FINO Payments Bank (NSE:FINOPB) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Fino Payments Bank Limited q one FY twenty seven earnings conference call hosted by Go India Advisors LLP. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing 0 on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to mister from Go India Advisors, LLP. Thank you, and over to you, sir. Thank you, Palla. Good afternoon, everyone, and welcome to the q one FY twenty seven earnings call of Fino Payments Bank.

0:50 We have on call mister Merchant, interim chief executive officer Mr. Anup Agarwal, Interim Chief Financial Officer and Mr. Tejas Maniar, Chief Digital and Liabilities Officer. We must remind you that the discussion on today's call may include certain forward looking statements and must, therefore, be viewed in conjunction with the risks that the company faces. May I now request the management to take us through the financials and the business outlook, subsequent to which we will open the floor for Q and A. Thank you, and over to you, sir. Thank you, Niqal. Good afternoon, everyone. Hi, this is Keaton here, Interim Chief Executive Officer for Fino Payments Bank.

1:37 Good afternoon, everyone, and thank you for joining Fino Payments Bank earnings call for first quarter FY 'twenty seven. It is just about fair for me to say that quarter one FY 'twenty seven has been one of the toughest quarter in the history of bank. Besides the event 'twenty six, one of our most profitable B2B business has been paused for recalibration, and it will take at least next couple of quarters for the relaunch. However, amidst the challenges, there are silver linings in quarter one FY 'twenty seven. Our focus is on retail segment, customer acquisition and referral lending, and we are taking right strides and at a steady pace in each of these. This is a conscious strategy in light of our small finance bank transition.

2:26 Let me now talk about our lending ecosystem. As you know, we consciously built our referral lending business as an important stepping stone towards our future lending franchise. Referral loan disbursement has reached INR $12.85 crores in FY 'twenty six, and the momentum accelerated further in quarter one FY 'twenty seven. During the quarter, referral loan disbursement increased to 28 crores, which is reaching 50% of the total disbursal in FY 'twenty six. In line with our long term vision of building predominantly secured lending portfolio, our referral lending business is also fully focused on gold loan, affordable housing and loan against property.

3:12 This allows us to develop customer relation with secured lending within the secured lending space, create customer credit insights while building agile underwriting and servicing capabilities over the next couple of quarters and more. Further, I am pleased to share that we are advancing well and remain on track to meet RBI's stipulated conditions for transition to small finance bank. We continue to expect that all required milestones will be completed within the prescribed eighteen month time line, and we remain on course to submit our readiness to the Reserve Bank of India by end of quarter four FY 'twenty seven. We have appointed PricewaterhouseCoopers to support the implementation and overall operational readiness of SFP.

3:58 We have also onboarded technology partners for our loan origination system, loan management system and other lending application that will form the backbone of our lending platform. Alongside this, we continue to strengthening our governance framework by putting in place the required policies, operating procedures and compliance process to support small finance bank. On the leadership front, recruitment is progressing and progressing well. Individuals for key leadership positions have been identified, and we expect these senior executives to join us by end of the calendar year. In parallel, technology stack for the end to end customer loan journey is under development and is expected to be ready by Feb 'twenty seven.

4:43 Overall, the implementation of road map remains well aligned within our planned time lines. As we prepare for next phase of our journey, technology and AI led automation will remain central to the improving customer experience, enhancing risk management and driving operational efficiency. Our USP, the existing fee based income, which contributes over 75% of the revenues stood at INR $2.34 crore in Q1 'twenty seven, and it remains our distinct advantage over other SSPs once we transit. Our cost of funds currently at 1.4% and our plans that will finance that will enable us to have a higher NIMs for secured assets. Our capital position continues to remain comfortably above the regulatory requirement for the proposed model finance bank.

5:35 At the same time, our business plan through FY 'thirty, which we have enunciated earlier, remain unchanged. We will continue to build a predominantly fee based business complemented by secured lending portfolio, allowing us to maintain prudent balance between growth, profitability and capital efficiency. Coming to our liability franchise, this continues to be the cornerstone of our business model and remains our biggest strategic differentiator. The average CASA balance stood at INR $12.80, while the average deposit increased 12% Y o Y to INR 2,772 crores. And renewal income grew by 7% year on year INR 67.5 crore during the quarter.

