This bank stock has surged 55% in 4 days; zoomed 103% from listing day low

Jana Small Finance Bank hit a record high of Rs 740 as they rallied 15% on the BSE in Monday's intraday trade amid heavy volumes

Jana SFB share price: Shares of Jana Small Finance Bank (Jana SFB) hit a record high of Rs 740 as they rallied 15 per cent on the BSE in Monday's intraday trade, amid heavy volume, in an otherwise rangebound market. The stock was trading at its highest level since its listing on February 14, 2024. In comparison, the BSE Sensex was up 0.02 per cent at 76,710 at 10:45 AM.

The market price of Jana SFB has more-than-doubled, zooming 103 per cent from its listing day low of Rs 365 per share. In the past four trading days, it has bounced back 55 per cent from a low of Rs 477.25, touched on June 4. Currently, Jana SFB is trading 78 per cent higher over its issue price of Rs 414 per share.

Business Standard had, last month, reported that the Bengaluru-based small finance bank is planning to apply for a universal bank licence during the next financial year (FY26). This will come after meeting the net non-performing asset (NPA) requirement of less than 1 per cent for two consecutive years. In April, the Reserve Bank of India (RBI) spelt out a glide path for SFBs to convert into universal banks.

Jana SFB had reported its highest-ever profit after tax (PAT) of Rs 670 crore, up 162 per cent year-on-year (Y-o-Y), in financial year 2024 (FY24). Net interest income grew 28.1 per cent Y-o-Y at Rs 2,127 crore. Net interest margin (NIM) improved to 8.0 per cent in FY24 as against 7.8 per cent in FY23. Loan asset under management (AUM) jumped 24.9 per cent Y-o-Y at Rs 24,746 crore. Total deposits increased 38 per cent Y-o-Y at Rs 22,571 crore.

Jana SFB primarily offers deposit products (including demand, savings, and term deposits) and lending services, comprising both secured and unsecured loans. The primary secured loan products are secured business loans, micro loans against property (Micro LAP), MSME loans, affordable housing loans, term loans to NBFC, loans against fixed deposits, two-wheeler loans, and gold loans.

It offers small ticket size loans (primarily MFI) to its customers through its Retail financial services vertical in the forms of Agri Group Loans, Group loans, Individual loans and Gold loans, these loans are offered to the customers who are unbanked/underbanked to bring them into the formal financial banking fold.

CareEdge Ratings forecasts a 30 per cent growth in FY25 for Affordable Housing Finance Companies (AHFCs). The optimistic outlook for AHFCs is supported by several factors, including their relatively smaller base compared to traditional banking institutions and prime housing finance entities, their capacity to penetrate unorganised market segments, and their adept appraisal skills. These competencies enable AHFCs to effectively serve customers who may not meet the prime credit criteria.

Jana SFB is strategically shifting towards a secured loan portfolio; the share of secured loans in its portfolio increased to nearly 60 per cent at FY24 (FYE23: 55 per cent; FYE22: 53 per cent). India Ratings and Research (Ind-Ra) expects this to further increase to around 80 per cent over the next two to three years, with a focus mainly towards home loans, loan against property and secured small, medium enterprise loans. Ind-Ra expects Jana SFB to maintain 25 per cent-30 per cent loan growth over the medium term as it may not launch any new products.

Meanwhile, the banking industry continues to look healthy with robust credit growth nearing 20 per cent for the industry. Deposit mobilisation, however, remains a challenge for banking industry with growth of 13.8 per cent. A healthy growth in economy provides opportunity for banks to grow their asset books, Under-pricing of risk in good times is a normal mistake which can be a risk.

"On liability side, the deposit growth vis-a-vis credit demand remains a challenge. With healthy capital position, sound economy banks have opportunity to grow. Funding this growth and negative impact on economy due to global headwind can be a risk," Jana SFB had said in its FY24 annual report.