Capital starved Jana Small Finance Bank is set to raise ₹250 crore through tier-2 bonds. The issuance is likely to happen in two phases, according to sources. The first tranche for ₹100 – 150 crore may be floated for issuance this week, while the second tranche may conclude by the month-end. If fully subscribed, with this fundraise, the bank’s capital adequacy may increase by 250 basis points (bps). “The purpose of this tier-2 bond issuance is to augment the capital base so that the bank can subsequently look at tapping the capital market for an initial public offering,” said a highly placed source aware of the matter. As of December 31, 2022, the bank’s CRAR or capital-to-risk weighted assets ratio stood at 15.8 per cent versus the regulatory requirement of 15 per cent.
The bank plans to roll out its IPO by the first half of FY24. “The plan is to hit the market by September with an issue size of ₹500 crore. The IPO is likely to be a combination of offer for sale and fresh issue,” according to sources. However, the plan would be contingent to the overall market sentiments turning positive over the course of the year.
Alternate plans
Hence, the management could be working out alternate plans in case the public issue is further delayed. Jana SFB had filed for IPO in March 2021. Since it couldn’t proceed within the slated timelines, the issue didn’t go through and the bank may have to re-file documents to hit the equity market.
According to sources, in September last year, Jana SFB raised ₹337 though rights issue, valuing the bank at about ₹3,000 crore. However, with the bank completing five years of operations, it cannot further delay it’s listing as per its licensing requirements.
Capital profile
Credit rating agency ICRA noted in its report dated March 1, 2023 that “Jana SFB’s inability to improve the capital profile from the current level or a sustained weakening in the asset quality, impacting the earnings profile, would affect the rating”.
The bank has posted 9-months cumulative net interest income of ₹1192.7 crore and net profit of ₹175 crore for FY23. It’s gross and net non-performing assets stood at 5.72 per cent and 3.22 per cent respectively as against 4.98 per cent and 3.43 per cent. It’s deposits stood at ₹15,277 crore and net advances at ₹16,145 crore.