6:23 Customer acquisition remained healthy and we added INR 8.4 lakhs new account in this quarter, taking our total account base to INR 1.83 crore. Our merchant network, which is close to around INR 20 lakh continues to be one of the biggest competitive strengths. It gives us unmatched physical reach across the country, while also supporting the growth of our digital ecosystem. This network not only helps us to acquire customers at a relatively low cost to date, but also provides a ready distribution platform for future banking and lending products. Customer engagement across our digital ecosystem also continued to strengthen during the quarter. Digitally active customer increased by 22% year on year to 64.6, while active Fino Pay, which is our app, customers grew even faster at 38% to 8.4 lakhs.

7:20 This clearly reflects the growing adoption of our digital channel and validates our strategy of combining assisted banking with digital convenience. On the technology front, we successfully implemented Pinnacle Go banking platform in the previous quarter. During quarter one, our primary focus shifted from implementation to platform stabilization while simultaneously progressing Phase II capabilities that will support lending, new product development and operational capability. Combined with our modular technology architecture and AI enabled lending platforms, this provides a scalable technology backbone for our proposed small finance bank. It will allow us to launch new products faster, improve customer experience and strengthen operational controls and support business growth much more efficiently.

8:13 We are preparing to relaunch our high growth B2B UPI P2M segment. However, this would depend on the ecosystem and other developments, which could result in the relaunch tenability in quarter four FY 'twenty seven. Our objective remains to build a differentiated small finance bank anchored on three enduring competitive strengths. The first is strong liability franchise that gives us structural advantage in terms of cost so far. Second is predominantly secured and asset light lending model powered by huge network covering more than 95% of India's PIN code, enabling efficient customer acquisition, disciplined underwriting and scalable growth. And third is technology led operation platform built around FinoCal.

9:02 AI enabled lending capabilities and robust digital infrastructure that will support innovation, operational efficiency and superior customer experience. Overall, this quarter has been a testimony of resilience, and I'm glad that in a relatively difficult phase, we've been able to excel on our strategic priorities of retail growth and customer acquisition. Our B2B business has been impacted due to February 26 event, and we are working towards rebuilding the same in next couple of quarters. We remain confident that the combination of our three competitive strengths, which are key pillars, will clearly differentiate Fino and position us to create sustainable long term value as we move towards a small finance bank.

9:50 With that, let me now hand it over to Anoop, who will take us through financial performance and analysis for the quarter in greater detail. Over to you, Anoop. Thank you, Ketan. Good afternoon, everyone. As Ketan mentioned, our focus has been building a sustainable institution by leveraging our distribution network and technology for our next phase. Currently, the focus is on improving the quality of our revenue mix, expanding our net revenue margins and continuing to invest in capabilities needed for our proposed differentiated small finance bank. One of the key highlights for the quarter was the continued improvement in our net revenue margin. Despite lower revenues, our net revenue margin expanded to its highest quarterly value of 42.8%, improving two seventy five basis points sequentially and nine twenty five basis points year on year. This clearly reflects the increasing contribution from our ownership led business and reinforces our strategy of improving the quality of earnings.

10:55 With retail focus enhancing, our margins are expected to be higher as compared to last year. And with increase in business momentum, this can lead to better earnings. As expected, EBITDA declined to INR 43.1 crore from INR 56 crore in Q4 FY 'twenty six. This was largely due to the pausing of our new PIP2 and B2B business and digital acceleration monitoring our cash transaction business and our continued investment in technology and risk management. We view these as investments that will strengthen our operating platform and support sustainable growth over the long term. Another favorable trend during the quarter was our continued improvement in our revenue mix on the back of 1.83 customer base, of which around 8.4 were added during the quarter.

11:51 CASA increased its contribution to the revenue from 45% in Q4 FY 'twenty six to 54% in the current quarter, reflecting the growing strength of our liability franchise. Our liability base continues to be one of the strongest pillars of our business and the biggest growth driver. Average total deposits in current quarter grew by 12% year on year to 2,772 crore with a structural low cost of deposits, as mentioned back in. Renewal income for the quarter remained healthy at INR 67.5 crore, a growth of 7% year on year. We continue to view renewal income as one of our best indicators of customer ownership and engagement as it reflects customers choosing to continue their relationship with the bank.

