# 1. Financial Performance ## A. Key Figures * **Revenue:** **₹453 Cr** (+4%) * **EBITDA:** **₹62 Cr** (+16%) * Cash Profit: ₹50.5 Cr (+20%) * **Renewal Income:** **₹56 Cr** (+38%) * PBT: INR24.6 crores (stable) * **PAT:** **₹18 Cr** (declined YoY) * **Net Revenue Margin:** **+250 bps YoY** (reached 33–34% range) ## B. Revenue Growth * **Resilient Core Growth:** Strong double-digit expansion in EBITDA and cash profit despite modest top-line growth, underpinned by robust renewal income momentum. * **Strategic Mix Shift:** Remittance revenue decline (now 10% of total) caused a 15% top-line drag but had negligible bottom-line impact due to proactive diversification. * **Growth Ambition Intact:** Management maintains target of **20%+ revenue growth** over time, supported by upcoming full-stack payment products in Q2–Q3. ## C. Profitability Trends * **Margin Expansion Achieved:** 250 bps net revenue margin improvement driven by favorable shift toward high-margin segments like **CASA and digital payments**, offsetting spread compression from repo rate cuts. * **Bottom-Line Focus:** Profitability strengthened despite becoming a full taxpaying entity; underlying pre-tax performance reflects disciplined cost control and business mix optimization. * **Stable Pre-Tax Earnings:** PBT held steady amid higher depreciation from prior tech investments, signaling operational resilience. * **Sustained Margin Outlook:** Margins expected to remain **range-bound at 33–34%** in coming quarters, supported by continued digital adoption and customer relationship depth. --- # 2. Segment & Revenue Mix ## A. Key Figures * **Revenue Mix:** **57%** from growing business (liabilities, digital payments) · **20%** from legacy cash transactions * **mBanking Revenue:** **57%** of total revenue (+40% YoY) · **39%** margin (**15 pts above** avg) * **Subscription Revenue:** **₹21.9 Cr** (quarterly) from **~7.5 Lakh** active accounts * **CMS Throughput & Revenue:** **₹20,400 Cr** throughput · **₹34 Cr** revenue * **Lending Volume:** **₹200 Cr** (stable QoQ) — referral-only income model ## B. Growing Business * **Strategic Realignment:** Business restructured into three distinct segments, with growing businesses (liabilities, CASA, digital payments) now the primary revenue and margin driver. * **High-Quality Growth:** Growing segment delivered **strong double-digit revenue expansion** and significantly outperformed in margins, reflecting successful monetization of digital adoption. * **Competitive Edge:** Fino’s **merchant-led account acquisition** enables faster onboarding and superior **cash-to-digital conversion** versus PSU peers. * **Subscription Momentum:** Active account base stabilized at **~5 lakh**, with cautious onboarding practices limiting mule account risks while supporting recurring revenue. ## C. Stable Business * **Resilient Partnerships:** Corporate BC business remains stable with consistent bank partnerships, providing reliable cash flow amid structural shifts. ## D. Legacy Business * **Accelerated Decline:** Legacy cash transaction segment (remittances, micro-ATM, AePS) saw further erosion, now representing only **one-fifth of revenue**, down from over one-third a year ago. * **TAM Strategy Execution:** Strategic pivot from low-margin transaction services to **ownership-based monetization** is progressing, with legacy volumes in structural decline. * **CMS Resilience:** Despite MFI/NBFC headwinds, CMS revenue held firm with **range-bound take rates (17–18%)**; early signs of revival and new use cases under exploration. --- # 3. CASA & Deposit Growth ## A. Key Figures * CASA Accounts Added: **~7 lakh** (Q) · Total base **~1.5 crore** * **CASA Revenue:** **₹154 Cr** (+30% YoY) * **Renewal Income:** **+38%** YoY * **Total Deposits:** **₹2,163 Cr** (Q1) (SA: ₹1,887 Cr; CA: ₹276 Cr) * **Average Daily CASA Balance:** **₹2,275 Cr** (CA: ₹300 Cr; SA: ₹1,974 Cr) * **Avg. New Customer Balance (3-month):** **₹1,750** (+22% vs. 2 yrs) ## B. Account Additions * **Cautious Growth, Strong Base:** CASA account additions moderated due to strategic prudence and muted government disbursements, but total base nears 5 crore with **brand trust sustaining acquisition**. * **Rebound in Sight:** Management expects return to **8+ lakh quarterly additions** from Q2, supported by government flows and anti-mule account solutions; July trends indicate improvement. * **Structural Shifts Driving Focus:** Channel sales team restructured into dedicated **CASA and merchant onboarding