RNFI Services coming with IPO to raise Rs 70.81 crore

RNFI Services

• RNFI Services is coming out with initial public offering (IPO) of 67,44,000 shares in a price band Rs 98-105 per equity share.
• The issue will open on July 22, 2024 and will close on July 24, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 9.80 times of its face value on the lower side and 10.50 times on the higher side.
• Book running lead manager to the issue is Choice Capital Advisors.
• Compliance Officer for the issue is Kush Mishra.

Profile of the company

The company is a tech enabled platform offering financial technology solutions in B2B and B2B2C financial technology arena through an integrated business model via its online portal and mobile application, focusing on providing banking, digital and Government to Citizen (G2C) services on PAN India basis. It segregates its business primarily into four segments namely (i) business correspondent services; (ii) non-business correspondent services; (iii) full-fledged money changer service; and (iv) insurance broking. It is providing full-fledged money changer service through its Material Subsidiary (wholly owned), namely RNFI Money which is RBI registered full-fledged money changer (FFMC) and insurance broking service through its wholly-owned Subsidiary, namely Reliassure Insurance Brokers which is registered as a direct broker (Life and General) with IRDAI.

It acts as a bridge to ensure the availability of tech enabled financial services throughout the country, including to the underserved population in remotest of the places by connecting them to formal financial channels. It also provides business and income-generating opportunities for shopkeepers and network partners by enabling them to provide banking, digital and government services to the end customers through its web and mobile application via an assisted model. It started its journey in the year 2015 in the fintech sector with a mission to empower rural India by promoting the accessibility of financial technology with simple and efficient financial solutions and contribute to the development of a DIGITAL BHARAT and a vision to become one of the leading financial solutions provider. 

Proceed is being used for:

• Funding the working capital requirements of the company
• Funding Capital expenditure requirements for the Purchase of Micro ATMs/laptops/Server
• Strengthening its technology infrastructure to develop new capabilities
• Achieving inorganic growth through unidentified acquisitions and other strategic initiatives
• General corporate purposes

Industry Overview

The Indian Information Technology (IT)/Software industry, a global powerhouse, has significantly shaped India's economic landscape, attracting substantial investments and creating extensive employment opportunities both in India and internationally. Its exponential growth over the last decade has led to a remarkable contribution of around 7.5% to India's GDP in FY2022-23. Renowned as the preferred off-shoring destination, Indian IT firms have demonstrated excellence in providing on-shore and off-shore services to global clientele, offering cost effectiveness, top-notch quality, reliability, timely deliveries, and cutting-edge technologies. 

India stands as one of the world's swiftest expanding Fintech markets, showcasing remarkable growth. The market size of the Indian FinTech industry surged from $50 billion in 2021 to a projected around $150 billion by 2025. The industry's Total Addressable Market is set to escalate to a staggering $1.3 trillion by 2025, with Assets under Management and Revenue projected at $1 trillion and $200 billion respectively by 2030. Key segments in this domain encompass Payments, Digital Lending, InsurTech, and WealthTech.

The Payments landscape alone is poised to attain remarkable heights, with an anticipated transaction volume of $100 trillion and revenue hitting $50 billion by 2030. Concurrently, India's digital lending market, valued at $270 billion in 2022, is on track to reach $350 billion in 2023. Notably, India claims the position of the second-largest Insurtech market in Asia-Pacific, predicted to surge nearly 15 times its current value, reaching a substantial $88.4 billion by 2030. This solidifies India's status as one of the world's fastest-growing insurance markets. Finally, the Indian WealthTech sector is anticipated to experience significant growth, propelling to an impressive $237 billion by 2030, driven by a burgeoning base of retail investors.

Pros and strengths

A technology focused business model with an advanced digital platform: It has consistently and will continue to allocate significant resources towards technological advancement across its operations. During the FY 2024, 2023 and 2022, it has invested Rs 454.91 lakh, Rs 225.08 lakh and Rs 37.00 lakh toward technological advancement. These investments encompassed enhancements to its core technology platform and the development of proprietary applications. This strategic investment is geared towards delivering user experience for its customers and enabling its network partners to conduct transactions seamlessly.

