All you need to know about FINCARE SMALL FINANCE BANK LIMITED
Fincare Small Finance Bank is a "digital-first" SFB with a focus on unbanked and under-banked
customer segments, especially in rural and semi-urban areas. Among comparable SFB peers in
India, the company had the second highest deposit growth over Fiscal 2020 to Fiscal 2022, at a
CAGR of 46.7% (Source: CRISIL Report). Further, from Fiscal 2019 to Fiscal 2022, it had the
second highest average ROA and ROE (adjusted for COVID-19 provisions) among SFBs and was
one of India's most profitable SFBs, based on ROA and ROE (Source: CRISIL Report).Fincare
Small Finance Bank follows a business model focused on financial inclusion and aims to provide
individuals and businesses with affordable financial products and services that meet their needs.
The company’s business objective is to enhance access to savings, credit and other financial
products for unbanked and under-banked individuals, MSMEs and unorganized entities, especially
in rural areas, by leveraging technology and last-mile distribution. The company’s "digital first"
approach supports its extensive physical network and focuses on technology-led operations across
all aspects of its banking operations.
|Promoter and Promoter Group
||Net Issue (%)
||Part-time Chairman and Non-Executive Directo
||MD & CEO
||IIFL Securities, Axis Capital
Limited, ICICI Securities Limited,
SBI Capital Markets Limited,
Ambit Private Limited
||KFin Technologies Private Limited
This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested
to refer the Red Herring Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment
decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of
future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so. This document is not
intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for
or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment
The Offer comprises of a Fresh Issue and an Offer for Sale. The Fresh Issue aggregates up to
₹6,250 million while the offer for sale is of Up to 17,000,000 Equity Shares. The Net Proceeds are
proposed to be utilized towards augmentation of the Bank’s Tier-I capital base to meet its future
The interest earned by the company has increased from ₹10,702.56 million in Fiscal 2020 to
₹14,458.72 million in Fiscal 2022. The company’s EBITDA decreased from ₹2,196.29 million in
Fiscal 2020 to ₹258.64 million in Fiscal 2022. Its PAT also decreased from ₹1,434.49 million in
Fiscal 2020 to ₹88.71 million in Fiscal 2022.
|₹ in Millions
|Net profit for the year
Customer-centric approach driven by digital banking and automation
Fincare Small Finance Bank follows a customer-centric business model, focused on financial
inclusion. It aims to provide individuals and businesses with affordable financial products and
services that meet their needs. The company is a "digital-first" bank and has been an early adopter
of scalable digital solutions in order to improve customer experience and/or operational efficiencies.
The company uses a combination of proprietary and third-party digital solutions, with the aim of
developing in-house digital solutions that are core to its business and buying those that are
commoditized or non-core to its business. It has implemented automation across a number of areas
including: (i) business intelligence and analytics, (ii) compliance, (iii) credit quality monitoring, (iv)
document management, (v) internal and external process and service requests, (vi) human
resource management, including payroll, leave, performance management and training, (vii) sales
and marketing activities, (viii) tablet based customer onboarding, account opening and account
servicing, and (ix) payments.
Strong commitment to financial inclusion with extensive rural franchise
Financial inclusion is at the core of Fincare Small Finance Bank’s business and its objective is to
enhance access to products such as savings accounts, microloans, loans against gold, insurance
and investment products for unbanked and under-banked individuals, MSMEs and unorganized
entities through high-tech, low-cost operations. As a majority of its customers are individuals from
low-income groups and lack financial sophistication, the company has designed its products in a
manner such that they are simple to understand, which contributes to their popularity with
customers. Further, it has a deep rural franchise and experience of over 15 years in microfinance.
As of March 31, 2022, the company covered 48,542 villages, with 2,391,850 base-of-pyramid
households and 2,352,093 rural savings accounts. Through this extensive rural network, as of
March 31, 2022, 93.44% of its customers were in rural areas. In rural areas, its key competitive
differentiator is that it provides loan products covering the full lifecycle of rural customers, delivered
using digital tools. In this regard, the company has continuously expanded its product suite to meet
additional financial needs of its customers, through products such as rural loans against property,
loans against gold, two-wheeler loans, and savings products. These products are tailor-made to
address the needs of its customer base.
