Jana Small Finance Bank IPO : 7 things to know

Jana Small Finance Bank Ltd, which focuses on giving loans to MSMEs, agriculturists, individuals and affordable housing, had filed its draft red herring prospectus (DRHP) in March 2021 and SEBI had already given its observations and approved the IPO in mid-July 2021.

However, Jana Small Finance Bank Ltd is yet to announce the dates of its IPO. The IPO approval given by SEBI is valid for 1 year so if they want to use this approval, the company has to do the IPO before July this year. The IPO will be a combination of fresh issue of shares and an offer for sale.

7 important things to know about Jana Small Finance Bank IPO
 

1) Jana Small Finance Bank Ltd filed for an IPO with SEBI which comprises of a fresh issue of Rs.700 crore and an offer for sale or OFS component 92,53,659 shares by the existing promoters and early shareholders.

However, since the price band for the stock has not been fixed, the size of the OFS and the value of the issue overall is not known as of now. Jana Small Finance Bank Ltd is into giving small ticket loans for the less banked sections of society and caters to MSMEs, affordable housing, individuals and to farmers to help them meet their temporary liquidity needs.

2) As stated earlier, the offer for sale (OFS) portion in the Jana Small Finance Bank IPO comprises of 92,53,659 shares in all.

Some of the shareholders selling or offering their shares in the OFS include Bajaj Allianz Life Insurance, Hero Enterprise Partner Ventures, ICICI Prudential Life Insurance, Enam Securities, North Haven Private Equity Asia Platinum, QRG Enterprises and Tree Line Master Fund Singapore Pte Ltd.

3) While the fresh issue portion will be Rs.700 crore, the overall IPO is expected to be the tune of Rs.1,100 crore, which means the offer for sale would be to the tune of Rs.400 crore approximately although we need to wait for the price band announcement.

The fresh funds will be utilized by the Jana Small Finance Bank towards augmenting the Tier-1 capital and also to meet their future capital requirements Since all SFBs are required to maintain the statutory minimum liquidity risk capital ratios at all times, these banks need a continuous supply of Tier-1 capital to be able to sustain their lending books at higher levels.
 

4) Jana Small Finance Bank is also exploring the option of a pre-IPO placement of up to Rs.500 crore. Out of this pre-IPO placement, around Rs.400 crore is proposed to be placed with the promoter group.

The balance will be placed with HNIs, family offices and with qualified institutional buyers (QIBs). If the pre-IPO placement is successful, then the total size of the issue will be reduced proportionately.

5) Jana Small Finance Bank essentially caters to the underbanked customers across India with a cross section of products. These broadly include zero balance savings accounts, fixed deposits with above market interest rates, collateral-free loans and special affordable housing loan schemes.

Apart from the above services to individual customers, Jana Small Finance Bank also offers loans to MSMEs (micro, small and medium enterprises), agriculturists to meet their fund shortfalls, individuals, affordable housing projects etc.

In addition to all these, Jana Small Finance Bank also focusses on giving loans to two-wheeler buyers and also provides gold loans to customers against the security of gold with a relatively high LTV ratio and quick processing.

6) Jana Small Finance Bank was one of the 10 financial institutions that had secured in-principle approval from the RBI for setting up of a small finance bank in 2015. The bank received its final banking licence in April 2017. It has been running a profitable operation since then.

Small Finance Banks have some restrictions in operating compared to the regular scheduled banks, but can play a very important role in what is called the last mile credit and enhancing the reach of the existing banks.

7) The IPO of Jana Small Finance Bank Ltd will be lead managed by Axis Capital, ICICI Securities and SBI Capital Markets. They will act as the book running lead managers or BRLMs to the issue.

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