As Jio Fin awaits MF biz licence, this brokerage sees 24% upside in stock

On the bourses, shares of Jio Financial Services advanced 3.2 per cent to Rs 242 apiece on the BSE in Thursday's intraday trade

As Jio Financial Services awaits licence for its mutual fund business from market regulator Securities and Exchange Board of India (Sebi),  analysts at KRChoksey Institutional Research see 24 per cent upside in the company's stock price. 
 

On Thursday, January 4th, the brokerage firm initiated coverage on the stock with a 'Buy' rating and a target price of Rs 290, which is 23.6 per cent higher from the stock's Wednesday's closing market price of Rs 234.45 per share. 
 

"With the partnership with Blackrock for the asset management business, we expect Jio Financial Services' assets under management (AUM) to be around Rs 2,330 crore in FY24, post-license approval and product launch, given the industry opportunities, brand equity, attraction towards the capital market, and the right choice of product basket," Unnati Jadhav, analyst at the brokerage, wrote in a report.

On the bourses, shares of JFS advanced 3.2 per cent to Rs 242 apiece on the BSE in Thursday's intraday trade as against 0.7 per cent gain in the benchmark BSE Sensex index. The stock, however, is down 10.5 per cent from its listing price of Rs 262.

It hit an all-time high of Rs 266.95 on September 4, 2023, and an all-time low of Rs 202.8 on August 25, 2023.
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Jio Financial Services, earlier known as Reliance Strategic Investments Private Ltd, operates its financial services business through its consumer-facing subsidiaries namely Jio Finance Ltd (JFL), Jio Insurance Broking Ltd (JIBL), and Jio Payment Solutions Ltd (JPSL), and joint venture namely Jio Payments Bank Ltd (JPBL).
 

At present, the application submitted by the joint venture between Jio Financial Services and BlackRock -- JioBlackRock -- is under consideration, according to a Sebi update.
 

JioBlackRock is a 50:50 joint venture with a $150 million investment each from JFS and BlackRock to cater to India's growing asset management business.

"The NBFC's focus on operational execution, bolstered by its banking correspondent and merchant network will allow it to offer a wide array of financial products through various distribution channels and pursue cross-sell opportunities. By executing these strategies, the NBFC aims to establish its presence as a prominent player in the financial services segment," the report by KRChoksey said. 
 

We believe the NBFC also benefits from being a part of Reliance Group, in terms of synergies derived from various businesses, and cross-selling opportunities to the entire Reliance ecosystem, it added.
 

JFS' current operations

At present, Jio Financial Services offers personal loans for salaried and self-employed individuals through the MyJio app.  It also launched consumer durable loans in H1FY24 across pan-India. 
 

That apart, it offers business and merchant loans for self-employed individuals, sole proprietors, and small business entities; auto loans; home loans; and loans against shares.
 

"The company, with D2C (direct-to-consumer) approach, is developing a unified app for diversified financial needs of the customers. D2C and digital offering will result in lower cost of customer acquisition. The company will leverage artificial intelligence (AI) and analytics to create improved customer profiles for tailored offerings," Sonal Gandhi of Centrum Broking had said in a previous report. 
 

The total size of MSME lending market across ticket sizes and various player groups (banks, NBFCs, small finance banks, and other formal lenders) was around Rs 24 trillion as of March 2023, as per data compiled by KRChoksey Institutional Research.

In FY24, the MSME industry's overall growth is expected to be at 13 per cent to 15 per cent owing to budgetary push and rise in entrepreneurship in India.

That apart, Jio Fin has also launched Sound Box at pilot stage which, analysts believe, can generate substantial data footprint, enhance customer engagement across digital channel, and facilitate other businesses.
 

Analysts forecast industry-wide MSME credit opportunity of Rs 60 trillion, a gross written premium of Rs 15 trillion, an AUM of Rs 79 trillion for mutual funds, and Rs 3,892 trillion in digital payment by FY26. 
 

At the end of the second quarter of the current financial year (Q2FY24), JFS' net profit stood at Rs 668.18 crore, up 101.30 per cent from Rs 331.92 crore reported in Q1FY24. The total revenue from operations, meanwhile, was Rs 608.04 crore, up 46 per cent from Rs 414.13 crore in the previous quarter.