Jana Small Finance Bank IPO open today: Should you subscribe to the lender?

Jana Small Finance Bank (SFB) launches its initial public offering (IPO) on Wednesday, February 7, 2023. The private lender is offering its shares in the price band of Rs 393-414 apiece. Investors can bid for a minimum of 36 equity shares and its multiples thereafter. The three-day bidding for the issue concludes on Friday, February 9. Incorporated in July 2006, Jana Small Finance Bank is engaged in providing MSME loans, affordable housing loans, term loans to NBFC, loans against fixed deposits, two-wheeler loans and gold loans. The Bengaluru-based lender offers a wide range of banking services. The Rs 570-crore IPO of Jana Small Finance Bank includes sale of fresh equity shares worth Rs 462 crore, while existing shareholders will offload up to 26,08,629 shares from their stake via offer-for-sale (OFS). Jana SFB has reserved shares worth Rs 13.5 crore for its eligible employees. Ahead of its IPO, the lender opted for pre-IPO placement of 24,39,607 equity shares at an issue price of Rs 414 apiece to investors including SBI General Insurance, Kotak Mahindra Life Insurance, Ananta Capital Ventures Fund, Arka Nxt Ventures, Capri Global Holdings, RPM Ventures Partners and others. Jana SFB provides digital products, services, and platforms, such as mobile and internet banking for both retail and corporate clients. It had 754 banking outlets across 22 states and two union territories, including 272 in unbanked rural centers as of March 31, 2023. The bank has provided services to almost 12 million customers since 2008. The net proceeds from the fresh issue shall be utilized towards augmenting its Tier-I capital base to meet the future capital requirements and meeting the expenses in relation to the offer. Proceeds from the OFS shall go to the selling shareholders of the lender. Jana Small Finance Bank mobilised Rs 166.95 crore from anchor investors including Citigroup Global, Copthall Mauritius Investment, Societe Generale Astrone Capital, 360 One Mutual Fund, Bandhan Mutual Fund, Tata AIA Life Insurance, Kotak Mahindra Life Insurance and Ananta Capital Ventures Fund. It alloted  40,32,588 equity shares at a price of Rs 414 apiece. Jana SFB has reserved 50 per cent of the net offer for qualified institutional investors (QIBs), while non-institutional investors (NIIs) will have 15 per cent of shares reserved for them. Retail investors will have 35 per cent of the net issue reserved for them. Axis Capital, ICICI Securities and SBI Capital Markets are the book running lead managers of the Jana Small Finance Bank IPO, while Kfin Technologies Limited is the registrar for the issue. Shares of the lender are likely to be listed on February 14, Wednesday on both BSE and NSE. Here's what analysts said about the IPO of Jana Small Finance Bank:Geojit Financial Services Rating: Subscribe for long term Jana SFB is the fourth largest SFB in terms of AUM (advances) as of H1FY24, with an AUM of Rs 21,350 crore, and its market share of AUM in the SFB segment as of H1FY24 is at 10.7 per cent. The cost of funds has reduced from 8.61 per cent in FY21 to 7.55 per cent in H1FY24, aided by a diversified retail deposit base, said Geojit Financial Services in its IPO note. "At the upper price band of Rs.414, Jana SFB is available at a P/Bv of 1.4 times, 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, we assign a 'subscribe' rating on a medium to long term basis," it said.Anand Rathi Research Rating: Subscribe Jana Small Finance Bank is a digitalized bank and majority services are available in digital form to customers with integrated risk and governance framework and customer-centric organization with more than 16 years’ experience in serving under banked and underserved customers along with pan-India presence with strong brand recognition, said Anand Rathi Research. "At the upper price band, the company is valuing at P/BV of 1.5 times with a market cap of Rs 4,330 crore post issue of equity shares and return on net worth of 14.40 per cent. We believe that the IPO is fairly priced, hence we recommend a 'subscribe' rating to the IPO," it added.Marwadi Financial Services

Rating: Subscribe Jana SFB's peers namely AU Small Finance Bank, Suryoday Small Finance Bank, Credit Access Grameen, Spandana Sphoorty Financial, Bandhan Bank, Ujjivan Small Finance Bank, Equitas Small Finance Bank, Fusion Micro Finance are trading at a P/B of 3.82 times, 1.09 times, 4.41 times, 2.20 times, 1.88 times, 2.72 times, 2.25 times and 2.30 times, respectively. "Jana SFB is going to list at a P/B of 1.43 times with a market cap of Rs 4,330 crore. We assign 'subscribe' rating to this IPO as the company has a pan-India presence with strong brand recognition along with 16 years of experience in serving underbanked and underserved customers. Also, it is available at a reasonable valuation as compared to its peers," it said.StoxBox by BP Equities Rating: Subscribe for long term Jana has transitioned its focus from microfinance loans to expanding its secured loan book. The key trigger of Jana SFB’s strong fundamentals is that it intends to strengthen its liability franchise with a focus on growing its deposit base to attain a stable and lowcost source of funding, said StoxBox by BP Equities. "As the lender will utilize 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. At the current P/BV multiple of 1.2 times based on book value as on September 2023, we believe the company is reasonably valued and advise investors to 'subscribe' it for medium-to-long term," it added.Ventura Securities Rating: Subscribe Jana Small Finance bank has prioritized the growth of its retail deposits, consisting of single Rupee term deposits below Rs 2 crore (Retail Term Deposits) and CASA accounts, due to their lower interest rates and higher retention rates compared to bulk deposits, said Ventura Securities in its IPO note. It has cited focus on accelerating secured loans book with the purpose of meeting customers’ needs and diversifying lending book; reshaping unsecured loans business; improved risk profile and enhanced retail deposit growth as the key strengths of business, suggesting investors to subscribe to it. Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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