Jio Financial Services is a non-deposit-taking, non-banking financial company. Its primary offerings include retail lending, merchant lending, payments bank operations, payments solutions, and insurance broking.
The company primarily targets key customer segments, namely individuals and small businesses in urban, semi-urban, and rural India, to offer a sustainable and comprehensive range of financial services. It operates its financial services business through its consumer-facing subsidiaries, namely Jio Finance Limited (JFL), Jio Insurance Broking Limited (JIBL), and Jio Payment Solutions Limited (JPSL), and a joint venture, namely Jio Payments Bank Limited (JPBL).
Also Read: NBFCs gave most retail loans to buy vehicles and houses, reveals RBI data
KR Choksey highlights the following key factors for its bullish outlook:
Deepening penetration by scaling up all segments
The financial services sector in India remains largely untapped, serving only tens of millions of individuals, presenting a significant growth opportunity for new entrants like Jio Financial Services.
The wide customer base of Reliance Jio (the telecom arm of Reliance Industries) and Reliance Retail provides a substantial advantage to Jio Financial Services. With millions of Jio & Retail mart users already onboard, the financial services arm has a vast potential customer base to tap into.
This synergy between telecom and finance is likely to fuel Jio Financial Services’ growth in the long run. The brokerage expects the lending business to report an AUM of ₹46 billion in FY24E, with a ramp-up in the product pipeline that is in line with consumer requirements.
Also Read: Personal loan growth spikes 32%, quarter soars 10%: CRIF-FIDC
Further, the brokerage has pointed out that the increased use of mobile apps and push towards UPI-based payments will enable JIOFIN to witness robust traction in volumes given the strong customer base of the parent group, which has more than 450 million telecom subscribers as well as 250 million retail customers as of FY23.
In the payments bank business, the brokerage said that the NBFC has reintroduced its savings and current account products using a digital platform. Additionally, it says the company has revamped its bill payment segment and is planning to introduce debit cards in the future.
According to the brokerage, the company has an on-ground network of approximately 2,400 business correspondents. The company will also continue to offer insurance products through its insurance broking business to meet the needs of consumers and merchants. It will offer solutions for corporate customers, vendor partners, and small businesses in this way.
Also Read: NBFCs to witness slower growth, need to diversify funding sources in 2024
Favourable industry trends and market opportunities
Demand for financial services is led by favourable demographics, rising affluence, the finalisation of savings, and robust public digital infrastructure.
There has been continuous progress on digital adoption, which is visible through the rapid growth of online engagement with increasing user activity across the entire funnel of smartphone-led online usage of commerce and services.
The financial services industry presents a large digital financial offering by FY26E, which includes a credit opportunity of ₹60 trillion, a gross written premium of ₹15 trillion, an AUM of ₹79 trillion for mutual funds, and ₹3,892 trillion in digital payment, according to the brokerage.
Also Read: RBI tightens norms for banks, NBFCs investing in Alternative Investment Funds
The company is focused on providing personalised financial products and services tailored to the specific needs of its target market. The brokerage sees its partners as key drivers of its growth, leveraging their diverse business interests. The brokerage believes that these partners can play a crucial role in supporting the NBFC by facilitating the implementation of various pilot programs and customised services to meet the unique requirements of different sectors.
Recent developments
The joint venture between Jio Financial Services and BlackRock has applied for a mutual fund licence with the market regulator, and the application is currently under consideration, PTI reported on Wednesday (January 03).
An update on mutual fund approval status from the Securities and Exchange Board of India (Sebi) as of December 31, 2023, lists Jio Financial Services & BlackRock Financial Management among the applicants under consideration for a mutual fund licence, the report said.
Jio submitted its application on October 19, and Sebi’s status report showed that it was “under process.”.
Jio Financial Services Ltd, the newly demerged financial services arm of billionaire Mukesh Ambani’s Reliance, and BlackRock announced an agreement in July 2023 to form a 50:50 joint venture with a USD 150 million investment each to enter the asset management business in India.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 04 Jan 2024, 12:29 PM IST