Jio Financial shares jump 2% on getting RBI's nod to become core investment company

Shares of Jio Financial Services Ltd (JFSL), a demerged entity of Reliance Industries (RIL), gained over 2% in opening trade on Friday, in sync with the broader market, a day after the Reserve Bank of India approved the conversion of the company from a non-banking financial company (NBFC) to a core investment company (CIC). On November 21, 2023, JFSL, the country’s third largest listed NBFC after Bajaj Finance and its holding company Bajaj Finserv, had submitted an application to the central bank for granting CIC status.

A CIC is a specialised NBFC with an asset size of more than ₹100 crore whose assets are largely invested in their group companies either in the form of equity, preference shares or convertible bonds or loans. Based on the RBI circular on December 20, 2016, it is supposed to hold not less than 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies.

According to the RBI norms, it is mandatory for JFSL to undertake the conversion exercise while changing the shareholding pattern and control of the company following the demerger from parent, RIL, in July 2023.

JFS is a holding company for operating a set of financial services businesses through its subsidiaries Jio Payment Solutions Ltd, Jio Payments Bank and Jio Insurance Broking Ltd, Jio Finance, and Jio Leasing. As a CIC, the company looks to get into the business of retail lending, merchant lending, leasing, payments bank operations, payments solutions and insurance broking. The company has also entered into a joint venture with BlackRock to foray into the asset management business and has sought in-principle approval from SEBI for the same.

As of March 2024, the AUM of JFL was ₹175 crore, majorly consisting of vendor financing which was launched in March 2024. The company plans to launch loans against mutual funds, home loans, loans against property (LAP), roof top solar and enterprise device leasing solutions, which are expected to be announced in FY25.  The medium term plan of the company is to build a secured lending book. On a consolidated basis, JFSL had a sizeable networth of ₹1,39,148 crore as on March 31, 2024. Liquidity was strong with liquid assets of about ₹22,000 crore as on the same date, as per CRISIL report.

Following the announcement, Jio Financial shares rose as much as 2.4% to ₹356.50, while the market capitalisation rose to ₹2.24 lakh crore. Early today, the NBFC stock opened higher at 353.55, against the previous closing price of ₹348.05on the BSE.  The counter hit an all-time high of ₹394.70 on April 23, 2024, while it touched its record low of ₹204.65 on October 23, 2023.

The board of Jio Financial is set to meet on July 15, 2024, to consider and approve financial results for the first quarter ended June 30, 2024. In the March quarter of FY24, the company posted a consolidated net profit of ₹311 crore as compared to ₹294 crore in the December quarter of FY24 and ₹31 crore in the same period last year. For the full financial year 2024, the consolidated profit stood at ₹1,605 crore.  

The consolidated total income climbed to ₹418 crore in Q4 FY24 versus ₹414 crore in Q3 FY24 and ₹44 crore in Q4 FY23. The total income for the fiscal 2024 rose to ₹1,855 crore.  

The company’s net interest income (NII) stood at ₹281 crore for the quarter as compared to ₹269 crore in the December quarter of FY24 and ₹38 crore in the March quarter of FY23. For the full FY24, the NII was at ₹938 crore.

Earlier this month, CRISIL Ratings assigned a ‘AAA/Stable’ rating to JFSL’s non-convertible debentures, while it reaffirmed the ratings on long-term bank facilities and commercial paper at ‘AAA/Stable/CRISIL A1+’. Another rating agency, CARE assigned ‘AAA/Stable’ rating to JFSL’s long term bank facilities and ‘A1+’ to short term bank facilities. 

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