Jana Small Finance Bank ready to appoint bankers for Rs 1,000-crore IPO

Jana Small Finance Bank (SFB) has begun looking for investment bankers to manage its public share sale, two people familiar with the matter confirmed.
 
The public offering could be in the range of Rs 1,000 crore and Rs 1,200 crore and the bank might hit the market in the second half of the year. The firm did not respond to an email seeking its response. SFBs have to list within three years of reaching a net worth of Rs 500 crore, according to the RBI norms.
 
Jana joins the likes of Equitas SFB, ESAF SFB, Utkarsh SFB, and Suryoday SFB through this move. The first two have already filed a draft offer with the regulator, and aim to raise about Rs 1,000 crore each. Last year, Suryoday announced plans to raise Rs 1,000 crore through an initial public offering (IPO) by mid-2020. 
 
Utkarsh SFB plans to mop up Rs 500-600 crore from its IPO. “Ideally, we are aiming at listing by December 2020, but we have kept a buffer of a few months, keeping in view market volatility,” said the firm’s Managing Director and Chief Executive Officer Govind Singh last year.
 
In December, the Rs 750-crore IPO of Ujjivan SFB was well received and got subscribed 166 times the number of shares put on offer. The shares of the bank rose 44 per cent over the issue price.
 
SFBs aim to cater to the low-income segment, and have grown at 26 per cent annually from 2015-16 to 2018-19 (FY19), in terms of assets under management. 
 
In the past three years, SFBs have shifted their focus from microfinance to other products, but the core customer focus is unlikely to change owing to regulatory norms. Profitability of SFBs, which was impacted in 2017-18 as a result of demonetisation and loan waivers, revived in FY19 as credit costs on new loans trended lower. “A large part of India is still underbanked. Since quite a few of these SFBs focus on microfinance as a big portion of their lending business, there is a lot of scope in tier-II, -III, and -IV cities and semi-urban/rural areas. In tier-I cities, they can focus on auto, home loans, and SME segments,” said Deepak Jasani, head–retail research, HDFC Securities.

 

According to him, the challenge will be to offer competitive rates on deposits and robust services to depositors in urban and semi-urban areas, and to put in place a strong system for recovery while maintaining decent net interest margins. “Deposit taking will predominantly be in tier-I and -II cities and there is likely to be some overlap and competition with other large banks,” said Jasani.
 
Jana SFB, formerly Janalakshmi Financial Services, is headquartered in Bengaluru. It is one of 10 financial institutions that received in-principle approval from RBI for setting up a small finance bank in 2015.
Established in 2008, it was the largest micro finance institution (MFI) in India, and was recognised globally as an innovative financial institution working for financial inclusion. Jana SFB received final banking licence in April 2017 and started operations on March 28, 2018.