Multi-channel, low-cost distribution network with diversified geographic presence
Fincare Small Finance Bank reaches its customers through a diversified, extensive multi-channel
network combining traditional brick-and-mortar banking outlets and digital banking. This allows it to
offer "last mile, doorstep connectivity" to its customers while maintaining low operating costs. As of
March 31, 2022, it had a pan-India network of 919 banking outlets (including 246 business
correspondent outlets) and 125 ATMs of which 90 were cash recyclers, spread across 14 states
and three union territories, covering 255 districts, which together covered over 48,542 villages and
reached 3.26 million customers. As of Fiscal 2022, the company was one of the two SFBs in India
with the highest number of banking outlets (Source: CRISIL Report). Its banking outlets are either
operated by the company or by business correspondents appointed by it, which provide it with a
low-cost means of extending the company’s distribution reach. Its extensive distribution network
provides it with meaningful geographic diversification in its deposit and loan portfolio.
Fast-growing stable deposit base with a growing CASA franchise
In Fiscal 2018, Fincare Small Finance Bank commenced small finance bank operations, which
provided it with access to a low-cost deposit base and also allowed it to expand the scope of its
lending operations. The company’s deposit products include term deposits, recurring deposits and
CASA. As of March 31, 2022, it had 4.03 million deposit accounts (including 0.24 million 101
accounts), representing a CAGR of 442.30% since March 31, 2020, covering both existing
microloan customers and new-to-bank customers, especially in urban areas. As of March 31, 2022,
it had 2.85 million deposit customers, representing a CAGR of 14.01% since March 31, 2018.In
Fiscal 2022, the company had the second-highest deposit growth among its SFB peers and the
third highest ratio of retail deposits to total deposits (Source: CRISIL Report). Its total retail deposits
(including retail term deposits and CASA) as of March 31, 2020, 2021 and 2022 were ₹ 35,789.27
million, ₹ 46,423.80 million and ₹ 53,011.00 million, respectively. Through its efforts, its credit-to deposit ratio improved from 103.47% to 109.00% and its CASA ratio improved from 11.93% to
36.30%, in the period between March 31, 2020 and March 31, 2022.
Robust risk management policies, leading to healthy asset quality
Fincare Small Finance Bank follows robust risk management policies, which aim to maintain healthy
asset quality and low credit costs for the company. It recognizes risk management as an integral
part of its business and management practices. The company has formulated its risk management
policy taking into account, among others, the practices and principles governing risk management
prescribed by the RBI. The company has certain key risk mitigation policies in place for various
types of risk:
- Operational risk: The company caps its portfolio exposure at state and district levels; has a
strong valuation framework for LAG; have audit checks and tight controls and conducts field
monitoring of its banking outlets.
- Credit risk: The company conducts customer due diligence; has a stringent customer
onboarding process encompassing layers of checks done by center managers and first level
supervisors; and it assigns rating scores to customers.
- Internal audits: The company has a comprehensive internal audit mechanism covering credit,
business, branches, process, information security and concurrent audit.
- IT risks: It has a robust IT system for monitoring risks.
Scale up lending portfolio with a focus on secured lending
While Fincare Small Finance Bank will continue to pursue opportunities to grow its microloan
portfolio, its focus is now also on scaling up its other lending products. Secured products would
allow the company to build a more diversified lending portfolio. Its loans against property, loans
against gold, two-wheeler loans, affordable housing loans and institutional finance loans are all
secured loans, as compared to microloans, which are traditionally unsecured. Fincare Small
Finance Bank intends to scale up its mix of these products by introducing them at banking outlets
that have not historically offered them, through improved productivity at its existing banking outlets
as well as through the addition of new banking outlets. The company also intends to focus on crossselling its capabilities to existing and new customers going forward, with the objective of expanding
its business. A significant portion of its asset customers opt to open savings accounts with the
company for new disbursements, which provides it with opportunities to cross-sell deposit products
to them. Further, the company intends to cross-sell additional loans such as two-wheeler loans,
loans against gold and loans against property to its existing borrowers who have demonstrated
good repayment histories and require higher ticket loans. Further, the company may also offer loans
in other categories such as supply chain financing and commercial vehicle loans to borrowers falling
within this category. It also intends to broaden its sale of fee-based products.
