Understanding Jio Financial Services Limited: A Detailed Breakdown
We’ll be discussing a stock that many people ask me about. A former MBA student recently asked me about Jio SIM cards, thinking they were listed on the stock exchange. I corrected her, saying that Jio Telecom is not listed; instead, it’s Jio Financial Services Limited, an NBFC (Non-Banking Financial Company) that has nothing to do with SIM cards.
Background of Jio Financial Services Limited
Jio Financial Services Limited, incorporated in 1999, was originally called Reliance Strategic Investments Private Limited. On July 25, 2023, its name changed to Jio Financial Services Limited. It’s classified as a systemically important non-deposit-taking NBFC, which means it falls under stringent norms due to its significance, often referred to as “too big to fail.”
The company also operates as a Core Investment Company (CIC), which implies it doesn’t engage in direct business operations like manufacturing or services. Instead, it acts as a holding company, investing in various businesses. The holding company benefits from the success of its subsidiaries.
Jio Financial Services: Structure and Subsidiaries
Let’s take a look at the structure of Jio Financial Services Limited. It’s the holding company, and its subsidiaries operate in various sectors, both existing (shown in gray) and upcoming (shown in orange). Here’s a breakdown:
- Jio Finance Limited: An NBFC that raises money and offers loans.
- Jio Leasing: Engages in leasing services.
- Jio Insurance Broking: Comparable to PolicyBazaar, it ties up with various insurance companies and earns commissions from selling insurance policies.
- Jio Payment Solutions: A payment aggregator regulated by RBI, it offers payment gateways.
- Jio Payment Banks: A payment bank regulated by RBI, similar to Airtel and Paytm Payment Banks.
They’ve also proposed a joint venture (JV) with BlackRock to enter the asset management space, potentially leading to broking services like Zerodha or Upstox. The company could also venture into asset management by introducing mutual funds.
Future Plans and Projections
According to the FY26 estimates from their investor presentation, here are some major goals:
- Jio Finance Limited: Disburse loans up to ₹60 lakh crore.
- JV with BlackRock: Achieve mutual fund AUM (Assets Under Management) of ₹79 lakh crore.
- Jio Insurance Broking: Aim for a gross written premium of ₹15 lakh crore.
- Jio Payment Bank: Target total digital payments of ₹3,892 lakh crore.
Business Updates
Some updates from various segments of the business:
- Jio Finance Limited: Started vendor financing in May 2024, launched loans against mutual funds, and is testing home loans in beta. They also plan to introduce loans against property and securities.
- Jio Insurance Broking: Partnered with 31 insurance companies and launched auto and two-wheeler insurance through the Jio Finance app.
- AMC (Asset Management Company): Leadership positions are identified, and tech platforms are in advanced stages.
- Jio Payment Bank: Approved for setting up 16,000 business correspondent outlets and has over 1 million current and savings account customers.
- Jio Payment Solutions: Integrated UPI on billing terminals and is preparing to offer EMI on credit and debit cards.
Market Performance and Valuation
Jio Financial Services’ stock has been in a sideways range since July 24, 2023, with a notable breakout on September 2 due to changes in regulations allowing the company to enter the futures and options (F&O) segment potentially. This triggered a stock surge of over 7% in a single day.
However, the big question is around valuation. Currently, the stock’s P/E ratio stands at 136, which raises concerns. After slicing off the reliance on Reliance Industries’ valuation, the standalone P/E for Jio Financial Services still stands at 59.21, which is a high figure.
Investors are betting on the potential of the company’s various business ventures—whether the NBFC, insurance broking, asset management, or payment solutions will grow significantly. The success of these projects could make Jio Financial Services an interesting stock to watch in the coming years.
Conclusion
Jio Financial Services Limited is positioned as a holding company with multiple subsidiaries in different sectors. While many of their businesses are still in the early or beta stages, the company has ambitious plans. The stock market is currently reacting to its potential, but whether the company can deliver on its promises remains to be seen.
I hope you enjoyed this breakdown of Jio Financial Services. If you did, please share it with your friends. I’ll see you in the next one—till then, take care!