Jana Small Finance Bank and Capital Small Finance Bank, have recently entered the market with Initial Public Offerings (IPOs). The small finance banking sector in India has witnessed significant growth in recent years, offering financial inclusion and banking services to the underserved and unbanked segments of the population. Two prominent players.
In this article, we will conduct a comparative analysis of these two IPOs, exploring key aspects such as their background, business models, financial performance, and growth prospects. Two IPOs are scheduled from 7th to 9th of February, both of which are Small Finance Banks (SFBs). In this blog, we will compare Jana Small Finance Bank and Capital Small Finance Bank to help you make an informed decision about investing in either of them.
Understanding Small Finance Banks
SFBs are similar to traditional banks as they accept deposits and provide loans. However, their main focus is to serve the underserved or unserved banking areas, primarily in rural areas and tier three cities where there are no mainstream banks. These banks provide loans to individuals and businesses that may not have access to traditional bank loans, such as small shop owners. SFBs are interested in getting listed on the stock exchange once they reach a net worth of 500 CR within 3 years, as mandated by the Reserve Bank of India (RBI).
Background:
Jana Small Finance Bank:
- This Bank, formerly known as Janalakshmi Financial Services, converted into a small finance bank in 2017. It focuses on providing financial services to the urban and rural underbanked population. With a widespread presence across the country, Jana Small Finance Bank aims to leverage its established customer base to drive growth and expansion.
Capital Small Finance Bank:
- Capital Small Finance Bank, headquartered in Jalandhar, Punjab, has a strong foothold in the northern regions of India. Established in 2016, it has rapidly expanded its network to cater to the financial needs of individuals and small businesses. The bank emphasizes technology-driven solutions to enhance customer experience and streamline its operations.
Business Models:
Jana Small Finance Bank:
- Jana Small Finance Bank’s business model revolves around offering a range of banking and financial products, including savings accounts, fixed deposits, loans, and microfinance. The bank aims to empower its customers with accessible and inclusive financial services, contributing to the overall socio-economic development of the communities it serves.
Capital Small Finance Bank:
- Capital Small Finance Bank, with a focus on serving the agriculture and MSME sectors, provides a diverse set of financial products such as agricultural loans, micro and small business loans, savings accounts, and more. The bank’s business model aligns with supporting the growth of small businesses and contributing to rural development.
Jana Small Finance Bank and Capital Small Finance Bank
Jana Small Finance Bank is the fourth largest SFB in terms of Assets Under Management (AUM) and deposit size. It was incorporated in 2006 and started operating as a small finance bank from 28th March 2018. On the other hand, Capital Small Finance Bank was introduced in 1999 as a local bank from Punjab and commenced its operation as India’s first small finance bank. Jana SFB has a PAN India presence with 771 banking outlets in 22 states and 2 union territories, while Capital SFB has a presence mainly in the northern states of India with 173 banking outlets.
Market Share And Growth Prospects :
Jana SFB has the fourth largest market share with 11%, while Capital SFB has a market share of 2.8%.
Growth Prospects:
Jana Small Finance Bank:
- Jana Small Finance Bank envisions sustainable growth by expanding its customer base, enhancing digital capabilities, and diversifying its product offerings. The bank’s focus on financial inclusion and technology-driven solutions may position it well for future opportunities in the evolving banking landscape.
Capital Small Finance Bank:
- Capital Small Finance Bank aims to capitalize on the growth potential in the northern regions of India, leveraging its established presence. The bank’s emphasis on agricultural and MSME lending aligns with the economic landscape of its target market, presenting opportunities for growth and profitability.
Financials
When comparing the financials of Jana SFB and Capital SFB, Jana SFB emerges as the larger bank. In terms of advances, Jana SFB has 2,13,471 million rupees, while Capital SFB has 57,841 million rupees. Jana SFB also has higher secured advances at 57.42%, compared to Capital SFB’s 99.85%. Additionally, Jana SFB has a higher growth rate in advances at 42% compared to Capital SFB’s 12%. In terms of deposits, Jana SFB has 1,89,367 million rupees, while Capital SFB has 70,000 million rupees. Jana SFB also has better deposit growth.
Jana Small Finance Bank:
- Analyzing Jana Small Finance Bank’s financial performance, it is essential to consider factors such as asset quality, loan portfolio, and profitability. Investors may assess key financial ratios, non-performing assets (NPA) levels, and the bank’s ability to manage risk while sustaining growth.
Capital Small Finance Bank:
- Investors should scrutinize Capital Small Finance Bank’s financial indicators, focusing on its asset quality, net interest margin, and capital adequacy. Understanding the bank’s approach to managing credit risk, diversifying its loan portfolio, and maintaining a healthy balance between deposits and loans is crucial.
Key Parameters
Looking at some key parameters, Jana SFB has a Kasa (Current Account Saving Account) percentage of 20%, while Capital SFB has a higher Kasa percentage of 37.76%.A higher Kasa proportion shows a lower cost of assets. Jana SFB also has a lower cost of funds at 7.4%, compared to Capital SFB’s 2.8%. Jana SFB has a higher net interest margin at 7.76%, while Capital SFB has a net interest margin of 2.02%. In terms of asset quality, Jana SFB has lower Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA) numbers at 2.44% and 0.87% respectively, compared to Capital SFB’s 2.73% and 1.36%. Jana SFB also has a higher Capital Reserve Adequacy Ratio (CRAR) and Provision Coverage Ratio (PCR) indicating better financial strength.
Valuation
When it comes to valuation, Jana SFB has a Price-to-Earnings (P/E) ratio of 9.71, while Capital SFB has a P/E ratio of 17.2. This indicates that Jana SFB is less expensive in terms of valuation.
IPO Details
Both Jana SFB and Capital SFB have their IPOs open from 7th to 9th of February. The price band for Capital SFB is 445 to 468 rupees, while the price band for Jana SFB is 393 to 414 rupees. The objectives of both IPOs are similar, as the funds raised from the issue will be used for tier one capital requirements and capital adequacy requirements.
Both Jana Small Finance Bank and Capital Small Finance Bank present unique value propositions to investors, emphasizing financial inclusion and catering to the diverse needs of their customer base. Potential investors should carefully assess each bank’s business model, financial performance, and growth prospects before making informed investment decisions. As the small finance banking sector continues to evolve, these IPOs provide an opportunity for investors to participate in the growth story of financial inclusion in India. That concludes our comparison of Jana Small Finance Bank and Capital Small Finance Bank. We hope this summary has provided you with valuable insights.
Disclaimer: The information is only for information purpose only. It is always recommended to consult with certified financial experts before making any investment decisions. Follow busymoneyfreak.com .