Continue to grow deposits base with a focus on CASA and retail term deposits
Fincare Small Finance Bank is focused on diversifying its liability profile, particularly through
building a stronger CASA and retail term deposit franchise. The company is focused on CASA and
retail term deposits as they are, typically, lower cost funding sources than bulk deposits and other,
non-deposit-based, sources of funding, such as refinancing, interbank borrowing, securitizations
and the issuance of debt securities. The company intends to take a multi-pronged approach to
source more CASA and retail term deposits, in part through an emphasis on mobile banking to
encourage customer loyalty and crossover into these products. To this end, it aims to introduce
short-term loyalty programs, such as providing cash back offers to customers who use their debit
cards more often; encouraging customers to maintain higher balances and also use their accounts
for purposes such as recurring bill payments
Increased use of technology and data analytics
While Fincare Small Finance Bank has a robust digital platform today, the company intends to
continue investing in digital offerings that are scalable, improve customer experience and improve
its profitability. Its digital strategy has many facets, including further scaling up cashless banking,
deepening automation and analytics capabilities and incentivizing the use of digital channels. The
company is pursuing a number of initiatives to deepen its automation and analytics capabilities. The
company intends to use data analytics to help identify potential new product segments that may be
popular amongst its target customer segments, and to promote cross-selling opportunities. It also
intends to use data analytics to provide early warning signals for customers at risk of nonrenewal in
order to improve customer retention, and to use predictive analytics based on GST payments and
client income to further enable loan sanctioning to first time SME borrowers. The company also
intends to introduce new algorithms for automated underwriting decisions and alternate-data-based
underwriting. Further, Fincare Small Finance Bank is pursuing automation of areas that can have
the greatest impact on its customers or its costs, such as low value customer interactions and backend processes.
Improve banking outlet efficiency, productivity and reach
Fincare Small Finance Bank intends to enhance the utilization of its existing banking outlets, in
order to add loans and deposits without having to make significant further investments in these
outlets. To do this, the company intends to optimize the size, number of centers and geographical
coverage of its micro banking outlets, establish well-defined geographical limits of operations,
implement productivity and other automation tools, roll out loan products to banking outlets that do
not currently offer them, and train and empower staff engaged in customer-facing roles to improve
sales and service understanding. With a view to enhancing productivity of its banking outlets, the
company aims to increase the contribution of liabilities from urban and semi-urban centers to target
the urban poor, providing them remittance and payment services in addition to deposit accounts. On
the assets side, it intends to source additional customers for its microloans, two-wheeler loans and
loans against property, largely in geographies where it currently does not operate, through its
business correspondent partners. In addition to increasing banking outlet utilization, it intends to
further expand its network of banking outlets, focusing particularly on its existing geographies and
those adjacent to them, whether rural or semi-urban, though also selectively expanding in key
markets to source deposits.
Improve banking outlet efficiency, productivity and reach
Fincare Small Finance Bank seeks to leverage and enhance its brand to build its presence in the
banking sector and enhance customer trust and recognition. The company seeks to build its brand
by maintaining official social media pages on popular sites; regularly posting on those platforms
about updates and new initiatives; leveraging its brand ambassador Chess Grandmaster
Viswanathan Anand for online and offline marketing campaigns; conducting customer events;
conducting marketing through TV, radio and print ads; and marketing through brand associations
and event sponsorships.
Pramod Kabra(Part-time Chairman and Non-Executive Director):
He holds a bachelor’s degree in commerce from Jodhpur University. He is also a chartered accountant with
the Institute of Chartered Accountants of India. He is currently associated with True North Managers LLP.
