Morgan Stanley and TPG-backed Jana Small Finance Bank IPO was subscribed 100 percent on February 8, the second day of bidding. The Rs 570-crore public offer has received a ‘subscribe’ rating from several brokerages because of its fair valuation, decent financials, and healthy return ratios.
Jana SFB is the fourth largest small finance bank in terms of AUM and deposit size. As of September 30, 2023, the bank had 771 outlets, including 278 in unbanked rural centres across 22 states and two Union Territories.
Secured loan products constitute 57.4 percent of the total loans with a focus on business loans, microloans against property, MSME loans, affordable housing loans, term loans to NBFCs, loans against fixed deposits, two-wheeler loans and gold loans. The rest 42.6 percent consists of an unsecured loan book that offers individual and micro business loans, agricultural and allied loans and group loans.
Jana SFB is also a corporate agent for third-party life insurance, general (non-life) insurance and health insurance products. It offers point-of-sales (PoS) terminals and payment gateway services through its merchant-acquiring partners. Key shareholders of the bank include TPG, HarbourVest Group, Amansa Capital, Morgan Stanley and Hero Ventures.
Offer details
The Rs 570-crore IPO consists of a fresh issue of 1.11 crore shares worth Rs 462 crore and an offer-for-sale (OFS) of 26.08 lakh shares worth Rs 108 crore. The price band for the issue, which will close on February 9, has been fixed at Rs 393-414 per share. The bank aims to utilise the net proceeds from the fresh issue to bolster its Tier-1 capital base for future capital requirements.
Also read: Jana Small Finance Bank IPO: 10 things to know before subscribing to the Rs 570-crore issue
The Bengaluru-based SFB raised Rs 113.15 crore from several investors in a pre-IPO placement. SBI General Insurance Company, Kotak Mahindra Life Insurance Company, and Ananta Capital Ventures Fund 1 were the biggest investors, picking up shares worth Rs 25 crore, Rs 20 crore, and Rs 15 crore, respectively.
Anchor investors
On February 6, the SFB mobilised Rs 166.95 crore from marquee institutional investors. A total of 17 institutional investors participated in the anchor book, including East Bridge Capital Master Fund and SBI Life Insurance Company, which were the biggest investors among them, buying Rs 24.99 crore worth of shares each.
Turnaround Opportunity Fund, HDFC Life Insurance Company, SBI General Insurance Company, and Kotak Iconic Fund were other big anchor investors, picking up Rs 58 crore of shares in the small finance bank.
Financials
The company's assets under management grew 35 percent to Rs 23,029.5 crore in H1FY24 compared to the year-ago period. Its CASA ratio stood at 20.49 percent and CRAR at 17.5 percent in the six months ended September 30, 2023. For the year ended March 31, 2023, total income rose 20.8 percent to Rs 3,699.87 crore, while net profit increased 1,365 percent to Rs 255.97 crore.
The bank has reduced its gross NPA ratio to 2.44 percent in H1FY24 from 3.94 percent in FY23 and 7.25 percent in FY21. The net NPA ratio has also declined to 0.87 percent in H1FY24 from 2.64 percent in FY23 and 5.33 percent in FY21.
Also read: Jana Small Finance Bank garners Rs 167 cr from anchor investors ahead of IPO
The bank has raised the provision coverage ratio to 64.9 percent in H1FY24 from 27.89 percent in FY21. Jana SFB has maintained healthy net interest margins at 7.78 percent in H1FY24, up from 7.47 percent in H1FY23 and 7.73 percent in FY23.
Should you subscribe to Jana Small Finance Bank IPO? Let's check out what brokerages say about the issue...
Anand Rathi: Subscribe
At the upper price band, the company is valued at a P/BV of 1.50x with a market cap of Rs 4,330 crore post-issue of equity shares and a return on net worth of 14.40 percent. “We believe that the IPO is fairly priced, hence we recommend a ‘subscribe’ rating to the IPO,” said Manan Goyal, equity research analyst at Anand Rathi Share and Stock Brokers.
BP Wealth: Subscribe
As the lender will utilise the net proceeds of the fresh equity issue to augment its Tier-I capital base, its capital adequacy will enhance and lead to a stable leverage position.
“We believe the company is reasonably valued and advise investors to ‘subscribe’ to the issue from a medium to long-term perspective,” said analysts at BP Wealth.
Geojit: Subscribe
“Considering its rapid growth in deposits, diversified loan portfolio, strong brand equity, improved asset quality ratios, healthy return ratios, and financial inclusion, we assign a ‘Subscribe’ rating on a medium to long-term basis,” said an analyst at Geojit Financial Services.
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