Fincare Small Finance Bank Ltd IPO 

Fincare Small Finance Bank Ltd. has re-filed its Draft Red Herring Prospectus (DRHP) with the Indian market regulator SEBI. Previously, SEBI returned the preliminary papers issued by the Small Finance Bank in March 2023. 

This initial public offering consists of fresh issues worth Rs. 625 crore and an offer for sale worth Rs. 1.7 crore by investors and promoters. It filed the DRHP on May 1 2023. The small finance bank aims to increase its capital base to suit its banking needs.

The promoter, Fincare Business Services, is joined by a group of investors including Kotak TATA Capital Financial Services, Wagner, Mahindra Life Insurance Company, True North Fund V LLP, Edelweiss Tokio Life Insurance Company, Bharti Axa Life Insurance Company, Silver Leaf Oak (Mauritius), LeapFrog Rural Inclusion (India), Omega TC Holdings Pte Ltd, and Zuno General Insurance. They are jointly offering their shares for sale.

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About the Company

Fincare Small Finance Bank ltd is the amalgamation of two NBFC microfinance institutions – Disha Microfin and Future Financial Services. The bank has been operational since July 21 2017. It aims to enable banking solutions to underbanked and unbanked customer segments inclusive of microentrepreneurs and enterprises. 

The bank offers a range of smart banking products. These include credit, deposit, wealth and protection solutions. Its products include fixed deposits, current and savings accounts, recurring deposits, NRI deposits, micro-loans, cash overdrafts, 3-in-1 accounts, loans against gold and property, two-wheeler loans, institutional finance, and a variety of insurance products. 

The bank offers to transform banking into smart banking and has always focused on digital upgrading since its inception. As of March 31 2022, the bank has over 32 lakh customers across 17 states and Union Territories. In 2020, the bank received the Economic Times BFSI Innovation Tribe Award for Best Digital Solutions. 

Company Financials

It is essential to have knowledge of a company’s financials to make an informed investment decision. The following table depicts the previous three years’ financial details of Fincare Small Finance Bank ltd: 

Parameters as Per the Year Ending (in Rs. Million Except EPS)	31 March 2023	31 March 2022	31 March 2021
Total Assets	1,10,756.40	92,281.26	76,218.90
Total Liabilities	1,11,535.59	92,710.25	76,218.88
Total Expenses	18,671.55	16,358.66	12,635.71
Total Revenue	19,707.96	16,447.37	13,767.10
Profit After Tax	1,036.41	88.71	1,131.39
EBITDA	1,513.72	258.64	1,634.28
Earnings Per Share (Basic)	4.69	0.38	5.55
Earnings Per Share (Diluted)	4.68	0.38	5.55

Strengths

Here are some of the strong suits of Fincare Small Finance Bank that sets it apart from its competitors:

• This digital-first bank has adopted a scalable digital solution to improve customer experience and operational efficiency. It provides the frontline staff with a wide range of digital tools for customer registration, account management, fund transfers, bill payments, loan applications, collections and cross-selling.
• The bank provides customer support through various digital channels like internet banking, mobile apps, WhatsApp and payment apps like BillPay, NEFT, RTGS, IMPS, NACH, UPI and debit cards. In addition, it ensures accessibility in regions with low technological literacy through employee-supported methods.
• The company’s focus is to expand its urban presence and grow an extensive rural presence. Fincare Small Finance Bank aims to enhance the financial inclusion of underserved people by extending access to its banking products such as microloans, savings accounts, loans against gold or property, and other investment and insurance products.
• The bank has a rapidly growing yet stable deposit base with a rising CASA. Its deposit products, including term deposits, recurring deposits and CASA, total 5.68 million accounts as of March 31, 2023, with a CAGR of 182.31% from March 31, 2021. Additionally, it had 3.85 million deposit customers as of 31 March 2023 with a remarkable CAGR of 377.87% since 31 March 2018. The bank’s total deposits for 31 March 2021, 2022 and 2023 were Rs. 53,184.98 million, Rs. 561.56 million and Rs. 80,331.94 million, respectively.

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Risks Involved

Along with many upsides, there are also some risks involved in this business. Informed investors should be aware of both. Here are some of these risks:

• Being a financial institution, Fincare Small Finance Bank is always exposed to liquidity risks. This is the risk of being unable to fund the current and expected cash flows as well as collateral needs without affecting daily operations. 
• There is also market and interest risk. Being exposed to this type of risk affects the bank’s earnings or capital. This risk can be a result of changes in market factors such as equity prices, credit spreads and market volatility. 

Also Read: Risk of investing in IPO

Summary

Fincare Small Finance Bank aims to use the fresh issue proceeds to enhance its Tier-1 capital base and meet upcoming financial requirements. The bank has over 15 years of experience in offering micro-loans and focuses on customers in semi-urban and rural areas. As such, it can be considered suitable for long-term investments. However, before making a decision, ensure to study the RHP and the risks involved.

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