Jio Financial keeps brokerages upbeat as RIL unit takes ‘balanced approach’ to growth

Brokerages remain watchful of Jio Financial’s progress, saying that it is taking a calibrated approach to growth

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Shares of Jio Financial Services tumbled over 6 percent to Rs 250 per share on January 16 after the demerged entity of Reliance Industries reported mixed October-December quarter (Q3FY24) performance. Brokerages remain watchful of the company’s progress, saying that it is taking a calibrated approach to growth.

This was the second financial report of Jio Financial Services after the stock was listed in August 2023. After its demerger, the company is eyeing to tap into multiple sectors like consumer finance, asset management, and insurance.

In the past one month, the stock of Jio Financial surged 12 percent as against a 2 percent rise in the benchmark Sensex.

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Jio Financial’s first innings: Muted net profit not a concern 

Analysts at CLSA said that Jio Financial’s quarterly profit of Rs 300 crore was “irrelevant” as the company is just starting up. “Jio Financial is taking a calibrated approach to growing its secured loan products and is planning to scale up to new segments like insurance broking and payments.

“They are also awaiting approval for mutual fund business,” the brokerage firm noted in a post-results review.

Those at Jefferies too said that the company is taking a balanced approach to growth as it ramps up its payments bank and payments platform. “The management is focused on consumer loans (secured and unsecured) and supply chain finance,” the brokerage firm highlighted.

Jio Financial Q3FY24 results and business update

In Q3FY24, Jio Financial Services net profit declined 56 percent quarter-on-quarter (QoQ) to Rs 293 crore as against Rs 668 crore in Q2FY24. The company’s net interest income (NII), however, rose 44 percent QoQ to Rs 186 crore in the quarter ended December.

Also read: Jio Financial Services Q3 results: Net profit at Rs 293 crore, NII at Rs 269 crore

The management highlighted big opportunity in lending, led by a calibrated approach to unsecured lending. Jio Financial will focus on secured products with launch of DaaS (Device-as-a-Service) which involves leasing of airfibre, phones, and laptops along with supply chain financing, loan against shares, and home loans.

In addition to lending, Jio Financial, as an insurance broker, tied up with three more insurers in Q3FY24, taking total partnerships to 27 across general and life insurers. In the payments bank division, it has revamped the digital savings bank account and undertaken a soft launch of debit card.

In the payment solutions business, it has carried out a pilot launch of Jio Voice box, enabled Jio Phones with UPI, and is implementing QR codes across the ecosystem. Apart from that, the company has filed an application for conversion from an NBFC to a core investment company (CIC). This structure allows the CIC to efficiently deploy capital to its subsidiaries as needed.

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