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ICICI Prudential, Lombard acquire 10% stake in Fino PayTech for $17.26 mn

12 January, 2017

Payments bank applicant FINO PayTech Ltd has closed Rs 400 crore in primary funding following the latest tranche of capital from ICICI Prudential Life Insurance and general insurer ICICI Lombard even as it awaits regulatory approval to launch the payments bank before early April, said a top company executive. 

Rishi Gupta, managing director and chief executive officer, FINO PayTech, said that ICICI Prudential Life Insurance and ICICI Lombard have infused Rs 100 crore ($14.62 million) and Rs 18 crore ($2.63 million), respectively, for a 10% stake, and Rs 31 crore ($4.53 million) came from two institutional investors. Gupta, however, didn’t disclose names of the institutional investors. 

In its first tranche, the company had closed a Rs 251-crore ($37.6 million) funding from state-run refiner Bharat Petroleum Corp. Ltd (BPCL) for a 21% stake, in July last year. 

With ICICI Bank already an existing investor, the stake acquisition by ICICI Prudential and ICICI Lombard means the (ICICI) group has become a major long-term partner for FINO PayTech, Gupta said.

In September, the Mumbai-based company had told VCCircle that it was raising the remaining Rs 149 crore from at least three domestic strategic investors, including financial services and insurance firms, that will help it comply with regulatory norms to start operating as a payments bank.

As per the norms, a payments bank has to bring down foreign stake from 75% currently to 49%. At Fino, primary funding has seen a total dilution of 33% and its investors include Intel Capital, IFC, Headland Capital and Blackstone. FINO was one of 11 companies to receive the Reserve Bank of India’s in-principle approval to start a payments bank last year.

Earlier today, The Economic Times had reported that ICICI Pru Life and ICICI Lombard have together invested Rs 149 crore in Fino Paytech along with two other small investors who have picked minority stakes. 

Proceeds from the fund-raise would be used to set up the technology framework for the payments bank, create physical infrastructure and meet marketing and operational expenses. Part of the funding will be committed to the lending subsidiary, added Gupta.

“BPCL would provide the distribution network required for a payments bank, while the strategic partnership with bank and insurance companies would provide third-party financial services product to sell to its customer base,” he added. 

BPCL is the second refiner to get into a payments bank company. Reliance Industries Ltd, India’s biggest private-sector refiner, was among the 11 companies to receive the RBI’s nod to start a payments bank. Reliance has tied up with State Bank of India for the venture.

Business overview

FINO PayTech currently provides basic banking, direct benefit transfer (DBT) payments, remittances and other payment services for the unbanked rural and urban masses in partnership with banks and financial institutions. The payments bank licence would help it provide a range of financial offerings, such as savings and term deposits, credit and insurance besides its existing set of basic banking and business correspondent services.

“Demonetisation has led to larger growth numbers for the company. There were several other new investors who showed interest after the November 8 announcement; however, the company may tap financial investors in the future,” Gupta added. 

Founded in 2006, FINO is a financial inclusion software solutions and services company. It has received funding from multiple investors. FINO recorded net profit of Rs 9.99 crore on gross revenue from operations of Rs 218.95 crore for the year through March 2015. It reported a revenue of Rs 250 crore as of March 2016, he added.

The company is expecting at least 30% revenue growth to Rs 325-340 crore in the current financial year, with 40% annualised growth in gross transactions to $2 billion in FY17, Gupta said.

In late 2009, FINO raised Rs 70 crore from Headland Capital, along with Intel Capital and International Finance Corporation. Headland and Intel Capital had also purchased the entire stake of Legatum Ventures, which invested in March 2007, in that round. A month after Blackstone made a $34-million investment in July 2011, Intel Capital also invested an undisclosed amount for a small stake through a secondary transfer from IFMR Trust.

Three of the 11 companies which received the RBI’s go-ahead, however, have dropped their plans to set up a payments bank. These are Tech Mahindra Ltd, which pulled out in May, as well as Cholamandalam Group and Sun Pharmaceutical Industries Ltd’s Dilip Shanghvi. Airtel M Commerce Services Ltd and Paytm’s Vijay Shekhar Sharma have got the final approval from the RBI. Others left in the fray are Aditya Birla Nuvo Ltd, Department of Posts, National Securities Depository Ltd and Vodafone m-pesa Ltd.

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ICICI Prudential, Lombard acquire 10% stake in Fino PayTech for $17.26 mn

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