Jana Small Finance Bank Ltd (JSFB) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to the Q2 FY '27 earnings call of Jana Small Finance Bank hosted by Systematix Group. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference call over to Mr. Gaurav Purohit from Systematix Group. Thank you and over to you, sir.
Gaurav Purohit (Systematix Group): Thank you, Iqra. Good afternoon, everyone and welcome to Jana Small Finance Bank's Q2 FY '27 earnings call. On behalf of Systematix Group, I would like to thank the Jana management team for giving us the opportunity to host this call. We are pleased to have with us today the bank's senior management team led by Mr. Ajay Kanwal, Managing Director and CEO; Mr. K. S. Raman, Executive Director; Mr. Abhilash Sandur, Chief Financial Officer; along with other members of the senior management team. With that, I would like to hand over the call to Ajay, sir, for his opening remarks following which we will open the floor for questions. Over to you, sir.
Ajay Kanwal (Jana Small Finance Bank Ltd): Thank you so much and good evening to everyone. As always, we will refer to the investor deck which we have loaded on, and we will talk through a few specific slides and then we would welcome Q&A or other questions from all of you. Let's move to slide number three, and in slide number three, there are very few very important few points to note. Q2 has been the highest ever PBT we've had in our history. Having seen our Q2 performance, which now if you add the Q1 it reaches 326 crores, which is equal to the PAT of last year of 326 crores. Hence,
Ajay Kanwal (Jana Small Finance Bank Ltd): an increase of 80% in PAT to 100% of PAT. So, we should double up our PAT this year versus last year. Few of the key drivers, which have which are getting us there. First is our net interest margins. And and one of the contributors to this net interest margin improvement other than the various components which has gone in to build asset book, we obviously seen a growth of MFI which was a negative growth till last year. That has helped improve the NIMs. And, of course, cost of funds is down from a 7.9% to a 7.4%. So, a good combination of slightly better mix on the loan side and drop in cost of funds. I'm very glad to report that our best ever PBT is accompanied by growth in secured assets which has seen a secular secular improvement year on year and now we stand at 73.7%. For folks who are joining this call the first time, we have several times said that our intention is to be around 80% of secured assets, and that we consider as a good answer. I must say, while secured assets improvement in NIMs, our operating cost has seen a 15% year-on-year increase. On the right side you can see a graph which explains that how the jaws is widening, which is cost run rate is much lower than the revenue run rate, and that is getting that has become very healthy this quarter because NII has grown, the net interest income is up 35%, cost is 15%. So, we got a positive jaws of 20%. But very importantly, absolute cost in Q2 is lower than Q1, marginally so, but yet we've been able to arrest cost. I can also tell you with great certainty that the likelihood of cost remaining muted and us getting more operating leverage for our business is a fairly highly likely expectation that you should have. So, cost under control, NIMs are getting better, secure assets are growing. Finally we should talk about how the quality of book is, which is in terms of portfolio health. Gross NPA is down to 2.17%. Our net NPA is up at 1.08. We normally do extra provision to drop net NPA below 1, but this time we have chosen to wait because we have lodged our claims for the guarantee program, which is about 68 crores, that will comfortably get us below 1% moment the claims are realized. So, rather than provide now and then, you know, work around the whole accounting system next quarter again, once this claim comes, we have chosen that we will go to 1.08% and then once the claim is received, which we already lodged, I think we will anyway come below 1%. So, all in all a very very healthy quarter. But importantly, when it comes to cost, when it comes to NPA, when it comes to NIMs, it is signaling that we're going to have a very good year. I would now move to the next page, which is page number four. I've already mentioned the gross NPA and how that has moderated. I want to draw your attention on this page to the chart below, which is on the SMA and slippages. So, in quarter one, we had a marginal increase in SMA growth. It led to a slight increase in slippages and we had two one-offs of
Ajay Kanwal (Jana Small Finance Bank Ltd): on on how the book is looking and what we expect, and what it translate in terms of credit costs, I would take you to the next I would probably ask you to wait for page number 6. But let me first cover page 5, and this is an important page.
Moderator: Ladies and gentlemen, the management line has been disconnected. Please hold while we get them back.
Moderator: Ladies and gentlemen, thank you for patiently holding. The management line is connected. Over to the management.
