Introduction:
Jana Small Finance Bank, a prominent player in the financial sector, is set to launch its Rs 570 crore Initial Public Offering (IPO) on February 7th. In an exclusive interview with NDTV Profit, Jana Small Finance Bank’s MD & CEO, Ajay Kanwal, shed light on the details of the IPO and discussed the bank’s strategic plans for growth.
Jana Small Finance Bank IPO Details:
The IPO, scheduled to hit the market on February 7th, 2024 has a total worth of Rs 570 crore. Ajay Kanwal highlighted that the primary purpose of raising funds through this IPO is to augment the bank’s tier-one capital base. This capital infusion is crucial for supporting the bank’s growth, and Ajay Kanwal emphasized that there is no foreseeable need for additional capital in the coming years, as the bank is well-capitalized and profitable.
Shift Towards Secured Business:
The conversation touched upon the bank’s business model, with a significant portion historically relying on unsecured lending. However, in response to regulatory concerns raised by the RBI, Jana Small Finance Bank has strategically shifted towards a more secure lending model. As of September, 57.8% of the bank’s business is now secured, primarily backed by property, providing resilience in challenging times.
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Geographical Expansion Strategy:
Ajay Kanwal outlined the bank’s strategy for geographical expansion, emphasizing that Jana Small Finance Bank is already present in 24 states with 771 branches. The concentration in top states like Tamil Nadu, Karnataka, and Maharashtra is 38%, indicating a well-distributed presence. The bank plans to focus on adjacent cities, ensuring a gradual and sustainable growth approach rather than rapid expansion.
Cost of Funds and Net Interest Margin:
The discussion delved into the challenges posed by the increasing cost of funds within the banking sector. Ajay Kanwal acknowledged the rise in the cost of funds but highlighted that the bank’s net interest margin (NIM) remains stable at 7.8%. With a focus on a mix of products and a significant shift towards secured lending, the bank aims to maintain competitive pricing and anticipates the cost of funds plateauing in the near future.
Sectoral Focus on Agriculture:
In response to queries about the bank’s increased exposure to agriculture, Ajay Kanwal clarified that their lending model, known as the GLG model of microfinance, has been successful over the bank’s 16-year history. With a focus on underbanked rural areas, the bank is committed to financial inclusion and understands the risks associated with this sector.
Conclusion:
Jana Small Finance Bank’s IPO marks a significant milestone in its journey, providing a glimpse into its strategic initiatives for growth and risk management. With a focus on secured lending, geographical expansion, and a commitment to financial inclusion, the bank positions itself as a resilient and well-prepared player in the evolving financial landscape. As investors eagerly anticipate the IPO, Jana Small Finance Bank continues to chart a path of sustainable growth in the competitive banking sector.