.
04:18So total income, that's the large break-up, but CASA, digital, and your CMS are the bigger
04:26driver of growth.
04:27CASA, for instance, grew by 36% in FY24, CMS grew by nearly 28% as such, remittance grew
04:36by around 14% in the last quarter.
04:39So that's the big driver for growth, as well as that's the way the entire revenue break-up
04:44is.
04:45And how much of this is renewable, Rishi?
04:49So give us that understanding as to out of this 360 odd crore, FQ4, or overall FY24,
04:57what percentage broadly would constitute something which would be annualized?
05:02So roughly about 11% to 12%, you can say, we earned about 40 crores of renewable income
05:10in the quarter four.
05:12So out of 40, 40 out of the 60, 11% to 12% is coming from renewal.
05:18But there are a lot of transaction charges and transaction fees also, which you can say
05:22are also part of the renewable income, so to say.
05:24So on an average, about 15% to 20%, you can assume is something which will be more like
05:30an annuity or a renewable income break-up.
05:32Understood.
05:33Understood.
05:34And lending business, what plans?
05:37So lending business, you already know, we applied to RBI last year in December.
05:44We are waiting to hear from them.
05:47As a company, because of the last distribution, which we have created across the country,
05:51nearly 18 lakh points, we have a lot of data for our customers and merchants, so to speak.
05:57And we are now quite active on the digital side.
05:59Nearly 40 lakh customers are now using UPI.
06:01UPI, we now contribute to about 1.25% plus in the overall UPI.
06:07So we have laid the foundation over and above this.
06:10We are trying to put more emphasis on partnership lending to start with.
06:14And as you know, we have already applied, so we are waiting for guidance from RBI on
06:18that.
06:19Understood.
06:20And you lend from your balance sheet, which earlier, maybe a couple of quarters back,
06:26you were non-committal.
06:27So now, is this going to be lending through your balance sheet?
06:30Is that how one looks at it?
06:32So we, yes, absolutely.
06:34So because of the foundation and the asset which we have created on the ground, and there
06:40is a lot of requirements of the customers also who have come in transacting at our point,
06:44they are also expecting that there should be some lending product also offered through
06:48FINO.
06:49So we want to do lending on our own books.
06:52But for that reason, we right now don't have the license as a payments bank.
06:57So we have applied for a small finance bank and when the RBI approval comes in and when
07:02we roll out, that is the time when we start lending on our own books.
07:06And as you grow at 20%, I'm just talking about non-lending business for now, is this 6% kind
07:12of PAT margin, 6% plus sustainable on this particular part of the business?
07:19So we are right now at about 5.8% margin, so to say, we were at 5.3%.
07:25So we have grown by 50 basis point in the last one year.
07:28We expect that as the product mix changes, to some extent, the digital mix will also
07:33become more, but digital margins are relatively lower.
07:37But from an overall point of view, we expect that the margin should grow from 6% in 5.8%
07:44to more than 6% in FY25 because of the change in the product mix and maybe some other items
07:50we might slow down on other side, but on our margin business, we'll continue to focus.
07:55So our target is to reach to 10% over the years as we move into lending and probably
08:01with lending, we can reach a 10% margin.
08:03Understood.
08:04On, you know, plenty happening in the regulatory environment, especially with regard to how
08:11RBI is focusing in and pulling a lot of regulated entities up with regard to tech, from tech
08:19to lending to all kinds of embargoes.
08:22How are you protecting yourself from some of these, especially on the tech side, because
08:27that's something you're doing very actively.
08:29So we, fortunately, we are a new age bank, so we don't have legacy systems and we are
08:35not having multiple systems, which we have issues of challenging and integrating all
08:39the systems together.
08:41So when we started, we already had the entire NPCS stack, we had the UID stack and also
08:46the fact that it came at a time when technology had fairly been advanced.
08:51Having said that, we continue to invest on technology.
08:53Technology continues to be our biggest expenses, so to say, nearly 7% of our total
09:01costs we spend on technology on an annual basis.
09:05Over and above that, as you already know, we are also doing a project where we are
09:11moving our core banking platform from FIS to Finnecal and making it announced rather
09:15than on an outsourced basis.
09:17And also we are hollowing the core to move some of the items which are in the core
09:22banking platform outside.
09:23We continue to invest on security, speed and scale.
09:26I think those are the three big cornerstones for any technology challenges and growth of
09:32a bank. So as a company, as management, as CEO, we will not shy away from investing in
09:38technology. In fact, technology is the biggest
09:40reason for the survival of any bank and more so for a payments bank.
09:45OK, thank you so much.
09:47That's quite comprehensive.
09:48Thank you so much, Mr. Gupta, for speaking with us today.
09:51It's been a pleasure and I look forward to speaking to you going forward as well.