Category
📺
TVTranscript
00:00I have with me Mr. Rishi Gupta, who is the MD, CEO at Fino Payments Bank.
00:05First off, good morning Mr. Gupta. It's good having you here.
00:08Just want to quickly understand from you, with regard to Q1 versus the full year FY25,
00:15how is the number really shaping up? You've guided for a 25%, largely 25% top line growth.
00:22How is it shaping up? How is Q1 shaping up? And how do you expect Q2, Q3 to start to stack up?
00:26Good morning, Harsh, and good morning to the viewers of NDTV. See, we have grown at 25% in
00:34the first quarter vis-a-vis last year. It's been a higher growth compared to our 20% growth,
00:40which we saw in the last couple of years. We expect that the guidance of 25% should hold
00:45good for FY25. We are seeing good numbers coming up in Q2 as well. And with the growth in the
00:52revenue, we also expect a growth at a profit level as well. Our PAD actually grew by more
00:57than 25%. It grew at 30%. We expect that the PAD numbers and the revenue numbers of 25% will hold
01:04good for FY25, as it has held good for in the quarter 1 of FY25. Understood. And what's going
01:11to drive this growth, Mr. Gupta? See, we have four in our business. We have the four legs.
01:18So to say, the first leg has been the transaction business, which is a hook product,
01:22which brings a lot of customers to our platform. Roughly 2 to 3 crore customers come to our
01:27platform for doing transaction business. On top of it, we have been able to add a lot of those
01:31customers, office customers. We are converting them into owners. So we are making them our own
01:36CASA customers rather than just a third bank customer to us, which is driving a lot of growth
01:41on our CASA acquisition, our new to bank, our existing to bank revenue streams, the liability
01:48growth, which is there. Third is the cash management services, because we have a very
01:52good penetration across the country, somewhere around 18 lakh odd merchants who are there across
01:57the country. A lot of companies, whether it is your NBFCs, MFIs, e-commerce, logistics, CRAs,
02:04all of them require some kind of a cash assistance or cash to digital services on the ground.
02:09So we are doing that business, roughly 20,000 crores of business we did in the first quarter,
02:13which has been the highest for us till date. So that is the third business. And the fourth,
02:18I think the biggest driver for us has been digital business. And we'll talk about it,
02:22but digital has been the biggest driver for us from a 2% contribution to revenue in FY24,
02:30in the first quarter. Now it's contributed to nearly 15% in the first quarter of FY25.
02:36We expect the digital to grow significantly in this year, somewhere around 18 to 20% of
02:42the total revenue we expect digital will be for the full year of FY25. So that's the four layers
02:49for us and all the layers are driving, some a little slower maybe than others,
02:54but we are seeing good numbers coming up in all our businesses.
02:57But Mr. Gupta, what for viewer context, give us more details on the digital business,
03:03what constitutes digital for you? Just break it down for our viewers.
03:09So digital, we started digital story about two and a half years back. And Fino, you know,
03:14has been a physical company and digital is something which we added. We started to see
03:19that a lot of customers who are our own customers started to use UPI as a big platform. And that is
03:25when we realized that we have to now start putting together a B2C strategy. So in FY22,
03:3123, we started to put a B2C UPI strategy in which we brought in a lot of UPI products.
03:36We first migrated from Office UPI switch to Honest UPI switch, which came around March of
03:4523. In line with that, we also brought in a lot of strategy around our FinoPay, which is our
03:50mobile app, our internet banking. All of this contributed to nearly 40 lakh plus customers
03:57who are now digitally active out of 1.18 crore customers which are there on the Fino platform.
04:02On top of it, in FY23-24, we also started to look at the B2B UPI services or the B2B
04:10digital payment services. We started with a couple of products of which one or two have really
04:14scaled, especially the paying product on the UPI site, where you can actually give the services to
04:21a lot of B2B partners. We have somewhere around 20-25 B2B partners who use paying services.
04:27Roughly about 2,500 to 3,000 crores of transactions are happening on that platform alone
04:31on a monthly basis. We expect that to grow in this year. On over and above that, we also expect
04:36to bring in a lot of other payment products on the digital side. So that is where we are quite
04:41upbeat and quite positive and feel that the 25% guidance which we have given for FY25, we'll be
04:48able to meet it. Right Mr. Gupta, I want to talk about a couple of factors. One is on the operational
04:54side of things, your margins have shrunk a little bit when I'm looking at it sequentially, even
04:59though your revenue has gone up by 5 plus percent in fact on a sequential basis. So talk to us about
05:06why the margins shrink and do you believe that some of that will start to unwind as the years
05:12as the year goes by or can we expect that unwind to happen next year?