12:44 We also witnessed an encouraging trend of newly acquired customers becoming UPI active within the same quarter for which stood at 68% during the quarter the customers acquired became UPI active in the same quarter. Higher UPI adoption is expected to deepen customer engagement and improve stickiness over time. This growing liability franchise is improving the quality of our earnings today while also creating a strong funding base for our proposed small finance bank. Our cost of funds further strengthens our liability franchise as we expect this to translate in approximately 300 basis points advantage as compared to other small finance banks in future.

13:31 As we continue to build a liability first bank, we believe the funding advantage will remain one of our biggest competitive strengths, apart from the distribution network. Our loan referral business, which serves as a pilot for our future lending franchise, continued to see a good momentum during the quarter. Referral loan dispersal surged 214% on year on year to INR $6.28 crore, nearly 50% of the total disposals in FY 'twenty six, indicating growing demand for credit in our banking ecosystem and our target customer segment. The referral pipeline remains well aligned with the secured lending segments that we intend to focus on, including affordable housing, loan against property, good loans and secured MSME lending.

14:23 This not only validates the strength of our asset light distribution network but also gives us confidence in our ability to create high quality secured lending opportunities at scale. Our capital position also remains comfortable above regulatory requirement for the proposed small finance bank as we have consistently maintained our business plan through FY 'twenty is built around predominantly fee based model complemented by secured lending portfolio. We continue to believe our future franchise will be differentiated by three structural strengths, low cost liability franchise, asset light operating model and a technology led distribution platform. Subject to the necessary regulatory approvals, we remain on track with our implementation road map.

15:13 Coming to the operational performance for the quarter. On a year on year basis, the total throughput declined by 10% largely due to the strategic recalibration of our UPI P2M B2B business segment and traditional cash transaction business hit by the industry's continued migration from cash to UPI. Along with our focus conscious decision to focus on high quality, more active merchants. However, throughput grew 3% sequentially, indicating our customer relationship, depth and faith in Fino's model. In the B2B CMS segment, throughput grew 26% sequentially to 18,000 crore as we further broadened our client base.

15:59 This also resulted in 5% revenue growth in this segment compared to previous quarter as it is facing challenges on the pricing. Our traditional transaction business, which forms part of which forms of remittance, microAT and APS saw 13% sequential revenue decline as it continued to face industry headwinds due to growing digital adoption in Bharat. However, due to this rise in digital adoption, we are witnessing encouraging trends in digital engagement as UPI throughput grew 14% year on year to INR 60,000 crore and digitally active customers for the month of June 26 stood at 65, a significant growth of 22% year on year compared to June 25.

16:50 Coming to UPI P2M B2P, as communicated earlier, the segment is currently undergoing a strategic recalibration, and it will take at least a couple of quarters for relaunch. Overall, on operating cost front, we remain flat year on year despite inflation and other related parameters. We continue to monitor costs and invest in technology, risk management, AI enabled solutions. Looking ahead, our priorities remain unchanged. We will continue to strengthen our liability franchise, improve the quality of our revenue mix, maintain disciplined cost management, invest selectively in the capabilities required for the small finance bank transition.

17:36 FY 'twenty seven is a year of consolidation, building on the foundation, investing in people and technology and pivoting to our next phase of growth. Overall, we believe the banking platform and the liability franchise that we have built over the past several years, together with our structural funding advantage, disciplined execution and focus on secured lending positions us well to create sustainable long term value for all our stakeholders. With that, we are happy to take the questions. Thank you very much. We will now begin the question and answer session. May please press star and one on their touch tone telephone.

18:25 If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Ankit from. Please proceed with your question. Yeah. Thank you for taking my question, and congratulations on the steady growth in the referral loans.

19:13 My first question is related to that only. So as you highlighted in your previous calls also, and it is there in the business updates also, our cost of fund is so low and our loan referral is going steadily well. So any color on at what rates are we giving these gold loans and lap and housing loans? Thank you, Ankit, for the question. Yes. So in terms of currently see, currently, what we are doing for the referral loans are we are partnering with a lot of NBFCs in the market in terms of when we are offering to our customers. When we will be going in the market when we become SFP in terms of our products. We are also looking at products of like housing loan, lab, gold loan and other products. We'll be better than these NBFCs in the market in terms of the rate of interest, which they are offering currently to our target segment. That is one.

