FINO PayTech, India’s largest business correspondent, is in advanced talks with five to six domestic investors, including its promoters ICICI Group, to dilute its stake and raise Rs 400-500 crore in the next two months.
Confirming the development, for which JM Financial is working as the investment bank, FINO’s chief executive and managing director Rishi Gupta said the fund would help the company transition itself from a financial inclusion firm to a payments bank.
“Most of the money will be needed for technology implementation as part of the transformation process. We also need to be prepared to absorb losses in the initial years of the bank,” said Gupta.
According to Reserve Bank of India (RBI) rules, payments banks should be owned and controlled by resident Indians. FINO is owned by both domestic and international investors such as ICICI Bank, International Finance Corporation, Intel Capital, The Blackstone Group, Life Insurance Corporation of India, Union Bank, and Corporation Bank.
By equity dilution and bringing in more investors, the total share of domestic investors will rise. Overall, FINO will have to shed 25-30 per cent in favour of domestic investors to become Indian-owned. The equity dilution to raise Rs 400-500 crore will partly take care of domestic ownership issue.
ICICI Group, through its other subsidiaries and not the bank, has agreed to infuse more capital if FINO needs it, Gupta said. ICICI Bank cannot infuse money in FINO as the bank is mostly foreign investor-owned.
However, Gupta did not share any further details about the valuation of FINO.
Diversified ownership is required when the payments bank reaches a net worth of Rs 500 crore. The bank is also required to list within three years of reaching the net worth of Rs 500 crore, according to RBI guidelines.
FINO, which is expected to have a net worth of Rs 500 crore from the first day itself, will list the company, but Gupta is in no hurry.
“We will go for listing only when there is stability and predictability in the business model,” said Gupta.
With the payments bank, FINO will stick to its core competency that has been achieved through financial inclusion and working as a business correspondent for banks. The payments bank will have a choice of products for its customers at the convenience of the customers. There will be innovative products like wallet account and savings accounts, provided the regulator allows inter-operability of payment wallets. But, the new payments bank does not intend to compete with other established banks.
“We will go to the segments where banks find it difficult to go; we will complement, rather than compete with the existing banks,” said Gupta.