05:16So two things on that Harsha. First is that the quarter one normally,
05:21the all increases whether it is salaries or operating expense or even your contracts
05:28normally come up for renewal in the first quarter. So the cost increase normally happens in the
05:33quarter one. After that we have seen that there is a moderate increase in the cost but the revenue
05:39starts to grow up at a faster speed. Because of the growth in the revenue and the costs not growing
05:44at that same level, we expect that the margins should improve in the quarter two to quarter
05:48four and that's been the trend in the last couple of years. In fact, if I look at quarter one of
05:54this year compared to my three previous quarters, I have seen that compared to 15 to 20 percent drop
06:00which is there in the margin, there's a marginal drop of 4 percent in this year compared to quarter
06:05four of FY24, which is a very positive conversation. Specifically coming to the net margin
06:11change which we have seen, that is largely on account of the product mix which has happened
06:16in this quarter because a lot of business has moved on and get added to on the digital side.
06:21Digital margins are relatively lower than the normal cash in the transaction margins. So that
06:27is why there is a little bit change in the net margin percentage and that is not resulting in
06:33any change because of the pricing in any of the products. The pricing is more or less constant
06:38but the mix which has got changed has resulted in some kind of a marginal drop on the net revenue.
06:44Whereas if I look at sequentially from the last two three years, we have seen the drop in this
06:49year is far better, far lesser than the previous couple of years and we are quite positive that
06:56as the revenue keeps on increasing and the cost keeps on moderating, we should see a better
07:02margin in the next two three quarters.
07:06Sure sir. I want to try and delve a little deeper. So you have got 3000 crore in terms of your market cap for viewer context and
07:14your cash profit on an annualized basis is roughly 150 crore at least as of now. So
07:21what are you doing with this cash? Where exactly are you making investments? Are you going deeper
07:26into geographies or are you pretty much covered in terms of pin codes where you want to be?
07:32The first quarter cash profit was about 42 crores. So if I extrapolate it for the four quarters,
07:37it should come to about 170 odd crores. We expect that it should be higher than 170,
07:43somewhere closer to 180 to 200 crores is what we are looking at. 200 would be definitely better
07:48for us but somewhere in that region we are looking as our cash profit. See largely what we are doing
07:54is our basic investments come, our basic cost is on the IT part. See we are a new age bank,
08:01digital is our focus area. Technology is something which is our bread and butter and through which
08:06only we are able to do millions of transactions on a daily basis. So technology is an area which
08:11we continue to invest. In fact, in this year we are actually spending a little bit more on the
08:17technology part because we are also migrating from our core banking platform, the old core
08:22banking platform to a new in-house core banking platform. Plus we are doing a lot of other
08:26technology development as such because technology is something which we have to be ahead of time.
08:32We have to keep on investing in IT security and systems. So we'll continue to build on the IT
08:37part and that's largely takes care of a lot of money which we generate from the cash profits
08:42which are there. We are also expanding our business both on the physical side. We are already
08:48covered 95% of the pin codes in the country. We expect to continue to add another one and a half
08:53to two lakh merchants on an annual basis. On top of it, we'll continue to push on the digital side.
08:59We are seeing a good growth coming on the UPI. We are seeing a good growth coming on our digital
09:03customers. So I would say the large part of our cash profits will go largely on building up the
09:08technology platform as well as our digital ecosystem which is there. Physical leg of business largely
09:14comes from our operating profits and operating expenses. So we don't expect too much money
09:21going into the acquisition phase on the merchant side. Got it and with regard to your small finance
09:29bank license, how far are we from it? What's the likelihood in terms of you getting that license
09:36and how quickly? There's nothing has changed Harsh from our last interview. So we have applied to RBS
09:43on two things. One is internal, one is external. On the internal side as I already mentioned, we have
09:48already started to invest a lot on our technology building on a new platform. On top of it, we are
09:54also piloting with some of the NBFCs to understand how lending will evolve in our ecosystem.
09:59Our strategy around the SRV is largely the DDD strategy which we have spoken in the past also
10:05which means pedal on the distribution, pedal on the data and pedal on the digital side. So we are
10:11doing all the three things. We already have a good customer base. We have a good merchant base.
10:16So they will become our first borrowers so to say. On top of it, on the external side, we
10:24have already applied to RBI in December last year. We are waiting to hear from them.
10:30Understood and so on the last count is if you do get a small finance bank license, you will
10:36have to rejig the shareholding of the company because you will have to comply with RBI norms
10:43with regard to SFB holding company norms. How best would you and how quickly would you need
10:49to shift that and what major changes will come about? So on that, see on the SFB side, we already
10:56have a good net worth of 675 to 700 crores. So we do not expect that we need to raise immediate
11:03capital once we convert into an SFB. As far as our other strategy of corporate restructuring
11:10between the holding company and the bank, that is as per the plan we are going ahead with that.
11:14I do not know whether it will get influenced or not influenced from the SFB license or not,
11:20but that will await from an RBI direction point of view. But whatever is required,
11:25at that point of time, we will definitely take those into account. But as of now,
11:31we are continuing with both our strategies of SFB as well as of restructuring between the holding
11:36company and the bank. And we do not require any new fresh capital to start with when we convert
11:41into an SFB. Got your point. Thank you so much, Mr. Gupta. It is always a pleasure speaking with
11:45you, breaking down the new age set of businesses and Fino Payments, of course, is one of them.
11:51Thank you so much for speaking with us.