20:26 And second, when we are and what we are looking at is 90% secured book of lending for our S and P portfolio with an average portfolio yield of around 14%. So which will be having a blending mix of gold loan also, housing loan, lab, MSME, secured lending. So considering all that, we are looking at a blended portfolio yield of 14%, which will be better off than lot of competitive players in the market, which are largely NBFCs in our target segment. Got it. Got it. So my second question is related to the recent MDR related provision, which is getting discussed at the level of the government. So if that comes through, and since we have a large merchant network and a good usage of UPI on our app, So do we stand to benefit if that MDR comes in?

21:24 Or can you give me more color on that? Ankit, I'll get Tejas to answer on that. He's our Chief Digital and Diabetes Officer and closely working on that based on what is currently available. Thank you, Ketan. So Ankit, it's a fair question. And this is again being introduced as we speak. What we are currently how do I say this? We are currently calculating or we're currently modeling as to in which are the areas where it will be helping us because it's very clear that the MDR will not be applicable on P2P or direct to customers. It will be on a B2B business. So we will be calculating we'll be recalibrating this when we anyways relaunch our UPI P2M business along with some of the partners.

22:15 So once we recalibrate that along with some of the larger strategies for the digital payments, we will be in a better position to answer because we are actually waiting for some clarification on the amount where this will be... I'm asking for a definite guidance as to what kind of numbers you are looking at. I'm just trying Hello? To Hello? Can you hear me? Yes. Yes. Please go ahead. So what I am just trying to understand from a qualitative perspective, is this MDR? As per the current reading of the new VITIC, the top 6% would be eligible in terms of the more than 2,000 where the transaction is more than 2,000.

23:07 If that comes through, will we stand to benefit in some ways? And would it be beneficial for us? That is my larger question, not asking for a definite guidance. Okay. So in that case, my answer is a definite yes. Okay. Okay. So the kind of business which we lost in the last one year or two years is stands to revive slowly if it gets implemented, right? Now that's a definite position you're putting me. That's what I'm saying. But at a quality level, yes, Fino Payments Bank will will stand to benefit. The controls of this as we move along, we'll be in a better position to highlight as we move along. Great, great. My third question is, so when I look at the promoter share willing, so Fino Payments has complete control over the shareholding of Fino Payments Bank.

24:00 And I happen to look at the annual report of Fino Payments Bank, and I find that something like BPCL is one of the largest shareholders there. So I'm just curious as to if BPCL tomorrow because BPCL, it could definitely be a noncore investment. If they want to liquidate their investment, how would we facilitate them? Because Fino Payments is invested in Fino. So are we trying to do something about it? Or can you throw some light on that? Let me understand your question. Your question pertains to the holding company investment where BPCL holds the higher significant percentage.

24:50 Now technically, Fino Paytech and Fino Payments Bank work at a complete arm's distance. They are our holding company. However, from Fino Payments Bank is the primary driver for Fino Paytech and is a key business. So there is no any awareness of why anyone should attempt to offload their investments, etcetera, etcetera. And anyway, those conversations essentially happen. My understanding is that maybe seven, eight years back, BPCL invested in Fino given the strategic partnership which can happen. Now core, noncore, that is something which BPCL can best reflect upon.

25:38 But I think from our functioning, our growth, our small finance bank perspective, nothing of this sort is being envisaged. And just so that we can reiterate it all, our capital position is also very adequately said. Anoop had said that we have reasonably capital position even to go into SFP and stuff. So there is no bearing on any activities of holding company investment on the FINOPB payments back. Sure, sure. That was very, very helpful. Thank you so much for the elaborate answer. And all the best for the future. If I have any more questions, I'll come back in the queue. Thank you very much. Thank you, Ladies and gentlemen to ask a question please press star and one now.

26:30 Participants who wish to ask questions may please press star and 1 at this time. The next question is on the line of Singh from AG Capital Investments. Please proceed with your question. Hi. Am I audible? Yes, sir. Yes. Yes. Go ahead, please. Yeah. So so my first question is how much of the SFT technology invest is now behind the bank? And should investors expect technology cost to moderate after FY twenty seven as the platform moves from implementation into steady state? Yes. So, Yash, to answer your question, terms of the investment, yes, the large part of investment are already done by moving the core banking from FIS Global to Fino.

