Janalakshmi Fin's equity infusion pegged at Rs 4,400 cr in 5 yrs

Bengaluru-based JFSL has a strong capital base, after an equity infusion of Rs 1,000 crore in 2016

Janalakshmi Financial Services Ltd (JFSL), a large micro-finance institution (MFI) which is becoming one of the new small finance bank (SFB), will need an estimated of Rs 4,400-5,300 crore over five years to grow assets annually by at least 40 per cent, rating agency ICRA has said.

Its assets under management were just over Rs 13,300 crore at end of September 2016. This equity infusion requirement is based on the expectation of Janalakshmi maintaining a leverage of seven times. Leverage refers to the amount of debt an institution can hold on the base of capital.

Janalakshmi has seen sharp rise in annual disbursements in loans in past five years. Its disbursements which were at Rs 422 crore in 2011-12, which grew to Rs 2,383 crore in 2013-14 and further to Rs 11,516 crore in 2015-16, according to its annual report for 2015-16.

Bengaluru-based JFSL has a strong capital base, after an equity infusion of Rs 1,000 crore in April 2016. This helped the institution to improve its net worth to Rs 2,421 crore (as on September 30). It has received fresh equity annually for the past four years.

JFSL is a non-banking finance company, catering to the urban poor women. It has a network across 197 cities in 18 states. The share of the top 3 states of Karnataka, Tamil Nadu and Maharashtra being about 46.8 per cent, at end of September. 

Beside capital injection, the institution will also have to make large scale recruitment and engage in training of employees for ensuring healthy business growth, ICRA said. 

Reserve Bank of India rules, those who got in-principle approval to start a SFB have 18-month time to comply with the guidelines.

Given the high growth target of the company, it is important for JFSL to ensure overleveraging is kept under check, as the penetration levels increase in the urban areas.