BPCL acquires 21% stake in Fino Paytech

Former's networks to help the latter's payments bank improve its reach

Government-owned oil marketing company Bharat Petroleum Co Ltd (BPCL) has acquired 21 per cent stake in Fino Paytech. The  latter had acquired a licence for payments bank last year.

“BPCL has entered into an agreement for acquiring 21 per cent stake (on a fully diluted basis) of Fino Paytech for Rs 251 crore in an all-cash deal,” said BPCL in a notice to the exchanges.

Rishi Gupta, chief executive officer and managing director of Fino PayTech, said the partnership will be a win-win for both sides. “The extensive reach of BPCL distribution allows Fino Payments Bank to substantially improve its reach, especially in rural India. On the other hand, BPCL will be able to offer a variety of payments bank products to its customers and partners.”

A BPCL spokesperson added the company was in the process of rolling out various customer service initiatives in its core retail fuels business using the emerging technology solutions and this investment would provide a base for supporting this imitative.

“The partnership offers an excellent platform for providing customised offerings to different segments of customers and thereby driving the business of fuel and non-fuel offerings,” the spokesperson added.

Fino PayTech is looking at launching its banking operations by December-January and is yet to apply to the Reserve Bank of India for the final approval. The BPCL management has said it expects the transactions is closed by 31 December.

At the moment, the major shareholders of Fino Paytech include The Blackstone Group, ICICI Bank, IFC, HAV3 holding and Intel Capital.

Last year, out of the 42 applicants for payments bank licence, RBI granted in-principle licence to 11 applicants. Payments banks can accept deposits of up to Rs 1 lakh and offer current and savings account deposits.They can also issue debit cards and offer internet banking. But they are not allowed to lend or issue credit cards.

However, this year we saw three licensees, Tech Mahindra, a consortium of Dilip Shanghvi, IDFC Bank and Telenor Financial Services and Cholamandalam Investment company opting out of the payments bank race.

One of the key reasons for it is because profitability will be a challenge for these palayers. However, analysts believe that for the payments banks increasing these partnerships will be a key to improve their distribution reach to ensure a quick break-even.