Rajeev Yadav(MD & CEO):
He holds a bachelor’s degree in technology from the Indian Institute ofTechnology, Kanpur, and a
post graduate diploma in management from the Indian Institute of Management, Ahmedabad. He
was previously the chief executive officer of G.E. Money Financial Services Private Limited.
He has a Bachelor’s degree in science (mathematics) from Maharaja Sayajirao University, Baroda
and Master’s in business administration from University of Pune. He is one of the founders of the
company. He was previously a partner at Disha Support Services.
A substantial portion of its banking outlets are located in and a significant portion of its
advances originate from four states, making it vulnerable to risks associated with having
geographically concentrated operations.
The company faces the threat of fraud and cyber-attacks targeted at disrupting its services,
such as hacking, phishing and trojans, and/or theft of sensitive internal data or customer
information. This may cause damage to its reputation and adversely impact its business.
The company may face risks associated with its large number of banking outlets and
extensive network and its reliance on third-party service providers including business
correspondents operating banking outlets, which may materially and adversely affect its
The company relies extensively on its information technology systems and any unforeseen
internal or external disruptions may have a detrimental impact on its operations.
The business is highly competitive, which creates significant pricing pressures for the
company to retain existing customers and solicit new business.
Customer-centric approach driven by digital banking and automation.
Strong commitment to financial inclusion with extensive rural franchise and expanding urban presence.
Multi-channel, low-cost distribution network with diversified geographic presence.
Fast-growing stable deposit base with a growing CASA franchise.
Robust risk management policies, leading to healthy asset quality.
It relies on deposits as a low-cost means of funding a substantial portion
of its loan portfolio and there is no guarantee that it will be able to source
enough deposits or alternative funding to support its business.
The company is required to extend a minimum level of advances to
certain sectors, has regulatory limitations on the percentage of its onbook advances above a particular loan size, and must maintain a
prescribed cash reserve ratio, statutory liquidity ratio and minimum
capital to risk-weighted assets ratio, each of which may have an adverse
effect on its business operations.
The company may face asset-liability mismatches, which could affect its
liquidity and consequently may adversely affect its business and financial
condition including liquidity.
Although the majority of Indian households are located in the rural
regions, the banking infrastructure in these regions is relatively inferior
and, thus, there is a gap in the supply and demand of financial services
in the backward regions of the country, which is a pocket of opportunity
for the company.
CASA and other retail deposits are a cheap source of funds for SFBs,
which help them expand their product portfolio. They can provide lower
rates in the market to compete with NBFCs. With SFBs expanding in the
underserved regions further, their deposit base is expected to further
widen. The CASA deposits for SFBs have grown at 76% CAGR form
Fiscal 2018 to Fiscal 2022.This will give them an advantage over NBFCs
and help expand their asset book.
The company is significantly dependent on its microloan business, which
has its own unique risks and, as a result, it may experience increased
levels of non-performing loans and related provisions and write-offs that
may materially adversely affect its business.
The business is vulnerable to interest rate and investment-related risks.
Volatility in interest rates, value of investments and other market
conditions could adversely affect its net interest margin, the value of its
fixed income portfolio, its income from treasury operations, the quality of
its loan portfolio and its financial performance.
An increase in its portfolio of non-performing assets may materially and
adversely affect the business, financial condition and results of
The Company is involved in the initial public offering of Fincare Small Finance Bank Limited, in the capacity of a Book Running Lead
Manager and a Syndicate Member to the Issue. However, IIFL Securities Limited shall not be in any way responsible for the
contents hereof, any omission there from or shall not be liable for any loss whatsoever arising from use of this document or
otherwise arising in connection therewith, including with respect to forward looking statements, if any. IIFL makes no
representation/s or warranty/ies, express or implied, as to the contents hereof, accuracy, completeness or reliability of any
information compiled herein, and hereby disclaims any liability with regard to the same. Neither IIFL Securities Limited nor any of its
affiliates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect,
special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
You shall verify the veracity of the information on your own before using the information provided in the document. Investors are
requested to review the prospectus carefully and obtain expert professional advice