Jana Small Finance Bank aims to reduce its unsecured loan share to 20% by increasing focus on vehicle and MSME financing. The bank is awaiting RBI approval for a 9.9% stake acquisition by the TVS Venu Group, which is expected to support growth in two-wheeler loans. This strategic pivot comes as the bank targets an 80% rise in annual net profit by FY27.
Jana Small Finance Bank is moving to change its business model by reducing its reliance on unsecured loans. Currently, these loans make up about 27% of the bank's total advances. The management plans to bring this figure down to 22-23% within two years, with a long-term goal of reaching a 20:80 unsecured-to-secured loan ratio. This shift is designed to lower the overall risk in the bank's loan book by prioritizing collateral-backed products like gold loans, vehicle financing, and loans to small businesses.
Strategic Partnership with TVS
A central part of this strategy involves a proposed investment by the TVS Venu Group, which intends to acquire a 9.9% stake in the bank. This deal is currently pending approval from the Reserve Bank of India. If approved, the partnership is expected to create new opportunities for the bank to increase its two-wheeler financing business. The collaboration aims to leverage the reach of the TVS ecosystem to offer financing products to a wider set of customers, particularly during peak periods like the festive season.
Financial Performance and Growth
The bank reported strong financial results for the first quarter ending in June. Net profit rose by 52% to Rs 155 crore compared to Rs 102 crore in the same quarter last year. This performance was helped by a 33% increase in net interest income, which reached Rs 782 crore. The bank also reported an improvement in its net interest margin, a measure of the difference between interest earned on loans and interest paid on deposits, which rose to 7.5% from 6.6% a year ago.
Asset quality, a key metric for investors, has also shown positive trends. The gross non-performing asset ratio, which tracks the proportion of bad loans, fell to 2.24% by the end of June from 2.76% a year earlier. While the bank is targeting a 19-21% growth in its loan book and a 23-25% increase in deposits, it has also set an ambitious goal to grow its annual net profit to Rs 600 crore by the end of the 2027 financial year.
For investors, the key developments to track moving forward will be the status of the regulatory approval for the stake sale to the TVS Venu Group and the bank's ability to maintain its asset quality while expanding its secured loan portfolio. The success of this transition will depend on whether the bank can successfully manage the shift toward lower-risk products without sacrificing its margins or growth momentum.