Jana Small Finance Bank IPO – Issue Details and Review

Jana Small Finance Bank is coming up with IPO which is scheduled to open on February 7, 2024. As the name indicates, it is the small finance bank in India which generated strong revenue and margin growth in the last few years. Check Jana Small Finance Bank IPO, Dates, Size, Objectives, reasons to invest, Risk Factors and Review in this article.

Jana Small Finance Bank IPO Details and Dates

IPO Opening Date 07-Feb-24
IPO Closing Date 09-Feb-24
IPO Listing Date 14-Feb-24
Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price band Rs 393 to Rs 414 per equity share
Lot Size 36 Shares
Listing at BSE and NSE
Total Issue Size Rs. 570 Crores
    Fresh issue     Rs. 462 Crores
    OFS     Rs. 108 Crores

About Jana Small Finance Bank Limited

The company is the fourth largest Small Finance Bank in terms of Assets Under Management (AUM) and deposit size as of September 30, 2023, according to a Fitch Report. They operate with 771 banking outlets, including 278 in unbanked rural centers across 22 states and two union territories. Since its inception in 2006, the company has served nearly 12 million customers, with 4.87 million active customers as of September 30, 2023.

Initially incorporated as a non-banking finance company (NBFC) in 2008, the company obtained NBFC-Microfinance Institution (NBFC-MFI) status in 2013. They transitioned into a Small Finance Bank in 2018 and became a Scheduled Commercial Bank in 2019.

Over 16 years, the company has developed an understanding of the financial needs of underbanked and underserved customers. They’ve improved customer experiences through digital sourcing and disbursement of loans.

Their primary secured loan products include secured business loans, micro loans against property, MSME loans, affordable housing loans, term loans to NBFCs, loans against fixed deposits, two-wheeler loans, and gold loans. Unsecured loan products include individual and micro business loans, agricultural and allied loans, and group loans using the Joint Liability Group (JLG) model.

The company’s gross advances have grown substantially, from ₹118,389.82 million as of March 31, 2021, to ₹213,471.30 million as of September 30, 2023, with a focus on increasing secured gross advances and agricultural loans. Secured gross advances increased from ₹50,760.00 million as of March 31, 2021, to ₹122,577.38 million as of September 30, 2023. Agricultural and allied loans increased from ₹15,510.70 million as of March 31, 2021, to ₹36,141.39 million as of September 30, 2023.

Their secured gross advances as a percentage of total gross advances increased from 42.87% as of March 31, 2021, to 57.42% as of September 30, 2023. Additionally, agricultural and allied loans as a percentage of gross advances increased from 13.10% as of March 31, 2021, to 16.93% as of September 30, 2023.

Jana Small Finance Bank Limited Financials

Financial Year ending / Period ending (Amt in Crores)
Period Ended 31-Mar-21 31-Mar-22 31-Mar-23 30-Sep-23
Assets 19,078.66 20,188.71 25,643.69 28,105.87
Revenue 2,720.74 3,062.37 3,699.88 2,215.57
Profit After Tax 72.26 17.47 255.97 213.22
Net Worth 1,100.77 1,184.56 1,777.07 2,547.11
Reserves and Surplus 914.09 999.29 1,472.28 2,225.44
Total Borrowing 4,815.32 4,509.83 6,277.46 5,313.54

Jana Small Finance Bank IPO Valuation

  • The IPO price band is Rs 393 to 414 per share
  • If we consider last 3 years weighted EPS of Rs 24.63, the P/E ratio works out to be 17x
  • If we consider the last year FY23 EPS of Rs 42.64, the P/E ratio works out to be 10x
  • If we annualise 6 months ended Sep-23 EPS, the P/E ratio works out to be 7x
  • The listed peers like Spandana Sphoorty Financial Limited trading at P/E 665x (Highest) and Ujjivan Small Finance Bank Limited is trading at P/E of 10x (Lowest) and industry average P/E is 93x. Hence, the IPO Price band at P/E of 10x to 17x is fully priced if we consider in small finance bank segment.