27:24 We have to add few modules relating to our lending business, which is like LOS, LMS, other related modules in terms of And the as you rightly said, after FY 'twenty seven, we should be completed by entire technology transition in terms of the SFP as well, at least for the first three years of our SFP. Yeah. Oh, okay. Yeah. Got it. And I had one more question. I just wanted to know the future guidance on ROEs post development of our loan book and what is expected boost in our top line growth due to us transitioning to SFB?

28:10 Speaking on a longer term basis, I guess, FY 'thirty. So I think, Yash, it's too early to comment on that right now. I think currently, we are in a consolidation phase. Maybe as we move along, we'll get more clarity around this thing. Yes. Hi, Ketan. Whilst we've not put a guidance around this, but let me just tell you some facts, which Anup earlier reiterated off or reiterated off. Currently, our liability book is broadly in the range of INR 2,800 crores to INR 3,000 crores. Cost of funds is 1.4%. Currently, we deploy all our yields are anywhere in the range of around six, 6.5, which is based on our current listing. So when we start the SSP on day zero itself, we have and one of the earlier questions, Anup mentioned about the yield expected, which is anywhere in the range of 14%.

29:14 So there is a big upside which can come through. Typically, SFP or any other bank comes through, the biggest challenge which they essentially have is the liability generation, specifically if it's low cost. So our model and I also made it in my sort of notes that our fee based income will continue to grow. We have a distinct advantage and an opening balance of our deposit coming through. So we and technology cost, etcetera, which Anup has anyway answered it off as well. So from a SOB perspective, with the kinds of asset products which we are looking at, we expect our NIMs and that may not answer your ROE question fully, but at least NIMs, which is highest in the industry, which we are looking at anywhere in the range of 8% to 9%.

30:06 Yes. So can I assume the earlier guidance of 20% plus on ROEs will hold still until further update there? Yes, absolutely. Okay. Thank you so much, sir. Thank you for answering my questions. Thank you, sir. Ladies and gentlemen, to ask a question, please press star and 1 now. Participants who wish to ask questions may please press star and 1 at this time. The next question is from the line of from Fortuna Asset Managers LLP. Please proceed with your question. Thank you, sir, for giving me the opportunity.

30:51 Two questions. First, on a step by step basis from here to getting the small finance bank operational, would you kindly lay down what are the exact steps? How have you planned those time lines? And second, the referral business that you're doing today and assuming you keep doing for the next few quarters, is there any non compete when you actually become a small finance yourself that you can or cannot go after those customers on your balance sheet? Yes. Thanks, Gurinder, for asking the question. So in terms of the SAP operational plan, I think we have included one slide in our investor presentation outlining the entire broad contours of our plan. The Slide number is 10 in our presentation.

31:50 Just to give you a heads up in terms of the plan, currently, in terms of people, the senior management, which we are required as per their proposed org structure, they are in the process of being hired. And all of them are likely to join between September and October, the top management, that is one. In terms of the middle management and the lateral hiring, it will be based on our rollout plan of the SAP because in terms of the business plan, which we have in terms of our asset book growth, it is in line with that, which will happen over a period of time. That is one. Second, in terms of our technology, for LOS, LMS and other key systems, we are already engaged with our technology partners, and we are working with them to and based on that, we are also preparing for our asset product journeys and everything.

32:50 Then there are GRC, governance risk and compliance related requirements. Everything is work in progress. We aim to roll out everything by end of Q4 and provide the operational readiness to RBI to give us a further approval to move ahead as an SFP. So as of now, we are working on that plan. Our time line, RBA has given us eighteen months on 12/05/2025, which ends on 06/05/2025. Before that, we need to submit an application to RBA showing that we are operationally ready to launch the SFP. That is on the plan, and we are on plan for that. Now in terms of loan referral business, whether we have a noncompete clause in terms of when we move to our SFP lending, the answer to that is no because currently, we are the referral lending is to our own customers.

