Fino Payments Bank Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

3
Anup Agarwal (Interim CFO), Ketan Merchant (Interim CEO), Tejas Maniar (Chief Digital & Liabilities Officer)

Analysts

8
Ankit Kanodia (Zen Nivesh), Divyansh Gupta (Latent PMF), Gurvinder Juneja (Fortuna Asset Managers LLP), Harsh (Individual Investor), Nithin (Individual Investor), Nikhar Arora (Go India Advisors), Unidentified Participant (Endorient Financial Services Ltd), Yash Singh (AG Capital Investments)

Financials & KPIs

Geographic & Segment Commentary

B2B UPI P2M Segment: Paused for recalibration following the February 26th event (one of the bank's most profitable segments). Management expects at least a couple of quarters before relaunch, tentatively targeting Q4 FY27 subject to ecosystem developments. Segment had been a major contributor to throughput and revenue growth.

B2B CMS Segment: Throughput grew 26% sequentially to ₹18,000 crores as client base broadened, resulting in 5% revenue growth QoQ despite pricing pressure in the segment.

Traditional Transaction Business (Remittance/Micro ATM/AEPS): Revenue declined 13% sequentially amid continued industry headwinds from cash-to-UPI migration. Management is consciously focusing on higher-quality, more active merchants rather than volume.

Referral Lending (Secured): Disbursements surged 214% YoY to ₹628 crores in Q1, focused on gold loans, affordable housing, and loan against property. Pipeline aligns with future SFB secured lending strategy targeting 90% secured book composition.

Digital Ecosystem: UPI throughput grew 14% YoY; 68% of newly acquired customers became UPI-active within the same quarter, indicating deepening engagement and stickiness.

Company-Specific & Strategic Commentary

Small Finance Bank Transition: On track to complete all RBI-stipulated milestones within the prescribed 18 months (from 5th December 2025). Management to submit operational readiness application to RBI by end of Q4 FY27. PwC appointed to support implementation; key leadership hires for credit vertical expected to join between September-October 2026, with senior executives onboarded by end of calendar year.

Lending Platform Build-out: Technology partners onboarded for loan origination system (LOS), loan management system (LMS), and other lending applications. End-to-end customer loan journey technology stack expected ready by February 2027. Target blended portfolio yield of ~14% on secured lending book (gold loan, affordable housing, LAP, secured MSME).

Technology Modernization: Finacle core banking platform implemented in previous quarter; Q1 focused on platform stabilization and Phase 2 capabilities for lending, new product development, and operational scalability. Large portion of technology investment already incurred; ~₹10 crores of SFB-related OPEX expected on FY27 P&L.

B2B Business Revitalization: Actively preparing to relaunch high-growth B2B UPI P2M segment, contingent on ecosystem developments; potential relaunch tenability in Q4 FY27.

Capital Position: Comfortably above regulatory requirement for proposed SFB; FY30 business plan unchanged—predominantly fee-based model complemented by secured lending portfolio.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Referral Lending Product Pricing

• Question: What rates are being offered on referral gold loans, LAP, and housing loans? (Ankit Kanodia)
• Answer: Currently partnering with NBFCs for referral loans. Post-SFB, product pricing will be better than prevalent NBFC rates in the target segment. Targeting 90% secured book with ~14% blended portfolio yield across gold loan, housing, LAP, and MSME secured lending. (Ketan Merchant)

MDR Implementation Impact

• Question: If the proposed MDR on B2B UPI transactions (over ₹2,000) comes through, will Fino benefit? (Ankit Kanodia)
• Answer: Qualitatively, a definite yes. MDR will not apply to P2P/retail transactions but will cover B2B. Management is modeling the impact and will recalibrate when relaunching the UPI P2M business, awaiting clarifications on quantum. (Tejas Maniar)

Promoter Shareholding / BPCL Stake

• Question: BPCL is a large shareholder in Fino PayTech; if they liquidate, how would Fino Payments Bank be affected? (Ankit Kanodia)
• Answer: Fino Payments Bank operates at arm's length from holding company. Capital position is adequate for SFB and there is no envisaged bearing from any holding company investment activity. (Ketan Merchant)

SFB Technology Costs

• Question: How much of the SFB technology investment is behind the bank; will costs moderate after FY27? (Yash Singh)
• Answer: Large part of investment is already done—core banking migration to Finacle is complete. Only lending modules (LOS, LMS) and related systems remain. After FY27, technology transition for at least the first three years of SFB will be complete. (Tejas Maniar)

