Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fino Payments Bank Ltd (BOM:543386, Financial) reported its highest quarterly revenue since inception, marking a significant milestone.
- Digital initiatives are contributing to nearly 15% of overall revenue, showcasing successful digital transformation.
- The company has seen a 141% year-on-year growth in digital throughput, reaching nearly INR44,200 crore.
- CASA accounts have grown significantly, with 8.1 lakh new accounts added in Q1 FY25, and 42 lakh digitally active customers.
- The company has increased its revenue growth guidance from 20% to 25% for the financial year, indicating strong business momentum.
Negative Points
- There are concerns about potential business attrition due to competition from other large conglomerate-promoted payment banks.
- The remittance and micro ATM businesses are experiencing a slowdown, which could impact overall growth.
- Margins have remained range-bound around 31%, with some fluctuations due to product mix changes.
- The company is still awaiting updates on its SFP license application, which could impact future business plans.
- There is a need for more clarity on the EBITDA contribution from the digital payment services segment, which could affect investor confidence.
Q & A Highlights
Q: There are two large conglomerates with payment banks increasing their banking correspondent network. Will this lead to business attrition for us? How do we look at the stickiness of our BC network? Also, any update on our SFP license?
A: We don't see a big challenge from the other payment banks. One has been in the market for a similar duration as us, and we have common interests in some products. The other conglomerate seems to focus on their own vendor and NBFC network. Regarding the SFP license, we are preparing internally, but there is no new regulatory update yet. (Rishi Gupta, CEO)
Q: You talked about increasing the revenue growth guidance by 5%. Is this growth primarily from new business segments or existing ones?
A: The growth will come from both new and existing segments. Digital payment services, CASA, and CMS are the main drivers. We also expect some growth in APS, which had challenges last year but is stabilizing now. (Ketan Merchant, CFO)
Q: There seems to be a slowdown in the remittance and micro ATM businesses. Is this structural?
A: The digital economy's growth impacts remittance, but it will stabilize. Micro ATM usage has been consistent over the last few quarters, and we don't expect significant changes. (Ketan Merchant, CFO)
Q: Will the increased revenue growth guidance translate into better ROE?
A: Yes, there will be an absolute growth in profitability, though not in direct proportion to revenue growth. We continue to invest in technology and people, which will enhance profitability. (Ketan Merchant, CFO)
Q: What is the new subscription revenue in the CASA segment? Also, can you provide the revenue split into own and API channels?
A: The subscription revenue for CASA this quarter is INR24.3 crore. The revenue split for Q1 FY25 is 72% own channel and 28% API. (Ketan Merchant, CFO)
Q: Can you explain the B2B and B2C components of your digital payment services?
A: B2C involves customers using UPI through their savings accounts. B2B includes providing UPI services to digital companies and aggregators for transactions like UPI collect services. (Rishi Gupta, CEO)
Q: How do you see the declining throughput in transaction business affecting customer acquisition?
A: While transaction volumes are moving to digital, we are promoting merchants to open accounts for customers in their geographies. This ensures a robust ecosystem for customer acquisition. (Rishi Gupta, CEO)
Q: Can you elaborate on the correlation between digital active customers and CASA accounts?
A: Digital active customers have higher activation rates, around 80% compared to 65% for non-UPI customers. We focus on customer lifecycle plans to retain and engage these customers. (Rishi Gupta, CEO)
Q: Why has the CASA balance degrown from Q4 to Q1?
A: The balance sheet movement shows a sequential decline, but the average deposit has grown by double digits. The YoY growth is 37%. (Ketan Merchant, CFO)
Q: What makes you confident about achieving 40% CASA growth?
A: Our renewal income has grown significantly, contributing to a stable and predictable business model. We are confident in our strategy and customer engagement initiatives. (Ketan Merchant, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
