Payment technology solutions provider FINO PayTech is in advanced talks with a few investors just after receiving a capital commitment worth Rs 251 crore from state-run refiner Bharat Petroleum Corp Ltd (BPCL) two months ago, a top executive told VCCircle.
The funding is part of the Rs 400 crore primary capital it sought to raise in a transaction that will help it comply with regulatory norms to start operating as a payment bank, even as it is exploring a potential acquisition of a fin-tech company, said Rishi Gupta, managing director and chief executive officer, FINO PayTech.
The Mumbai-based company is raising the remaining capital of about Rs 150 crore from at least three domestic strategic investors such as financial services and insurance firms, he said. The fundraise involves dilution of foreign stake from 75% currently to 49% to comply with the regulatory ownership requirement for the payment bank, Gupta said. The deal values the company at a post money valuation of about Rs 2,000 crore ($307 million), indicating a significant rise of more than double of its valuation when it raised Rs 150 crore ($33 million) at a post-money valuation of $126 million in 2011.
Gupta said the firm plans to launch payment banking operations within five months after raising the funds, which would take a few more weeks as it is getting multiple regulatory approvals as a result of the large equity dilution. There would be another fundraise to provide an exit to some of its existing investors, he said.
Through the deal, the company can tap BPCL's extensive fuel distribution and marketing network to participate in the government’s financial inclusion initiative and the new investors would add to the existing suite of financial services products.
At present, the company 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 payment banking 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, he said.
At present, cash management services such as government DBT payments to Mahatma Gandhi National Rural Employment Gurantee Act (NREGA) and old age pension beneficiaries and domestic remittance transactions account for 60% of FINO’s business, he said. Domestic remittance accounts for transactions worth Rs 400 crore a month, he said.
Founded in 2006, FINO is a financial inclusion software solutions and services company. It has received funding from investors including Intel Capital, IFC, Headland Capital, Blackstone and ICICI Bank.
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.
It processes Rs 1,000 crore worth of transactions every month with a gross margin of 2-3%. It has around 30,000 transaction points, about 20,000 business correspondent agents across 28 states covering over 500 districts.
Acquisitive
The company is interested in exploring acquisition of fin-tech firm that would help it roll out several mobile-first banking features, Gupta said.
The target firm should be able to provide distribution of financial services products through online, preferably with capabilities in credit scoring, online lending, data analytics and on-field product management software.
As a payment bank, there is an opportunity to tap new customer segments; hence, the emphasis on new age tech solutions around mobile devices, Gupta said. Therefore, it would be open to acquisition or strategic investment in a company that helps to scale, he said.
In 2012, it acquired the prepaid mobile payment business of erstwhile Nokia Mobile Payment Services in India for an undisclosed amount. The acquired firm was to focus on prepaid payment service offerings, such as money transfer, utility bill payment, mobile and DTH recharge, etc.
Two years before that, it acquired a non-deposit accepting NBFC and a microfinance institution Intrepid Leasing and Finance Pvt Ltd, which crossed Rs 500 crore in assets under management (AUM) last month. It expects a portfolio of Rs 750 crore as of March 2017 compared with Rs 351 crore in the previous financial year. The firm’s microfinance business is present across Uttar Pradesh, Madhya Pradesh, Bihar, Karnataka and Maharashtra.
JM Financial is advising FINO on the fundraise.
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