Jana Small Finance Bank IPO Objective

The IPO size is Rs 570 crores which has both OFS and fresh issue.

  • OFS of Rs 108 Crores – Under offer for sale, the proceeds would go to selling share holders and company would not get anyting.
  • Fresh issue of Rs 462 Crores – Fresh issue would be used for augmentation of Bank’s Tier –1 capital base.

Why to invest in Jana Small Finance Bank IPO?

  • Digitalization and Technological Infrastructure: The company has embraced digital banking, offering a wide range of digital products and services to its customers. With integrated multi-channel operations and automated backend processes, the bank has enhanced efficiency, customer satisfaction, and business operations.
  • Focus on Innovation: The company continually innovates its technology platforms to deliver better quality services. It leverages API technology and digital onboarding channels to enhance customer experience and increase operational efficiency.
  • Integrated Risk and Governance Framework: The company has a robust risk management framework in place, covering key risks such as credit, operations, liquidity, market, and cyber and information security. It has detailed risk management policies and governance structures to ensure effective risk oversight.
  • Customer-Centric Approach: With over 16 years of experience in serving underbanked and underserved customers, the company has built a strong customer base. It offers a variety of banking services tailored to meet the diverse needs of its customers, driving financial inclusion.
  • Pan-India Presence and Brand Recognition: The company has a widespread presence across 22 states and two union territories in India, reducing concentration risk. It has served nearly 12 million customers and has strong brand recognition.
  • Fast-Growing Retail Deposits Base: Since becoming a Small Finance Bank, the company has focused on growing its retail deposits, offering a diverse range of deposit products. Its retail deposits have shown significant growth, contributing to a lower cost of funds and increased stability.
  • Proven Execution Ability: The company has demonstrated its ability to scale up its business operations significantly, with substantial growth in deposits and advances over the years. Its focus on expanding product offerings and reaching a wider customer base has been successful.

Risk factors in Jana Small Finance Bank IPO

  • Company is subject to inspections by  various  regulatory  authorities,  such  as  the  RBI,  PFRDA,  IRDA  and  National Pension  System    Non-compliance  with  the  observations  of  such  regulators  could  adversely  affect  its business.
  • They are subject to stringent regulatory requirements and prudential norms. In addition, some of these regulatory requirements and prudential norms are more onerous for Small Finance Banks compared to other banks.
  • There have  been  irregularities  in  certain  regulatory  filings  made  by  them with  the  RoC  under  applicable  lawand delays in submitting regulatory filings with the RBI. Further, certain of its statutory and regulatory records are untraceable.  They cannot  assure  that  no  legal  proceedings  or  regulatory  actions  will  be  initiated  against  the Bank in the future in relation to such missing corporate records or irregular filings.
  • They may be unable to maintain or renew its statutory and regulatory permits, licences and approvals required to operate its business, which may adversely affect its business.
  • Due to the non-updating of their Aadhaar numbers by certain of its employees with the Pension Fund Regulatory and Development Authority (PFRDA), they were unable to deposit the provident fund payments for such employees with the    All  such  amounts  have  been  remitted  to  an  escrow  account.  They deposit  the  provident  fund payments for such employees with the PFRDA once they receive their updated Aadhaar numbers. They are subject to an  interest  levy  payable  on  the  amounts  that  are  required  to  be  deposited  with  the  PFRDA  until  the  date  such amounts are deposited with the PFRDA.

Jana Small Finance Bank IPO Review – Should you subscribe?

  • The company has stable financial performance, that can be seen by consistent growth in assets, revenues, and profits over recent years. Additionally, the IPO’s reasonable valuation, with a P/E ratio ranging from 10x to 17x, offers investors a balanced proposition.
  • However, regulatory risks for the company, with potential non-compliance issues leading to penalties or even revocation of approvals. Moreover, operating in a competitive landscape poses challenges, especially with varying P/E ratios among listed peers. Such dynamics heighten market uncertainties and could impact investor sentiment.

High Risk investors who are comfortable with all risk factors indicated in Jana Small Finance Bank RHP can invest in such IPOs.

Suresh KP

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