Ajay Kanwal (Jana Small Finance Bank Ltd): Yeah. Good evening again, folks. So, I'm on page number 5, very important page. You can see our total unsecured book gross NPA is 673 crores. The provisions we have against is 377, leaving uncovered book of 296. Now, this 296 is completely under the guarantee program. In fact, the guarantee program is at 319 crores, of which I had mentioned earlier that we have already lodged 68 crores as claims, and the balance 251, we would lodge next next year in Q3 again. So, from a variety of perspectives, I think one is obviously the collection efficiencies have gone up, and has been at 99%, which we'll talk of when we go to the asset page. While more importantly, the old slippages, for which we have been paying guarantee commission over the last I would say, nearly Now, it's we began in November '24, so it's been a good 18 to yeah, nearly 18 to 20 months we have been paying this commission. We are finally seeing some result of that, and that we will see this year and the following year. So, I think that's an important one. The other piece I want the investors to note is we had said that all the new disbursements, we will continue putting under the guarantee program. The CGFMU program is is right now not open for fresh guarantees to be added to it. The scheme is going through an approval process, and but what we have done is we expect that to get reopened soon. We have assumed that it'll be open. We have taken the 1% that is required to put into the program, and we've already accrued for it. So, our results today that you see of 170 crores of profit already has a accrual, which is waiting to be used once the CGFMU program opens up. Our guidance of 100% growth in PAT also assumes that we will get our entire portfolio, even in the next half, under the CGFMU and CGTMSE programs. Having said that, I did want to give you the factual picture, which is right now the CGFMU portal is not open for the fresh ones, and once it opens, we will do the entire thing. But P&L wise, we've already accounted for it, and there will be no change or impact other than what you have already seen in our numbers in terms of PAT and a guidance for the second half. I should move to page number 6. Here, you can see the clear expectation from our end is we'll be much we'll be under 2% this financial year in terms of credit cost. If you add up the first half, it is 0.43 and 0.49. That comes out to a 0.92% for the first half. We do expect second half, which is quarter 3 starting, slippages to get lower. So, I would expect that our second half credit cost will be lower than the first half. Overall, certainly below 2%. I think that was the most important point here. I will now move on to page number 8, and this does discuss a few things about our advances. So, first is, our growth is 22% year-on-year at 38,752 crores, secured obviously growing faster at 24%. Our disbursements in the second
Ajay Kanwal (Jana Small Finance Bank Ltd): which is Rs. 4,414 crores is 7% high year-on-year and 5% quarter-on-quarter. We don't normally add up the NBFC disbursements, because they're lumpy and it can, you know, any quarter can look a little bit odd because of it. And we have been doing that for some time. I want to talk a bit about the MFI book, because I think that's been a key part of how things have turned around so dramatically for us. Other than the 99% collections, you can see that the and you will see that on the next page, MFI book is not growing too fast. And where in them in an MFI market where we can see that the number of players are lower, there is less capital and liquidity for many players who are very active, normally you would expect an MFI book growth to be very strong. But given that there have been enough and more customers who have not so good histories in the credit bureau, the MFI growth is a bit more subdued. The good news is also that our criteria is slightly tighter and I have given a simple variable here. 97% of all my customers have less than or equal to two MFIs versus 93% for the industry. Collection efficiency already meant and this time, I must add that our 99% collection efficiency is not just on the Jana collections, but all our BCs. And our BC book has been one of the problems in the past, but I'm glad to report that they are also in the 99% bucket with us. Our gold loan had a slow quarter. Our Q1 was very strong, Q2 was flattish. The primary reason here is that our big growth came in Jan '26 to March '26, and a big chunk of about 65% to 70% of these loans were six-month loans, so they all came up for renewals and interest servicing in Q2 this year. And with a drop in gold price, many of the folks had to pay their margins and you know, serve their interest components, etcetera. So, it's been a slow quarter from growth because the entire chain has been working hard on making sure that there is a very smooth transition given the change in gold prices, etcetera. We really have seen customers respond very responsibly. But of course, there is timing and work, which is why I think lot of the sales people have been busy getting this addressed. We should resume good growth starting Q3 again. I did want to talk about vehicle loans because our vehicle loan, which were primarily two-wheelers in the past, now include two-wheelers and used cars. Two-wheelers are now offered in about 135 cities and used cars in 50 cities. I did want to make a mention of it, because you