33:53 So these customers belong to the bank and not to the NBFCs whose loan referring we are doing. So there is no noncompete clause or any implication for that matter. Hope I've answered those two questions, Kurinder? Yes, please. Thank you, sir. Thank you. Thank you, sir. Participants who wish to ask questions, may please press star and 1 at this time. The next question is on the line of Gupta from Latent PMS. Please proceed with your question. Divyansh, your line has been unmuted. Please proceed with your question.

34:46 As there is no response, we'll move to the next question. The next question is from the line of from Credential Asset Management Private Limited. Please proceed with your question. Yeah. Good evening, and thanks for the opportunity. Can you hear me? Yes, sir. Yes, sir. This is regarding regarding the referral. Is it that you are getting a report on the Sorry. Parimal, your line is not clear. So we could gauge. We might Yeah. Parimal, sir, can you please use your handsets?

35:36 So I guess he has dropped. So can we move to the next question? Yes, please. Okay, sir. The next question is from the line of Gupta from PMS. Please proceed with your question. Hi. Am I audible? Yes, sir. Yeah. Hi. So couple of question. You mentioned that the people for the leadership role have been identified, and they are joining in October. So this is the leadership for us, let's say, for the CEO and at least the CEO level designate that we want to hire? Or we are, let's say, talking one level below the CEO? So Ketan here. So the hiring which we were essentially referring to was the hiring which we are doing for small finance bank. This is the credit vertical which we are essentially making off.

36:38 That's where I think Anup in his note have enunciated the time lines coming across in terms of the hiring. Got it. Got it. And with respect to the CEO for the bank, have we zeroed down on the candidates? Have we submitted anything to the RBI? What's the visibility of plan around that? So that good is question. I think this is being worked out by the Board, the relevant stakeholders and in conjunction with the Reserve Bank of India. As we speak, all of us are holding our positions. And as and when the development happens, we will keep the stakeholders updated about that.

37:25 That is being very, very critically handled by the Board and the investors as required. Got it. Understood. So on the people hiring that we are doing, let's say, the credit function. So while the bank doesn't, let's say, get launched as if the whole process goes on, right? And assuming that the B2B business also will take a couple of quarters, how much of or actually independent of the B2B business drives, how much of OpEx burn should we expect to incur while we go towards the SFB, let's say, commercialization, if I have to use that term or launch of these systems?

38:15 Divyanshu, Anup here. Let me take this question. So in terms of the burden on OpEx this year, we are anticipating anything around INR 10 crore on this year's P and L in terms of the S and P OpEx. Got it. Which includes hiring, which includes all the other related OpEx for the bank. Yes. Viren, just to put it in perspective, what Anup was saying is that October onwards, the leadership teams or unit vertical heads are expected. And Anup in his note again earlier mentioned it off as well that the operation hands on guys are expected in the subsequent quarter or thereafter as well. Having said that, I think your assessment seems to be right. There will always be a quarter or two kind of lag between these infrastructure being set up and the SSB operation being started.

39:14 Understood. And just the last question. So while, let's say, we would have given the bank the RBI application of doing a secured base loan, and we continue on that part. But given that there is a... Well, you're doing a good job. I'm not commenting on that. But let's say the new CEO who comes, he might have different product nuances or strategy nuances, right? How should we think about that transition from the moment he comes to what we are developing from a tech side to what gets eventually launched and what we actually what he might want the bank to take direction, right? How should we think about that risk aspect?

40:04 So again, that is a question to reckon. I think I'll answer it in a manner. There is no single individual who has been contemplating a business move. Fino in its own virtue, the way we are going about small finance bank and it was never an individual earlier who built it, it will never be an individual earlier and in the subsequent times who will run with it. We have our distinct strength. Anup again highlighted it of asset light model, financial inclusion, secured loans, BC leveraging network. So from an overall perspective, the business model and plan is how it has been built across.

