Jana SFB raises ₹560-cr capital at discount to earlier rounds

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Jana Small Finance Bank has raised Rs 560 crore capital from a group of investors such as Ashish Kacholia, Amansa Holdings and Enam Holdings. The capital increase was important to save the Bank’s capital adequacy.

According to sources, for the purpose of fundraising, the pre-financial value of the bank was considered at ₹ 1,700 crore. Her net worth in the financial year was Rs. 231,504 crore. To extend the run rate of profitability for Q4 FY ’23, the net worth before the transaction will be around Rs 1,600 crore. At these valuations, capital was raised at a marginal premium to book value, echoing current sentiment for small finance banks.

Capital was raised through the correct release last week.

Interestingly, TPG Capital refrained from the issuance because it had exhausted the bank’s permissible investment limits. Reports suggest that Ramesh Damani has also participated in this round of fund-raising, though this cannot be independently verified.

important deal

This round of capital injection is significant for three reasons.

First, at a capital adequacy ratio of 15.6 percent as at March 31, 2023, the bank would have been exposed to regulatory oversight risk. The minimum share capital for SFBs is 15 per cent and with the entry of Rs 560 crore contingent capital, the ratio is said to have increased to 19 per cent.

Secondly, this bank is also taking a step closer to an IPO, which has been on hold for the past two years. Hero Ventures is expected to be allotted equity shares of INR 350 crore as compulsory convertible preferred shares will be converted prior to the IPO. According to the draft Red herring prospectus submitted by Jana SFB in 2021, Hero Ventures owns more than five percent of the bank’s stake.

Subscription setup

The sources say that this is the first injection of money that is made at a discount to the bank. The rights issue of Rs 337 crore conducted in September 2022 valued the bank at Rs 3,000 crore – approximately 2.5 times booking price based on FY22 financial statements.

With an equity infusion of Rs 560 crores, the bank’s pre-IPO, including expected future earnings, has been pegged at Rs 3,500 crores – 4,000 crores. This is about 1.2x the forward price of the reservation.

Jana SFB is expected to submit a revised draft prospectus to the Market Regulatory Authority in a week or so.