The initial share sale of Jana Small Finance Bank will kick in for subscription today (February 7). The issue will close on February 9. Jana SFB has fixed its price band at ₹393-414 apiece.
The IPO includes sale of fresh equity shares worth ₹462 crore. Existing shareholders will offload up to 26.08 lakh shares from their stake via the OFS.
SWOT Analysis
| Strength4th largest SFB in IndiaHealthy NIMsDigitalised bankNo geographic concentrationPortfolio has been cleaned up (aha, via write offs) | WeaknessRBI has placed concerns, in Oct’23 relating to CASA & loan growthRBI has raised flags on CRAR, failure to achieve target of capital infusion in earlier timesCredit underwriting is a bit poor; seen with MFI playersWeak return ratios profile – historicallySlippages have been elevated |
| OpportunitiesMost of the financial parameters improved in H2FY23 & H1FY24Less concentration w.r.t. customers & geographyReduction in unsecured lending will provide better road ahead with regulator and investors and aid in improvement in risk profile of the SFBCredit rating is BBB+ (lower side); further rating upgrade will ease in borrowings cost | ThreatsThere is gap in system-based NPA identification & clarification as per extant guidelinesUnsecured loans are at 42%; on the higher side in the systemSustainability of CASA depositsRestrictions on advances and ticket size due to regulations from RBIHave exposures to borrowers who were NPAs earlier & new loans given to them, had off-setted the earlier repaymentAbility to maintain return ratios at current levelsCompetition from peersRural market is under pressure as seen with other lenders |
Peer Comparison
| Peer Comparison | Jana SFB | Equitas SFB | Ujjivan SFB | Utkarsh SFB |
| AUM, ₹cr | 23,029.56 | 32,776.00 | 27,743.00 | 16,407.00 |
| NIM, % | 7.78% | 8.37% | 8.80% | 9.70% |
| Cost to income, % | 58.48% | 63.63% | 56.23% | 54.66% |
| PCR, % | 64.92% | 55.97% | 92.51% | 93.80% |
| CRAR, % | 17.50% | 20.24% | 24.37% | 23.18% |
| GNPA Ratio, % | 2.44% | 2.53% | 2.18% | 3.04% |
| NNPA Ratio, % | 0.87% | 1.13% | 0.17% | 0.19% |
| P/BV, x | 1.43 | 2.01 | 2.26 | 2.37 |
Financials
| Asset Quality | FY22 | FY23 | H1FY23 | H1FY24 |
| Gross NPA (₹cr) | 756.90 | 709.19 | 1,023.49 | 521.31 |
| Net NPA (₹cr) | 513.26 | 468.00 | 674.11 | 182.89 |
| Gross NPA (%) | 5.71 | 3.94 | 6.83 | 2.44 |
| Net NPA (%) | 3.95 | 2.64 | 4.60 | 0.87 |
| PCR (%) | 32.19 | 34.01 | 34.14 | 64.92 |
| Movement of NPAs, Rs cr | H1FY24 | H1FY23 | FY23 | FY22 | FY21 |
| Opening | 709.19 | 756.90 | 756.90 | 857.98 | 320.81 |
| Slippages | 519.01 | 841.58 | 1,311.15 | 1,304.24 | 828.91 |
| Annualised slippage ratio, % | 4.51 | 9.87 | 6.52 | 8.50 | 6.49 |
| Recoveries | 497.59 | 222.95 | 559.80 | 571.67 | 16.82 |
| Upgrades | 85.08 | 72.21 | 160.11 | 248.31 | 41.49 |
| Write offs | 124.22 | 279.83 | 638.96 | 585.33 | 232.70 |
| Write offs as % of Opening GNPA | 17.52 | 36.97 | 84.42 | 68.22 | 72.54 |
| Closing | 521.31 | 1,023.49 | 709.19 | 756.90 | 858.71 |
| Net NPA | 182.89 | 674.11 | 468.00 | 513.26 | 618.68 |
| GNPA Ratio, % | 2.44 | 6.83 | 3.94 | 5.71 | 7.24 |
| NNPA Ratio, % | 0.87 | 4.60 | 2.64 | 3.95 | 5.33 |
| PCR, % | 64.92 | 34.14 | 34.01 | 32.19 | 27.95 |
| Profit & Loss Statement (₹cr) | FY22 | FY23 | H1FY23 | H1FY24 |
| Interest Earned | 2,726.54 | 3,075.01 | 1,396.23 | 1,863.94 |
| Interest Expenses | 1,336.75 | 1,414.99 | 644.36 | 876.31 |
| Net Interest Income | 1,389.78 | 1,660.02 | 751.86 | 987.63 |
| Other Income | 335.83 | 624.87 | 293.39 | 351.63 |
| Net Income | 1,725.61 | 2,284.89 | 1,045.25 | 1,339.26 |
