About JIO Financial Services as a Second Largest NBFC Company in India

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About JIO Financial Services as a Second Largest NBFC Company in India

Baja Finserv is the largest NBFC in India with a market capitalisation of Rs. 4.6 lakh crore. On August 21, 2023, Jio Financial Services (JFS) took over second place with a market capitalisation of Rs. 1.66 lakh crore.

The JFL left behind the Cholamandalam Investment and Finance which holds the position of second-largest NBFC in India with a market cap of Rs. 96,000 crore. Also, it makes JFL the 32nd most valuable company in India ahead of companies like Tata Steel, Coal India, Infosys, ITC, HDFC Life and Bajaj Auto.

The price of the share was higher than the brokerage estimates, as per the experts it must trade between Rs. 160-190 per share but it was trading at 261.85 per share which was much higher. The key investors in Jio Financial Services include Reliance Industries Limited, Google and Facebook. Jio Financial Services Ltd. formerly known as Reliance Strategic Investment Limited. Below check the plan behind JFSL to make it second largest NBFC. 

What is the Plan of Ambani for JFSL?

Mukesh Ambani is all set to disrupt top NBFC comapnies with a digital-first approach and a dream team consisting of ex-ICICI executives KV Kamath and Hitesh Sethi, along with daughter Isha Ambani. 

They already have regulatory NBFC license for key businesses and plan to incubate other financial services verticals like insurance, payments, digital broking and asset management. The new initiatives may come through joint-venture partnerships or inorganic opportunities. The enterprise is expected to launch a consumer and merchant lending business soon, making use of proprietary data analytics to support traditional credit bureau-based underwriting.

Existing Customer Base

Reliance has a registered customer base of 249 million, while Jio's subscriber base is 428 million. According to Sonal Gandhi of Centrum Broking, "With access to a wide retail footprint and strong subscriber base, Reliance has a competitive edge in terms of data that it can leverage to scale up its financial services business. There are 219 million total live customers in the bureau, Jio’s subscriber base of 439.3mn customers, suggesting access to far more data that can support lending decisions."

JFSL's strong capitalisation means that the company won't need to raise external equity capital for a while, limiting any dilution overhang. Additionally, because RIL has a AAA rating from credit agencies in India, JFSL will receive the same rating, enabling it to borrow funds at a low.

It is predicted by analysts that JFSL's entry into the financial market poses a threat to Bajaj Finance and fintech companies like Paytm. The Ambani family is expected to announce their business plan for the company in the AGM, which may take place next month. Macquarie, a global brokerage firm, had previously downgraded Paytm in June, citing JFSL's entry as a potential threat. 

Sushil Choksey of Indus Equity Advisors stated that he cannot compare Bajaj Finance to Jio at this time, but he believes that Reliance has always performed with big numbers and big rollout plans. In the quarter that ended on June 30, JFSL, formerly known as Reliance Strategic Investments, reported a consolidated profit of Rs 331.9 crore. The Ambani family decided to create a separate entity for JFSL due to the unique risks, market dynamics, and growth trajectory of the financial services industry.

Why the Demerger?

The Ambani family decided to create a separate entity for JFSL because of the unique risks, market dynamics, and growth trajectory of the financial services industry. This step was taken as the nature of competition involved in financial services is different from the other businesses that are owned by RIL, such as oil to chemicals, retail, and telecom. Also, the demerger will allow JFSL to have higher leverage for its growth compared to RIL. For shareholders, it will be like a value-unlocking exercise.

Frequently Asked Questions (FAQs)

What is the price of Jio financial services share in the GREY market?

Market observers state that the GMP for Jio Financial Services is currently at ₹73. This indicates that the grey market is anticipating a listing price of around ₹335 for Jio Financial Services, which is approximately 28% higher than the current market value of ₹262 per share.

What is the net worth of Jio Financial Services?

On Monday, Mukesh Ambani, the chairman of Reliance Industries Ltd, announced that Jio Financial Services is the latest part of the company. It has a net worth of Rs 1.2 lakh crore. It became one of the highly capitalized financial services platforms at the start.

Would it be wise to invest in Jio Financial Services?

Investing in Jio Financial Services completely depends on your investment goals and risk tolerance. The company is relatively new and it was not profitable in past. Although, it has a robust parent company and a vast market to tap into. The last choice will completely be yours whether you want to invest or not.

What is the potential for growth in Jio Financial Services?

Jio Financial Services has strong growth prospects as it targets a large and expanding market, supported by its parent company Reliance Industries Ltd. It is also well-positioned to capitalize on the increasing popularity of digital financial services in India.

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