Blackstone may earn five-fold return from Fino Payments Bank’s listing next month

Photo: Bloomberg

US private equity (PE) major Blackstone Group is likely to make more than five times return on its investment in Fino Payments Bank when the latter goes ahead with its public listing planned for next month.

The Navi Mumbai-based scheduled commercial bank is a fully-owned subsidiary of Fino Paytech, which is backed by marquee investors such as Blackstone Group, Mauritius-based Headland Asian Ventures Fund 3 Ltd (HAV 3 Holdings), Intel Capital, World Bank unit and global development finance institution International Finance Corporation (IFC), ICICI Group and Bharat Petroleum Corp. Ltd (BPCL).

The decision on shareholding dilution will be decided by November.

New York-headquartered Blackstone Group had first invested 150 crore (approximately $33 million) in Fino Ltd, now Fino Payments Bank, for a significant minority stake in July 2011. With an expected valuation of 5,300 crore ($703 million) for the upcoming initial public offering (IPO), its 15.13% stake in the company is now valued at more than 800 crore.

Thus, the investor is set to make annualized returns of close to 18% with its initial investment growing by more than 5.3 times, according to VCCircle estimates.

IFC has made a cumulative investment of 31.28 crore since 2007. That stands at more than 413 crore now. This translates into over 21% annualized returns and 13 times return on cumulative investment in absolute terms.

Intel Capital has invested just over 36 crore in Fino Paytech till date. Its stake value exceeds 406 crore at the given valuation, which is more than 11 times its cumulative investment. This sums up to annualized returns of 21%.

Headland Asian Ventures (formerly HSBC PE Asia), has put in 69 crore and is sitting on more than 608 crore at the time of IPO. This turns out to be annualized returns of over 20% and close to nine times returns in absolute terms.

Emailed queries sent to the investors and Fino did not elicit a response till press time.

Fino has already expressed its intent of looking to raise a pre-IPO round and a rights issue of 75 crore at the holding company level (Fino Paytech). “The proceeds of this rights issue will go to a microfinance subsidiary, Fino Finance Pvt. Ltd,” a senior executive familiar with the deal said on condition of anonymity. “The asset-light model is helping us scale up faster. We operate a three-layered pyramid, which is helping us to digitize cash for remitters, merchants, logistics and e-commerce firms, and individuals,” the person said.

If the listing goes ahead as planned, it will be the third IPO for a Blackstone portfolio company this year after Sona Comstar and TaskUS.

A fourth portfolio company, Aadhar Housing Finance, has also filed for a listing.

IFC, Intel Capital and other investors are also likely to rake in near-benchmark returns with Fino’s IPO, which received the go-ahead from the Securities and Exchange Board of India (Sebi) last week.

Fino, however, will be required to collapse the holding company Fino Paytech, which it plans to do with the help of a reverse merger of the entity with the bank. A merger of Fino Paytech with the payments bank could help shareholders realize value, said the executive mentioned above. However, there may not be any “major exits by strategic investors”, the executive said.

The article was first published on livemint.com.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.