Jana Small Finance Bank shares zoom 20% on strong Q4 results, plan to convert into regular bank; here are 6 factors fueling the rally

Microlender Jana Small Finance Bank surged at the stock market on Tuesday, April 30, in the backdrop of strong results reported for the March 2024 quarter and the plan announced to convert the small finance bank (SFB) into a regular bank.

Shares of Jana SFB were locked in the 20% upper circuit in morning trade on Tuesday. The stock peaked to lifetime highs of ₹600.35 apiece on the NSE.

The shares showed no signs of weakening during the mid-day trade, with the scrip valued at ₹596.25 apiece on the NSE at 12:56 pm, up 19.3% as against the previous day’s close.

Notably, Jana SFB was listed on the exchanges in February this year and has already advanced 45% from its initial public offering (IPO) price of ₹414 in nearly two-and-a-half months.

Here are six key factors that have aided the rally in the Jana SFB stock:

Plan to convert into universal bank

Days after the Reserve Bank of India (RBI) unveiled the roadmap for small finance banks to voluntarily convert into regular or universal banks, Jana SFB became the first among the microlenders to announce that it would avail the opportunity extended by the central bank.

Also Read: RBI shares roadmap to convert SFBs into universal banks; check minimum profit, NPA & other eligibility criteria

Following the release of Q4 results on Monday, April 29, Jana SFB confirmed to the press that it would be applying for a universal bank licence.

As per the norms laid down by the RBI, the applying SFBs should have a net worth of ₹1,000 crore, must have logged a net profit in the last two financial years, and their gross non-performing assets (GNPA) and net NPA (NNPA) ratios should be less than or equal to 3% and 1%, respectively, in the last two financial years.

Nearly four-fold jump in Q4 net profit

Jana Small Finance Bank’s profit after tax (PAT) jumped 297% to ₹321.4 crore in Q4FY24 compared to ₹81 crore in Q4FY23. Compared with the previous quarter, PAT was up 138.7% from ₹134.6 crore in the December quarter.

For the full year 2023-24, Jana Small Finance Bank’s PAT stood at ₹670 crore compared to ₹256 crore in FY23, registering a growth of 162%.

Healthy double digit growth in NII

The bank’s net interest income (NII) rose 26.4% to ₹590.7 crore in the March quarter compared to ₹467.3 crore a year ago. Sequentially, NII was up 7.7% from ₹548.5 crore in Q3FY24. NII grew to ₹2,127 crore in FY24 compared with ₹1,660 crore in FY23, up 28.1%.

Drop in bad loans

Provisions for bad loans, too, dropped 12.1% year-on-year in Q4 FY24 to ₹175.45 crore. Sequentially, however, they were up 9.2%.

CASA ratio improves

The Bengaluru-based SFB’s CASA ratio stood at ₹4,447 crore in Q4FY24, up 34.7% from the same period a year ago and 14.05% from the December quarter.

CASA ratio stood at 19.7% in the March quarter compared to 20.21% in the year-ago period and 18.76% in Q3FY24.

AUM rises 25% to ₹24,745 crore

The lender’s assets under management (AUM) increased to ₹24,745 crore, up 25.6% YoY compared to Q4FY23 and 4.8% QoQ compared to the December quarter.

Jana Small Finance Bank is a scheduled commercial bank and the fourth largest small finance bank in India. The bank was launched in March 2018. From its origin of being a NBFC-MFI, the bank has transformed steadily over the years, leading to 60% of its lending book being secured, mostly backed by mortgages.