units**, enabling targeted strategies and early positive traction—**46,000 new merchants** added (55–60% direct, ~40% via API partners). * **Digital Momentum:** Digital active customers surpassed **53 lakh**, with over **65,000 new digital accounts** added, reflecting growing platform engagement. ## C. Average Balance Trends * **Higher-Quality Customers:** Strong **34% YoY growth in average deposits** and rising initial balances (₹1,750 in first 3 months) signal improved customer quality and refined acquisition strategy. * **Decoupled Growth Model:** CASA additions are increasingly independent of transaction volumes, as strategy shifts to **direct acquisition via dedicated teams**, reducing reliance on cross-sell through payment hooks. * **Competitive Pressure:** **Zero-balance account model** remains core to value proposition, but **public sector banks waiving similar requirements** may erode differentiation over time. ## D. Government Disbursements * **Headwinds from Muted Payouts:** Q1 saw softer government disbursements (vs. election-boosted FY25), particularly under **NREGA and DBT**, weighing on liability growth and new account additions. * **Recovery Expected:** Absence of large-scale disbursements was a key drag; outlook assumes normalization in coming quarters, supporting projected rebound in CASA momentum. --- # 4. Digital Payments & Throughput ## A. Key Figures * **Digital Payments Revenue:** **₹106 Cr** (+59% YoY) (23% of total) · **Sequential decline of 10%** (ex-onetime) * **Digital Throughput:** **₹67,800 Cr** (+54% YoY) (55% of total) * **UPI Throughput:** **₹52,829 Cr** (Q1 FY'26), comprising **₹45,000 Cr P2P** and **₹7,000 Cr P2M** * **Merchant Additions:** **19.5 Lakh** total merchants · **43,000 new** in quarter * UPI Transactions: 97.9 Cr (+39% YoY) · ~1.5% market share ## B. Transaction Volumes * **Dominant Digital Shift:** Digital payments now represent **55% of total throughput**, driven by strong YoY growth despite tighter B2B controls and regulatory due diligence headwinds. * **Structural Volume Migration:** Decline in cash and remittance volumes reflects strategic shift to on-us transactions and DIY UPI usage, enhancing **customer ownership and account-level monetization**. * **UPI Momentum with Monetization Focus:** UPI drives significant volume growth, particularly in P2M (30% value, 45% volume growth), though lower average ticket sizes persist; platform enhancements underway to boost throughput and monetization. * **Mixed CMS Performance:** Cash management services show **early signs of revival** with transaction value up over 5%, despite competitive and sector-specific pressures on take rates. ## C. Merchant Additions * **Accelerating Network Expansion:** Merchant acquisition remains a core growth lever, with **43,000 new merchants added in the quarter** and active onboarding of large payment aggregators and partners. * **Strategic Partnerships in Pipeline:** Collaborations with major payment aggregators underway, targeting **H2 FY'26 product launches**, though specific names remain undisclosed. * **Scaling Phase Ahead:** Merchant ecosystem still maturing—company expects **1–2 quarters** to achieve clearer scale and visibility on new partner contributions. ## D. UPI Market Share * **Stable UPI Positioning:** Platform transactions grew 39% YoY to 9 crore, maintaining a **consistent ~5% UPI market share** despite rising competition. --- # 5. Cost & Technology Investment ## A. Key Figures * **Technology & Infrastructure Costs:** **₹20 Cr** (Q1) · **Depreciation:** **₹17 Cr** (Q1) · **Total Tech-Related Cost:** **₹37 Cr** (Q1) ## B. Operating Expenses * **Cost Discipline Maintained:** Operating expenses expected to remain stable through FY, supporting profitability despite inflationary and compliance cost pressures. * **Cost-to-Income Ratio Guidance:** Ratio to stay **range-bound between 25% and 26%** due to operational discipline, even as compliance and digital expansion drive marginal cost increases. * **Targeted Team Expansion:** Digital sales and CMS teams expanded to drive growth in digital channels and new product lines, with careful cost control in SFB organizational buildout. ## C. Tech Capex * **Strategic Tech Investments:** Focus on enhancing UPI platform monetization, AI-driven fraud detection, customer experience, and process automation, with current capex aligned to Payments Bank operations. * **No Near-Term SFB-Driven Cost Spike:** Management clarifies **no major incremental tech expenses** are