| Operating Expenses | 1,138.82 | 1,284.51 | 610.60 | 783.16 |
| Operating Profits | 586.79 | 1,000.37 | 434.65 | 556.10 |
| Provisions | 569.32 | 744.40 | 379.02 | 342.88 |
| Profit after Tax | 17.47 | 255.97 | 55.63 | 213.22 |
| Ratios, % | FY22 | FY23 | H1FY23 | H1FY24 |
| Yield on Advances | 14.4% | 14.3% | 13.9% | 14.7% |
| Cost of Funds | 7.4% | 7.0% | 6.7% | 7.6% |
| CRAR | 15.3% | 15.6% | 15.4% | 17.5% |
| NIM | 7.3% | 7.7% | 7.5% | 7.8% |
| Cost to Income ratio | 66.0% | 56.2% | 58.4% | 58.5% |
| Particulars | H1FY24 | H1FY23 | FY23 | FY22 | FY21 |
| RWA, ₹cr | 15,626.71 | 10,841.88 | 13,112.36 | 9,613.11 | 9,147.05 |
| AUM, ₹cr | 23,029.56 | 17,056.76 | 20,101.80 | 15,347.34 | 12,770.53 |
| RWA to AUM Ratio, % | 67.86 | 63.56 | 65.23 | 62.64 | 71.63 |
| Disbursements, ₹ cr | 8,479.10 | 6,562.96 | 14,811.72 | 11,586.26 | 7,624.46 |
| Loan Break up, % | FY21 | FY22 | FY23 | H1FY24 |
| Secured Loans | 5,076.00 | 7,027.13 | 9,904.75 | 12,257.74 |
| Unsecured loans | 6,762.98 | 6,223.20 | 8,095.99 | 9,089.39 |
| Total Advances | 11,838.98 | 13,250.32 | 18,000.74 | 21,347.13 |
| Unsecured, % | 57.12 | 46.97 | 44.98 | 42.58 |
| Dupont Table based on Assets | FY22 | FY23 | H1FY23 | H1FY24 |
| Interest income | 13.5% | 12.0% | 12.3% | 13.3% |
| Interest expenses | 6.6% | 5.5% | 5.7% | 6.2% |
| Net interest income | 6.9% | 6.5% | 6.6% | 7.0% |
| Other income | 1.7% | 2.4% | 2.6% | 2.5% |
| Net income | 8.5% | 8.9% | 9.2% | 9.5% |
| Opex | 5.6% | 5.0% | 5.4% | 5.6% |
| Operating profit | 2.9% | 3.9% | 3.8% | 4.0% |
| RoAA | 0.1% | 1.0% | 0.5% | 1.5% |
| RoAE | 1.5% | 14.2% | 7.0% | 16.6% |
| Leverage, x | 16.81 | 14.27 | 14.22 | 10.94 |
Company background
Jana Small Finance Bank (“Jana SFB”) was incorporated as ‘Janalakshmi Financial Services Private Limited’ on July 24, 2006, at Bengaluru, Karnataka as a private limited company. It started operating as a Small Finance Bank w.e.f. March 28, 2018. Jana SFB is the 4th largest Small Finance Bank in terms of AUM and the 4th largest Small Finance Bank in terms of deposit size as at September 30, 2023.
Jana SFB had 771 banking outlets, including 278 banking outlets in unbanked rural centres, in 22 states and 2 union territories as on September 30, 2023. It has served nearly 12 million customers since 2008, including 4.87 million active customers as at September 30, 2023.
The bank’s primary secured loan products are secured business loans, micro loans against property (“Micro LAP”), MSME loans, affordable housing loans, term loans to NBFC, loans against fixed deposits, 2-wheeler loans, and gold loans.
Jana SFB is also a corporate agent for third-party life insurance products, general (non-life) insurance products and health insurance products, including COVID-19 insurance products.
Jana SFB was amongst the Top-5 Small Finance Banks in term of share of Retail Deposits (comprising CASA and Retail Term Deposits) as a percentage of total deposits among all Small Finance Banks as at March 31, 2023.
Jana SFB has placed a strong emphasis on increasing their Retail Deposits, and with its low-cost, diversified Retail Deposit base, the bank has decreased its Cost of Funds from 8.61% as at March 31, 2021, to 7.02% as at March 31, 2023.
Jana SFB’s Shareholders include TPG, HarbourVest Group, Amansa Capital, Morgan Stanley and Hero Ventures. In June 2023, they raised ₹449.94 crore through the issuance of Equity Shares to new and existing investors and ₹112 crore through the issuance of Preference Shares.
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