IPO listed on 14 Feb'24
Jana Small Finance Bank Ltd
Minimum Investment
₹ 14,904 / 36 shares
Grey market premium
₹ 66 (16% premium)
Issue price
₹ 414
Listing price
₹ 396
Listing day %
-11%
Listing on
Feb 14, 2024
Our Verdict:
Avoid
- Jana Small Finance Bank (JSFB) lacks a distinctive advantage in both its funding and lending operations. Its historical performance has been plagued by significant levels of non-performing assets (NPAs) and substantial capital infusions to fuel growth. Prior to FY23, its capital adequacy ratios hovered just above the regulatory minimum of 15%. However, a recent pre-IPO capital injection of Rs 562 crore helped improve this ratio to 17.5% as of September 30, 2023, up from 15.6% in March 2023.
- Additionally, ~42% of its lending portfolio is dedicated to microfinance, a sector known for its high-risk nature (explained below under “Risk Factors”).
- While the initial public offering (IPO) may seem appealing with a price-to-earnings (P/E) ratio of 8.7 times based on FY23 earnings, the potential risks associated with the investment may overweigh the potential returns. Given these considerations, investors are advised to observe the bank’s financial performance over the coming quarters before committing to any investments.
About the company
Founded in
24 Jul'06
Managing director
Ajay Kanwal
- JSFB ranks as the fourth largest Small Finance Bank in India based on assets under management (AUM) and deposit volume as of September 2023. With 771 banking outlets, including 278 in previously unbanked rural areas, the bank has established a broad presence in 22 states and 2 union territories.
- Its product portfolio includes a variety of secured loans such as business loans secured against property, micro-loans, MSME loans, affordable housing loans, term loans for NBFCs, loans secured against fixed deposits, two-wheeler loans, and gold loans. Its unsecured loan offerings comprise individual and micro business loans, agricultural and allied loans, and group loans, specifically targeting women groups under the Joint Liability Group (JLG) model.
STRENGTHS
- Significant Growth in Profits: JSFB has witnessed a remarkable compound annual growth rate (CAGR) of 88% in net profit over the last three years, reaching Rs 255.97 crore in FY23. Additionally, the net interest margin (NIM) saw an increase from 7.32% in FY22 to 7.73% in FY23.
- Impressive Expansion of AUM: The Assets under Management (AUM) experienced a robust growth rate of 25% CAGR from FY21 to FY23, reaching Rs 20,101.80 crore by the end of FY23, and further expanding to Rs 23,029.55 crore by September 2023.
- Enhanced Asset Quality: JSFB showed significant improvement in asset quality, with the gross Non-Performing Assets (NPA) ratio declining from 7.25% in FY21 to 3.94% in FY23, and the net NPA ratio decreasing from 5.33% to 2.64% over the same period.
- Return Metrics: The Return on Equity saw a substantial increase, rising from 6.51% in FY21 to 16.78% in FY23.
RISK FACTORS
- Exposure to Unsecured Microfinance Loans: As of September 2023, unsecured microfinance loans constitute 42.3% of JSFB's total lending portfolio. These loans, extended without collateral, carry a higher risk of credit loss. Borrowers of microfinance often have limited income and inadequate credit histories for thorough creditworthiness assessment.
- Geographic Concentration in Loan Portfolio: A significant concentration of JSFB’s lending activities, deposits, and branches is in Tamil Nadu, Karnataka, and Maharashtra, representing 38.24%, 31.59%, and 28.92% respectively. Adverse events in these regions, such as economic downturns, political disturbances, natural calamities, or health epidemics, could negatively impact the bank's operations.
- Elevated Illiquidity Ratio: As of September 2023, JSFB reported an illiquidity ratio of 40.24%, indicating a lower proportion of liquid assets. This condition compromises the bank's ability to meet short-term debts and liabilities. Failure to improve this ratio may detrimentally affect the bank's operational and financial stability.
- Low Core Deposit Ratio: The core deposit ratio stood at 40.19% in September 2023, below the industry average of 50%. This indicates a lesser extent of assets financed by stable deposits, suggesting liquidity concerns. An inability to enhance this ratio could impact the bank's operational continuity and financial health adversely.
- Reliance on Bulk Deposits: JSFB's dependence on bulk deposits is high at 32.8%, with a relatively low current and savings account (CASA) ratio of 20.5% as of September 2023. The withdrawal of bulk deposits by any major depositor could negatively influence the bank's operations.
- Legal Dispute over Receivables: A legal disagreement concerning receivables worth Rs 100 crore assigned to the Bank of Maharashtra, including related interest payments, is pending resolution. The Bombay High Court has advised both parties to amicably settle the dispute, which remains unresolved.
Issue details
Issue type
Mainstream
Issue size
₹ 570 crore
Fresh Issue
₹ 462 crore
OFS
₹ 108 crore
Price range
₹ 393 - 414
Lot size
36 shares
Issue Objective
The company intends to utilise the proceeds from the net issue towards augmenting its Tier-1 capital base to meet future capital requirements.
Dates
Bidding open
7 Feb'24
Bidding close
9 Feb'24
Allotment date
12 Feb'24
Refund date
13 Feb'24
Listing
14 Feb'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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