expected from SFB license; core banking capex is volume-driven and not pre-positioned for SFB. * **LOS/LMS Partners Finalized:** Technology vendors for loan origination and management systems have been shortlisted, pending regulatory approval for implementation. ## D. Core Banking Migration * **Migration in Final Phase:** Core banking system upgrade nearing completion, expected **before year-end**, with go-live targeted before next earnings call. * **Future Efficiency Gains:** New tech stack will enable faster product development, improved operational efficiency, and integration of AI tools in live environment. --- # 6. Risks & Regulatory Pressures ## A. Key Figures * **New Merchants Onboarded:** **43,500** in Q1 FY'26 * Active Merchant Network: Expanded to 19.5 lakhs merchants across 97% of India’s pin codes * **CASA Merchant Decline:** **5% to 8%** reduction due to mule account closures * **Remittance Volume Impact:** Industry-wide **60% slowdown** post-November 2024 RBI guidelines ## B. Mule Account Impact * **Heightened Risk Environment:** Operating conditions tightened due to rising digital fraud and regulatory scrutiny, prompting a **risk-calibrated approach** across onboarding and monitoring systems. * **Merchant Growth Moderation:** BC store additions slowed slightly amid cautious expansion, though network scale remained robust with strong geographic penetration. * **CASA Volatility:** Active merchant base declined modestly due to targeted closures in high-risk geographies, reflecting **spillover impact from mule account crackdowns**. * **Channel Performance Divergence:** mATM yields weakened significantly, though management did not directly link this to mule accounts or provide remedial outlook. ## C. Compliance Costs * **Regulatory Headwinds in Remittances:** Full compliance with RBI’s November 2024 DMT guidelines led to **disproportionate volume loss** versus less-regulated peers leveraging PPI and nonbank payout models. * **MDR/P2M Uncertainty:** Potential margin upside from incentive revisions remains **excluded from current financial planning**, as near-term policy relief appears unlikely. ## D. Regulatory Disparity * **Competitive Imbalance:** Nonbank players benefit from lighter regulatory oversight in domestic remittances, prompting industry-level advocacy for policy recalibration. * **PSU Banking Competition:** Public sector banks’ rural BC expansion and zero-balance BSBD accounts pose growing competitive pressure, though recent policy changes offer limited incremental threat. --- # 7. Guidance & Outlook ## A. Key Figures * **Revenue Growth Outlook:** **Single-digit** full-year growth expected, with no formal guidance issued * **SFB Float Impact:** **₹200–250 Cr** in partner bank float could return to balance sheet upon SFB license approval ## B. Revenue Expectations * **No Formal Guidance:** Management explicitly refrains from issuing top-line guidance, citing industry-wide headwinds and uncertainty; **20% growth target dismissed as invalid** for near term. * **Cautious H2 Optimism:** Confidence in long-term strategy remains, with expectations of a more favorable growth environment in second half of FY'26. * **Structural DMT Shift:** Decline in bank-led domestic money transfer expected to persist indefinitely, with revival dependent on uncertain regulatory intervention. * **Digital Momentum Continues:** Transaction volumes growing digitally, though revenue growth constrained by pricing and competitive dynamics. ## C. Margin Targets * **Bottom-Line Focus Intact:** Despite near-term pressure, strategic emphasis on **maintaining elevated margins** and disciplined execution remains central for FY'25–'26. * **CASA Growth Supports Resilience:** Continued momentum in low-cost deposit base strengthens margin durability and funding stability. ## D. SFB License Timeline * **SFB Application Active:** Formal application under regulatory review, with outcome expected in **3–6 months**; regular engagement ongoing. * **Preparations Underway:** Internal planning for SFB launch progressing—target geographies, secured lending model, and core team being developed from existing resources. * **One-Year Launch Commitment:** Intent to commence lending operations within one year of in-principle approval, leveraging Payments Bank infrastructure for cost efficiency. * **Reverse Merger Linked to SFB:** Strategic decisions on corporate structure now intertwined with SFB license progression, adding complexity and dependency on regulatory outcomes.