know, the vehicle loans have a 76% year-on-year growth. It will maintain very robust growth, not for any change in credit criteria or any aggression on our side. We just are available in so many geographies. If we just expand geographies, the growth will sustain. How many geographies are we present in for our affordable housing micro LAP? We're in about 220-odd cities. That's the number of cities that two-wheelers and used cars can get up to. We normally give you a bar graph explaining the state concentration there is. And we think that it has been so consistent for so long that we don't give you half a page of that information, so we've just added a line here which says our top seven state concentration is at 67% with the top three at 37%. So, that's a bit of preamble on our asset business. I would now like you to turn to page 9. And here is where our biggest asset book today in secured assets is affordable housing. It is growing at 28.2% year-on-year with an average ticket size of 11.9 lakhs. Micro LAP we had slowed down. We intend to pick it up, but slowly and surely is our effort. That is on micro LAP. MSME, I had signaled earlier, is going to be one of our fastest growth engines. It is a 20.6% growth year-on-year. I would expect it to grow strongly and robustly. NBFC is 0.7%. Given that we have enough and more assets growing at our end, we are not really expecting to grow the NBFC term loans in any significant way. Vehicle loans you already spoke of 76%. Gold loans year-on-year, 81 though, of course, quarter has been tepid at 0.3. Others
Ajay Kanwal (Jana Small Finance Bank Ltd): you know, employee loans and FDODs, nothing consequential, from a P&L perspective. But we did have one large FDOD closure, which is why it is showing a quarter-on-quarter slight drop. Unsecured advances, year-on-year is 17% growth, but the quarterly growth is at negative 0.3 like I said that given that we are tight on the credit criteria and there is a huge population which is possibly unable to borrow. We are not seeing aggressive growth here, which is absolutely fine by us. And because we do want to have only good growth, so we'll keep trying to grow, but not diminishing our criteria and ensuring that whatever we grow, we put them in the guarantee program. I would now take your attention to slide number 11. Slide 11 is an important slide, because this is where we kind of draw our strength as a competitive moat, where the entire sales force of the bank is focused on doing multiple relationships with customers. This page specifically for our investors who are seeing it first time is on the housing loan and Micro LAP book, where our average active relationship is four. And you can see a good dispersal of where all these relationships lie, primarily from pre-approved business loans, you can see how gold loan penetration is improving though I think there is a lot more room there. Our two-wheeler penetration is still low at 1.1%. And of course our TD penetration, which was at 21, is at 19, but still very healthy. So, this is primary reason why we expect customers to use Jana as a preferred bank. And this is where we do expect operating leverage to really play a role with us. I'll swiftly move to page number 13 which is the liabilities page. Year-on-year CASA growth is 13, TD is 18.5. We have work to do on CASA. And we are committing that you will see a very different CASA growth in the second half. We have been a bit more focused on the TD in the first half. Our total liability book is now at 38 point 38,221 crores. Irrespective of the TD and CASA growth rate, our cost of funds remains stable at 7.4% both in Q1 and Q2, and is down from Q2 last year of 7.9 and it's got a very healthy mix of non-callables, bulk, and retail. And we've always maintained this that our contractual bookings is never short-term, so 96.1% of deposits are one year and above. So, I will just ensure, I just want to tell everyone that, yes, we have very strong plans to grow CASA. It hasn't picked up to our expectation in first half, but we are very comfortable both on liquidity and keep though the interest rates don't look very simplistic. Interest rates are slightly harder in Q2 than Q1, but we do want to do our best to make sure that cost of funds remain where they are at this point of time. I will now move on to the financial slide and I'll ask Abhilash to take you through some key financial slides so that you get a good flavor on some of our ratios.
Abhilash Sandur (Jana Small Finance Bank Ltd): Thanks, Ajay. So, I am now in slide number 16 which is explaining the profit for half-year, the numbers for half-year period. Like Ajay mentioned earlier, this is the quarter has been the highest ever PBT quarter for us. Half-year profits is equal to last year full year profits of 326 crore. Our ROA has improved to 1.4%. Our ROE is currently close to 14%. Book value per share is at ₹455 per share and our OpEx while quarter-on-quarter is has been flat, if I look at H1 against H1, that's around 15%, 16% growth in OpEx. That's how we have been managed to have a PPOP growth of almost 27% year-on-year. And then our we are continued to be comfortable in capital adequacy with 20% CRAR. NNPA, like Ajay mentioned, 1.08% with the claim coming in, it will be below 1%. And secured share of secured assets is at 73.7%. These are the key numbers which I wanted to cover in slide number 16. Moving on,
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