Jana Small finance bank is a play on underserved middle income group
Jana SFB is the 4th largest Small Finance Bank in terms of AUM as well as in terms of deposit size as on September 30, 2023. As of Sep 30, 2023, Jana SFB has a rapidly expanded network with 771 banking outlets, including 278 banking outlets in unbanked rural centers, in 22 states and 2 UTs while serving 4.87Mn active customers. Jana has witnessed a robust AUM growth (25% CAGR FY21- FY23) and has also witnessed healthy deposit growth, at a CAGR of 15% FY21- FY23. The bank has placed a strong emphasis on increasing their Retail Deposits, and with its low-cost, diversified Retail Deposit base, the bank has decreased its Cost of Funds from 8.61% FY21, to 7.02% FY23. At upper price band, IPO is priced at P/BV of 1.2x based on Sep’23 with ROA of 1.60%. We recommend SUBSCRIBE for long term.
Key Investment Rationale
Proven execution ability: The bank has demonstrated ability to scale-up its business significantly. Its gross advances have increased from ₹118,389.82 million as at March 31, 2021 to ₹180,007.41 million as at 31-Mar-23, representing a CAGR of 23.31%, and further increased to ₹213,471.30 million as at 30-Sep-23, an increase of 18.59%.
Pan India presence reduces geographical concentration risk: The bank has reduced the geographical concentration risk with presence across 24 states and UTs; it’s second highest among all SFBs. Also, bank has moved from unsecured to secured lending portfolio (57% H1FY24 vs 43% FY21).
Fast growing Retail Deposits base and diversified deposit franchise: Its deposits increased from ₹123,162.58 million as at 31-Mar-21 to ₹163,340.16 million as at 31-Mar-23, representing a CAGR of 15.16% and further increased to ₹189,367.24 million as at 30-Sep-23, an increase of 15.93%. It is among the top four Small Finance Banks in India in terms of deposit size as at 30-Sep-23.
Note: As per press reports Enam Holdings’ Akash Bhanshali, Ashish Kacholia, noted investor Ramesh Damani and Akash Prakash’s Amansa Holdings have participated in the fund raising.
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