40:49 And as we speak now or otherwise, we do not see a major change happening in terms of philosophy of the organization. We have our sets of strengths. We will leverage that sets of strengths and it is irrespective of the individuals which are running. Otherwise, we lose our first mover advantage, we lose the way we have institutionalized and modelized our business model. Having said that, there will always be some amount of tweaks which can happen to plan irrespective of new people, old people, etcetera. Those kind of agility and the ability to modify are always inbuilt into the agile systems. But by and large, as we are looking at it, our Fino model and somewhere I or maybe Anoop in our notes also mentioned the top that we are on our FY 'thirty plans, way we had envisaged and the way we had articulated in our earlier calls as well. And this is a thought out strategy, which has been worked out over the past couple of years that when we have been anticipating to become a small finance bank, socialize it with our BI blessed by the Board, etcetera, etcetera. So we do not see a sudden and a sea change happening in terms of any individuals or any sort of tax changes out here.

42:13 Got it. And just the last question, I think, Ankit in the first part asked about the Fino Paytech. Now I understand that there will be some slump sale and then, let's say, change in the whole cost structure, right? Or will Fino Paytech will the current legal structure remain as it is? No. I think this has come in the past as well. Ankit's question was slightly different. He was more towards... Yes. He was asking about VPCL. As things are calibrated or as things are being envisaged and being worked out, our current structures vis a vis the holding company and the listed outflow, all of that remains unchanged for some time.

43:03 Got it. Got it. Understood. Got it. Yes. That's it. Thank you and all the best. Thank Thank you, sir. Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference call, Please limit your question to two per participant. The next question is from the line of Nitin, an individual investor. Please proceed with your question. Hi, Nitin. So I wanted to understand is the sale of the BC business and the reverse merger, are these two the requirements laid down by RBI to get the final approval? Or that's more that can be done even after we get converted to SSB?

43:53 No. So as regards to there are prescribed conditions. And by virtue of the regulation, a small finance bank cannot carry out VC activities for other banks. So that is one of the prescribed stipulation, which is there by virtue of the small finance bank license. So basically, we that means that by the end of Q4, we would have sold our BC business because we are agreeing that we would have finished all the requirements of RBI, correct? Becomes one of the things that we will be finishing by March end. So there are a couple of things out there. RBI definitely has its own conditions, which are, as I said, one of the condition or one of the regulation, which essentially says that I would not want to currently put a definite action plan. Yes, we have to look at the VC business differently in some form or the other. There are various avenues to look at it, including some sort of restructuring, etcetera, etcetera. We are working on that, and we may come up with a very concrete plan on this over next quarter or so.

45:05 And reverse merger is not something that RBI stipulated in their requirements, like that was never put down by RBI? No. I think this is similar to the previous question. Our holding and the structure or the list of structure essentially remains the same as it is currently there. So one last thing. Okay. You're saying that you're going to... Nitin, sir, may be request that you return the question queue for follow-up. Okay. Thanks. Thank you, sir. The next question is from the line of Harsh, an individual investor. Please proceed with your question. Hello. Am I audible? Yes, sir. Yes. So again, my question was a little bit about our strategy, right? So we have a very granular and a very short term liability book.

46:00 And then we plan to lend primarily in the secured division, which is usually a longer tenure loan. So how do you look at the asset liability management? Because given you're using a short term liability, which again is very, very granular. So it's not really supposed to be sticky. Thank you. Let me just give some statistics around it. Our typical book the if I do a behavioral study across out there, around 90% plus, we do not mostly our book is SAAR and a very small component is CAAR, given it is. So contrary to what your understanding is, it is our stable book or our core book, as we call it in the asset liability management, is in the excess of 90% plus.

46:57 So there is no challenge or it actually suits us in terms of having a midterm to long term kind of a scenario. And these are statistics which have come based on the behavioral study over last four, five years. And that is the kind of the demographic profile of our current liabilities. Okay. So just a follow-up. Did the liability book behave in the same manner during like periods of stress, like maybe COVID or recent microfinance crisis? I'll give you one more bigger black swan event, which we went through in March. Actually, with that event, which happened in March, we were not only able to maintain our liability book. And typically in such a scenario, the most important aspect all around was managing liquidity.

47:51 In the month of March, we reached one of our highest possible liability book balance. And thereafter on an average basis, our liability in the month of March perhaps increased by around 9%. I think from a liability franchise, which we are running across or we are building across, besides the cost of funds advantage, we also have ourselves reasonably insulated by and I am using the word reasonably insulated by such kind of events, whether it is internal or external. So the core nature of the book, the stability of the book remains.

