IPO Alert: Jana Small Finance Bank
If you are someone who is curious about investing in IPOs, fasten your seat belt because we are back again with another IPO study!
In this blog, we will explore the details of Jana Small Finance Bank IPO, which is all set to hit the Indian stock exchange on 14th February 2024.
Overview
Before its establishment in 2006, Jana Small Finance Bank Limited was known as Janalakshmi Financial Services. It offered Micro, Small and Medium Enterprises (MSME) loans, affordable housing loans, term loans, fixed deposit loans, two-wheeler loans, and gold loans.
In 2017, the Reserve Bank of India (RBI) granted Janalakshmi Financial Services a license to become a Small Finance Bank (SFB), enabling it to provide a broader range of financial products.
SFBs are a new entrant into the banking system established to provide essential banking services to MSMEs, Shopkeepers, Farmers, etc. Recently, SFBs have witnessed a rapid growth in terms of deposits and branches.
In terms of AUM and deposit size, Jana Small Finance Bank ranks as the fourth-largest small finance bank. Additionally, it has 771 banking outlets including 278 in unbanked rural centers. Thus serving more than 4.87 million active clients. The company is run by 18,184 permanent employees.
Promoters
The promoters of Jana Small Finance Bank are Jana Holdings Limited, Jana Capital Limited, and Jana Urban Foundation (which was previously known as Jana Social Services).
Details of the IPO
Jana Small Finance Bank IPO’s issue size is INR 570 crore, through a book-building issue. The IPO is a combination of a fresh issue and an offer for sale; the fresh issue consists of about INR 462 crores whereas, the offer for sale consists of INR 108 crores.
The IPO’s subscription period will begin on February 7th, 2024, and will end on February 9th, 2024.
Timeline of the IPO
| IPO Open Date | 7th Feb 2024 |
| IPO Close Date | 9th Feb 2024 |
| Finalisation of Allotment | 12th Feb 2024 |
| Initiation of Refund (in case of no allotment) | 13th Feb 2024 |
| The credit of shares into Demat Account (in case of allotment) | 13th Feb 2024 |
| Listing Date on NSE & BSE (tentative) | 14th Feb 2024 |
The objective of the Issue
The goal of Jana Small Finance Bank’s IPO is to use the proceeds to cover the bank’s anticipated future capital needs. The raised capital can also be used to cover the cost of the issue.
Key details of the IPO
| Face Value of Share | Rs. 10 |
| Price Band | Rs. 393 – Rs. 414 per share |
| Market Lot | 36 Shares |
| Total Issue Size | Rs. 570 Crores |
| Total Number of Shares | 13,768,049 shares |
| Fresh Issue Size | Rs. 462 Crore |
| Offer for Sale | Rs. 108 Crore |
| Listing Exchange | NSE & BSE |
Allotment Size
The market lot of Jana Small Finance Bank IPO is 36 Shares. The minimum and maximum number of shares that an investor can apply for are shown in the table below.
| Applicant | Market Lot(s) | Shares | Amount (Rs.) |
| Retailer (Min) | 1 | 36 | 14,904 |
| Retailer (Max) | 13 | 468 | 1,93,752 |
| Small High Net Worth Individual (Min) | 14 | 504 | 2,08,656 |
| Small High Net Worth Individual (Max) | 67 | 2412 | 9,98,568 |
| Ultra-High Net Worth Individual (Min) | 68 | 2448 | 10,13,172 |
The figures above showcase that a retail investor can invest as little as INR 14,904 rupees and as much as INR 1,93,752 at maximum.
Financial Highlights
Have a look at the key Financial metrics of the company (in Crores, unless stated otherwise).
| Particulars | FY 2023 | FY 2022 | FY 2021 |
| Total Assets | 25,644 | 20,189 | 19,079 |
| Revenue | 3,700 | 3,062 | 2,721 |
| Profit After Tax (PAT) | 256 | 17.47 | 72 |
| Net Worth | 1,777 | 1,185 | 1,101 |
| Reserves & Surplus | 1,472 | 999 | 914 |
| Total Borrowings | 6,277 | 4,509 | 4,815 |
| Total Capital Ratio (CRAR) (%) | 15.57% | 15.26% | 15.51% |
| Tier 1 Capital Ratio (%) | 13.02% | 11.83% | 11.75% |
| Net Non-Performing Assets (NPA) (%) | 2.64% | 3.95% | 5.33% |
| Net Interest Margin (NIM) (%) | 7.73% | 7.32% | 8.36% |
| CASA Ratio# (%) | 20.21% | 22.52% | 16.29% |
# – CASA Ratio is the ratio of current and savings account deposits to total deposits. It tells us the percentage of deposits that are low-cost access to banks as interest in these accounts is lower than in other deposits such as Fixed Deposits.
The financial data makes it evident that profit after taxes has improved over the years, and NPAs have reduced substantially. Both assets and borrowings have increased with a significant increase in revenue. It is indicative of sound fundamentals.
But, the NIM and CASA ratios tell a different story. The NIM of small finance banks are generally higher than other banks, and Jana SFB’s competitor, Ujjivan SFB, is averaging 9% NIM in these markets. The CASA ratio also does not paint a rosy picture of the bank’s operations. The industry standard ranges at north of 25%, but Jana SFB is unable to achieve these ratios. Also, the CRAR has a trend of barely meeting the guideline of 15% for small finance banks.
Additional Ratios
ROAE – ROAE or Return on Average Equity is calculated as the net profit for the relevant period to Average Net Worth for the relevant period, expressed as a percentage.
Jana SFB’s ROAE as now is 16.78%.
P/BV – Price to book value represents the price divided by book value or how much an investor is willing to pay for the company over book value.
Price to book value or P/BV ratio is 1.28 for Jana Small Finance Bank.
EPS – Earnings per share, or EPS, is the total earnings a shareholder has earned. It is computed by dividing the business’s profit after tax by the number of outstanding shares.
Jana Small Finance Bank’s Basic EPS stands at 47.47.
P/E Ratio – The relationship between the stock price and earnings per share is known as the company’s price-to-earnings ratio.
According to the price range of IPO, Jana Small Finance Bank would have a PE Ratio of 8.28 – 8.72.
Conclusion
The growing network of Jana Small Finance Bank may pose a threat to the current small financing banks. The Jana Small Finance Bank’s primary goal is to empower individuals and small businesses.
Before taking into consideration the above-mentioned IPO of Jana Small Finance Bank, remember to consult your financial advisor. Keep in mind that the suitability of investment in IPOs completely depends on your investment horizon and risk profile.
Frequently Asked Questions (FAQs)
1. What is the issue price of Jana Small Finance Bank IPO?
Ans: The price band of Jana Small Finance Bank IPO is INR 393 to 414.
2. What will be the issue size of the Jana Small Finance Bank IPO?
Ans: The issue size of Jana Small Finance Bank IPO is 570 crore.
3. What is the minimum investment amount for retail investors?
Ans: The minimum investment amount for a retail investor to invest in Jana Small Finance Bank IPO is INR 14,148 (at the lower end of the price range).
4. Can Jana Small Finance Bank successfully expand its operations?
Ans: With rural areas exhibiting lower financial inclusion rates than urban areas and facing less competition in banking services, it seems Jana Small Finance Bank has promising growth prospects ahead.
5. Does Jana Small Finance Bank have any regulatory penalties?
Ans: No, the management has remained clear of any major regulatory penalties as of Feb 2024.
Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.