ROE and NIM Guidance

• Question: Should investors expect 20%+ ROE guidance to hold for FY30? (Yash Singh)
• Answer: Yes, absolutely. Cost of funds at 1.4% with current yields around 6.5% provides structural upside; SFB asset products expected to deliver 8-9% NIMs—the highest in the industry. (Ketan Merchant)

SFB Operational Roadmap

• Question: Can you lay down the step-by-step plan to SFB operational readiness and whether non-compete clauses exist on referral customers? (Gurvinder Juneja)
• Answer: Senior management hires joining Sep-Oct 2026; LOS/LMS technology partners engaged; GRC framework in progress. Application to RBI by end of Q4 FY27. No non-compete exists—referral customers belong to the bank, not the partner NBFCs. (Ketan Merchant)

Leadership Hiring & CEO Position

• Question: Have candidates been zeroed in for CEO; what's the visibility on appointment? Also, what will be the OPEX burn while preparing for SFB? (Divyansh Gupta)
• Answer: CEO designation is being worked out by the board with RBI; stakeholders will be kept updated. SFB OPEX impact on FY27 P&L estimated at ~₹10 crores, including leadership hiring from October onwards. (Ketan Merchant, Anup Agarwal)

Strategy Continuity Post New CEO

• Question: If a new CEO arrives with different product/strategy nuances, how should we think about risk to the current SFB plan? (Divyansh Gupta)
• Answer: The SFB business plan is institutionalized and has been socialized with RBI and blessed by the board over the past couple of years. No single individual built or runs the model; only minor tweaks expected. Losing first-mover advantage would be costly. (Ketan Merchant)

BC Business Sale & Reverse Merger

• Question: Are the sale of the BC business and reverse merger conditions stipulated by RBI for SFB approval? (Nithin)
• Answer: SFB regulations prohibit carrying out BC activities for other banks—this is a prescribed requirement. Management is working on a concrete plan (options include restructuring) and expects to share it by next quarter. Reverse merger is not an RBI-stipulated condition; the HoldCo-OPCO structure remains unchanged. (Ketan Merchant)

Asset-Liability Management & Deposit Stickiness

• Question: How do you manage ALM given granular short-term liabilities against longer-tenure secured loans? (Harsh)
• Answer: Behavioral study over last 4-5 years shows 90%+ of the CASA book is stable/core. During the March event, the bank reached its highest liability balance and average book grew ~9%. The book is reasonably insulated from internal/external shocks. (Ketan Merchant)

Term Deposit Strategy for Lower-Income Segments

• Question: How do you plan term deposit accretion given lower-income demographics? (Harsh)
• Answer: Plan targets ~65% CASA ratio and ~70% CDR; term deposits are for customer stickiness, not aggressive liability sourcing. Adding 40 new branches in SFB Year 1 across new geographies and demographics to support deposit growth. (Anup Agarwal, Ketan Merchant)

BC Business Timeline & M&A

• Question: What is the expected timeline for BC business sale completion and any M&A plans to accelerate lending/digital capabilities? (Unidentified Participant)
• Answer: BC business restructuring plan will be announced over the next quarter or so. FY30 plan is organic; inorganic opportunities will be evaluated if they accelerate book building, but current focus remains on organic institution-building. (Ketan Merchant)

Key Takeaway

Fino Payments Bank delivered a resilient Q1 FY27 despite one of its toughest quarters: the B2B UPI P2M business (paused post-February 26th event) and declining cash transactions drove total throughput down 10% YoY and EBITDA to ₹43.1 crores, but the bank compensated with record network revenue margin of 42.8% (+275 bps QoQ) and strong strategic execution. Referral loan disbursements surged 214% YoY to ₹628 crores (~50% of FY26 full-year volumes), CASA contribution to revenue rose to 54%, and deposits grew 12% YoY to ₹2,772 crores—all while the bank advanced its SFB transition: PwC engaged, lending technology partners onboarded, senior credit hires expected by October, and readiness submission to RBI targeted for end of Q4 FY27. Management reaffirmed 20%+ ROE and 8-9% NIM guidance post-transition, anchored on 1.4% cost of funds and ~14% blended secured yields. The B2B UPI P2M relaunch (possibly Q4 FY27) remains the swing factor for near-term earnings recovery, alongside the structural decline in cash transactions and clarity on the BC business restructuring; however, management stated "the worst seems to be behind us" with acceleration toward SFB-driven growth expected through FY27-FY28.