48:36 And in the earlier calls, we have provided our building plans, our liability book building plan, which we have anyway provided as well that how much will come from our current expansion of our current PC business, etcetera, and how much will come from branch. So from a asset liability mismatch from the stability of liability and from the cost of funds, all of three are reasonable advantage, which we put for ourselves for. Okay. Understood. And my second question along similar lines would be, so we are sort of catering to the lower end of the pyramid, right, in terms of liability. So how do you look at term deposit accretion in that state of the society?

49:29 See, Anup here. Let me answer that So currently, as per our business plan, we are looking at two main ratios. One is the credit deposit ratio, we are looking at around 70%. So we are not looking at aggressive lending book right now as per the plan for the first three years. That is one. Second, we are looking at, as Ketan mentioned, our core book is stable. So 90% of our current CASA is the core. So we are looking at a CASA ratio of around 65%. So that itself shows that we are less dependent on the term deposit. Term deposit offering will be only from a customer stickiness point of view and not aggressively sourcing liabilities for building our asset book.

50:20 Okay. My question was more about customer penetration in terms of because I am going by the fact that maybe the term deposit accretion in rural and lower incomes would be lesser than greater than higher. So how do you look at that? So on that particular thing, I think in our earlier SSB plant, and we will further bring it out perhaps in the next call as well, we are also enhancing our wise BCs and merchants will become our best kind of a scenario. There are new products, there are new target segments and there are new geographical locations, which are coming across as well. So we intend to open in year one forty new branches as well and that has been a part of our plan as well.

51:11 And that is where it will take cater to the location and the demographics of the term deposit in terms of economic viability. What Anup essentially answered is that our primary source will continue to be low cost SAAT, which rate we have earlier put it across. That will be dovetailed or that will be enhanced with this term deposit and a differential product and location and geography strategy in terms of term deposit. So there is a plan, which if I'm not mistaken, we've put it in the past as well, and we intend to bring it as we go closer towards the next couple of Please limit your question to one per participant.

52:04 The next question is from the line of from Indorean Financial Services Limited. Please proceed with your question. Hello? Yes, ma'am. Please proceed. Talking. So my question has been partially answered. It was regarding your current status of the sale of the BC business. And what is the expected time line for completion? I wanted to know that. As well as are there is there any M and A news that we are expecting? Sorry, what was your second question? I think the first question, I'll anyway stand to answer what I've just said. I didn't get your second question, please. It is regarding the reverse merger, but you answered that the reverse merger is not a condition by RBI. But can you elaborate on the reverse merger? And also, since we are transitioning into an SLP, are you looking at any acquisitions or strategic investment to accelerate your lending and digital capability?

53:09 So now actually, have three questions. First one, I think, B. C. Got answered. First one, we answered, yes, so yes. Regarding the M and A news. Yes, yes. You wanted the reverse merger kind of a scenario. As I said, in our thought process is and the way we are functioning is over the next couple of years, the holdco and the opco structure will essentially remain the same, okay? So that's how we are going towards. As regards to the inorganic opportunities in terms of acquisition, etcetera, with our kind of a liability franchise, we will keep our eyes and ears open. And if anything interesting comes across, will be looking at it as and when it comes and if at all it comes through. So at current stage, our plan which we have put for our FY 'thirty is an organic plan. And in the bargain, if there is something which is coming up to accelerate book building, we will look at it as and when it comes or as and when we want to see it across. Our current focus remains essentially is to organically build the institution and our technology and our franchise based on the kind of advantages which we currently have.

54:31 Okay. Thank you, ma'am. Ladies and gentlemen, in the interest of time, that was the last question for today. Would now like to hand the conference over to management for closing comments. Thank you and over to you, sir. Yes. Thank you. As I earlier said, it's been one of the toughest quarters and the resilience which the team has shown, the focus, the priorities which we have stuck to and the rebuilding of some of our B2B businesses which we are working through. Our priorities remain on the SSB execution as well and bringing back some of the businesses which is on account of ecosystem or otherwise we've lost across.

55:19 But we can assure you that management in its current state is fully geared to get across or rather the worst seems to be behind us and then we are just going towards an accelerated growth or the days of glory again. Thank you. Thank you, everyone, for joining the call. Thank you, sir. On behalf of Go India Advisors LLP, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you. Thank you.