Jana Small Finance Bank makes weak debut; lists 4% below issue price

The Rs 570-crore initial public offer (IPO) was subscribed 19.89 times, with steady demand across investor categories.

Jana Small Finance Bank (SFB) made a weak debut, with its shares listed at Rs 396, a 4 per cent discount against its issue price of Rs 414 per share on the National Stock Exchange (NSE) and BSE on Wednesday. The stock hit a low of Rs 385 and high of Rs 409 in intra-day trade so far.

At 10:06 am; Jana SFB was trading at Rs 399.75, down 3 per cent as against its issue price. A combined 2.3 million equity shares changed hands on the NSE and BSE. In comparison, the S&P BSE Sensex was down 0.77 per cent at 71,007.

The Rs 570-crore initial public offer (IPO) was subscribed 19.89 times. The public issue was subscribed 5.7 times in the retail category and 26.13 times in the Non-Institutional Investors’ (NII) category, while the Qualified Institutional Buyers’ (QIB) portion was booked 39.81 times. The bank plans to use fresh issue proceeds to bolster its Tier-1 capital base.

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 banking outlets. Jana SFB primarily offers deposit products (including demand, savings, and term deposits) and lending services, comprising both secured and unsecured loans.

The bank has significantly reduced its GNPA (gross NPA) ratio to 2.44 per cent in H1FY24 from 3.94 per cent in FY23 and 7.25 per cent in FY21. The NNPA (net NPA) ratio has also declined to 0.87 per cent in H1FY24 from 2.64 per cent in FY23 and 5.33 per cent in FY21. Further, the bank has raised the provision coverage ratio to 64.9 per cent in H1FY24 from 27.89 per cent in FY21.

At the upper price band of Rs 414, Jana SFB is available at a P/Bv of 1.4x (FY24E annualised), which appears to be reasonably priced compared to its peers. Considering its rapid growth in deposits, diversified loan portfolio, strong brand equity, improved asset quality ratios, healthy return ratios, and financial inclusion, the brokerage firm Geojit Financial Services had assigned a “Subscribe” rating on a medium to long term basis.

Analysts at Indsec Securities and Finance had recommended “Subscribe” to the issue given its strong presence on Pan-India basis, focus on growing the secured book and agri book, management efforts towards reshaping the unsecured book, increasing cross-selling business through digitization, supported by professional and experienced management.

Meanwhile, SFBs offer basic banking services such as payment, accepting deposits and lending to the unserved and the underserved segments of the Indian economy, including small businesses, marginal farmers, micro and small industries, and the unorganized sector.

SFBs are focused on serving the customers at the bottom of the pyramid to drive financial inclusion. The growth in the industry is illustrated by the exponential growth in both advances and deposits and is supported by the robust rural growth, new product offerings and associated crossselling opportunities, which will drive the SFBs’ market share to multi folds in the future, according to analysts.