“Expensive valuation, stiff competition makes Fino Payments Bank IPO unattractive”

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Fino Payments Bank Rs 1,200.29 crore initial public offering is set to hit the street tomorrow making it the first payments bank in the country to raise money from Dalal Street. The three-day issue of the bank closes on November 02. The price band for the payments bank has been fixed at Rs 560-577 per share having a face value of Rs 10 per share.

An investor can apply for a minimum of 25 equity shares and in multiples, thereafter, translating to a minimum bidding amount of Rs 14,425 at the higher end of the price band. A retail investor can at max apply for 13 lots or 325 shares for Rs 1,87,525.

The Rs 1,200.29-crore public offer comprises fresh issuance of equity shares of Rs 300 crore, and an OFS (offer for sale) of Rs 900.29 crore by shares by Fino Paytech. The bank will utilise the net proceeds from the fresh issue towards augmenting Bank’s Tier – 1 capital base to meet its future capital requirements and meet the expenses in relation to the offer.

Should you apply?

Here is what brokerages have to say about the IPO

BP Wealth | Rating: Avoid

Fino Payments has a highly experienced Board and management, and their framework provides seamless interplay between distributors, Technology and Partnerships. The company has even entered into a massive untapped opportunity, “the Emerging India”, which has a massive scope of growth, but its profitability has only been recently achieved. However, on the upper end of the price band, the issue is valued at a P/B (Price to book value) of 31.89x based on FY21 book value. The Company exists in a stiff competitive environment where companies like PayTM Payments Bank and India Post Payments bank exist and outperform many aspects. Hence the current growth momentum is difficult to sustain in the long term.

Swastika Investmart | Rating: Avoid

Fino Payment is a fast-growing fintech company and it is one of its kind company to list on the stock exchanges. If we consider last year’s profit then the PE ratio turns out to be around 235 however it has carried forward losses which is a major concern. Its unique DTP (Distribution, Technology, Partnerships) network and new edge business model may garner investors’ interest. However, the brokerage is varied about the issue on the back of expensive valuation and regulatory risk.

Marwardi Shares & Finance | Rating: Subscribe

Considering the trailing twelve month (June 2021) adjusted book value per share of Rs 54.52 on the post-issue basis, the company is going to list at a P/B of 10.58 with a market cap of Rs 4.801.5 crore. There are no listed companies in India whose business is comparable with that of the company’s business. The company has an asset-light and scalable business model with operational experience and expertise. Also, it has a unique DTP (Distribution, Technology, Partnerships) framework that enables it to serve the target market efficiently.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)