Jana Small Finance Bank is a Mainboard IPO with a book-built issue of Rs. 570 crores, a fresh issue of Rs. 462 Cr. and an offer for sale of Rs. 108 Cr. The IPO will open from 7th February to 9th February 2024, allotment is expected to be done on 12th February, and it will be listed on BSE and NSE on 14th February 2024. The price band is ₹393 to ₹414 per share, with a minimum lot size of 36 shares, and a minimum investment amount of ₹14,904. The book-running lead managers are Axis Capital, ICICI Securities, and SBI Capital Markets. Kfin Technologies Limited is the registrar for the issue.

The objective of the IPO is to augment the Bank’s Tier-1 capital base to meet its future capital requirements. The net proceeds from the fresh issue will help to improve the Tier-1 capital and CRAR. Proceeds from the Fresh Issue will also be used towards meeting the expenses of the Offer. 

Jana Small Finance Bank is the fourth largest small finance bank in terms of AUM and deposits as of Sept’23. They have 771 banking outlets across 22 states and 2 union territories. The top three states where the bank has operations are Maharashtra, Karnataka, and Tamil Nadu. The bank has served nearly 12 million customers since 2008 and has an active customer base of 4.9 million as of Sept’23. The loan products offered by banks are Individual and micro business loans, agricultural and allied loans, MSME loans, affordable housing loans, etc. As of Sept’23, the bank has an AUM of Rs. 23029.5 Cr. which is a jump of 35.02% YoY. The AUM has grown at 25.5% CAGR between March’21 and March’23. As of Sept’23, the bank has a GNPA of 2.44% and NNPA of 0.87%.

• Jana Small Finance bank has a professional and experienced management as well as the board. The MD and CEO Ajay Kanwal has more than 33 years of experience in financial services and was previously the regional CEO, of ASEAN and South Asia at Standard Chartered Bank in India and Singapore. The senior management personnel have held various leadership positions in the banking sector including at Standard Chartered Bank, State Bank of India, Citibank, HDFC Bank, and Kotak Mahindra Bank.
• The bank has more than 16 years of experience in serving underbanked and underserved customers. Its business model is centered on building a ‘one-stop shop’ to cater their customers’ different financial needs.
• As of Sept’23, the bank has 771 banking outlets, including 278 banking outlets in rural areas. With its pan India presence across 22 states and 2 union territories, the bank can reduce its concentration risk. The top three states combined form 38.24% of its advances and the top state forms 13.81% of its advances.
• The bank has increased the share of secured loans from 41.31% in FY21 to 55.25% as of Sept’23. The asset quality of the bank has also improved substantially with GNPA declining from 7.24% in FY21 to 2.44% as of Sept’23.

The following points should be kept in mind:

• The bank has a low CASA ratio at 20.49% as of Sept’23. A lower CASA leads to a higher cost of funds as the banks have to depend on higher yield term deposits and borrowing, affecting the net interest margins. In the past three years, the bank had a peak CASA ratio of 22.52% in FY22.
• The bank has a negative liquidity gap in the one-month to one-year bucket. Also, there is a negative cumulative liquidity gap of Rs. 2,001 Cr. for the period of six months to one year. This is a risk in terms of ALM.
• JHL, one of the promoters of the bank has undertaken to pledge 23,575,790 equity shares (~22.5% of the post-issue shares) held by it in the bank. The pledge becomes effective within two days of the expiry of the lock-in period.