Diverse distribution network spread across PAN India: Its extensive network encompasses a diverse range of participants. As of June 3, 2024, it has a network base of over 3.60 lakh network partners with presence in 28 States and 5 Union territories. These key stakeholders play a vital role in its network. Its strategic business relationships with these network partners significantly augment its reach, bolster its brand visibility, and fortify its customer acquisition endeavours. It has identified various locations across PAN India wherein it has devised a specialised strategy to rapidly increase its network partner and further strengthen its foot hold in the deepest rural parts of India.

Asset light and scalable business model: Its business strategy revolves around a network partner-centric model that emphasizes lean capital investment for network expansion. By associating with network partners who operate their own premises and shops, it reduces its need for costly brick-and-mortar establishments. This arrangement not only lowers its operating expenses but also extends its reach into diverse markets through the local presence of its network partners. Another significant benefit of this model is that network partners use their own computer systems.

Risks and concerns

Substantial portion of the revenue is generated from banking partners: Its success depends on its ability to maintain a mutually beneficial partnership with its banking partners. Its banking partners may determine to reach and acquire consumers directly instead of partnering with it; may renegotiate commercial terms of the fee arrangements it has with them; may become unwilling to offer products and services on its platforms; and may reduce or cease their cooperation with the copmany. Any failure to maintain its relationships with them could have an adverse impact on its operations.

Heavily rely on information technology systems: It heavily relies on the performance, reliability, and security of its tech enabled platform and technology infrastructure, as well as its service providers that facilitate and process transactions. Its information technology systems serve a vital role in managing both the customer-facing front-end interface and digital mobile applications, as well as the back-end operations that support its internal enterprise-wide digital systems, client integration, document management, and connections to data center. Any disruption in its information technology systems or its ability to process transactions efficiently and reliably, including issues with its web applications and digital mobile applications, could have adverse effects on its operations, reputation, and financial stability.

Require certain approvals and licenses: It requires several statutory and regulatory permits, licenses and approvals to operate its business. Many of these approvals are subject to periodical renewal. Any failure to renew the approvals that may expire, or to apply for the required approvals, licences, registrations or permits, or any suspension or revocation of any of the approvals, licences, registrations and permits that have been or may be issued to it, could result in delaying the operations of its business, which may adversely affect its business, financial condition, results of operations and prospects.

Outlook

RNFI Services is a tech enabled platform offering financial technology solutions in B2B and B2B2C financial technology arena through an integrated business model via its online portal and mobile application, focusing on providing banking, digital and Government to Citizen (G2C) services on PAN India basis. It segregates its business primarily into four segments namely (i) business correspondent services; (ii) non-business correspondent services; (iii) full-fledged money changer service; and (iv) insurance broking. On the concern side, its business is subject to rapid changes in the industries its operates in, such as the introduction of new business models, and the entry of new and well-funded competitors or industry disruptors, including other leading internet, financial technology and payment services companies. In addition, the increased adoption of UPI and other alternative modes of digital payments by consumers have further increased competition for it in its payment services platform and could have an adverse impact on its business, financial condition, results of operations and prospects.

The company is coming out with a maiden IPO of 67,44,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 98-105 per equity share. The aggregate size of the offer is around Rs 66.09 crore to Rs 70.81 crore based on lower and upper price band respectively. On performance front, its total income has decreased by 11.81% to Rs 94,305.10 lakh in Financial Year ended March 31, 2024 from Rs 1,06,939.62 lakh in Financial Year ended March 31, 2023. The company’s profit after tax (PAT) stood at Rs 996.07 lakh in the Financial Year 2024 as compared to Rs 488.71 lakh in the Financial Year 2023. Also, the company’s PAT margin increased from 0.46% in Financial Year 2023 to 1.06% in the Financial Year 2024. Meanwhile, its goal is to not only maintain but also accelerate growth across all its business segments. Key to this is its strategic focus on cross-selling, a vital approach that solidifies its value proposition for customers by seamlessly merging all its product and service functionalities into a single, comprehensive platform. While it already hold market positions across its primary business segments, the dynamic demand for digital products and services in India presents significant growth opportunities.