How Jio Financial Services will Empower India\'s Financial Future?

JIOFIN

Summary

Jio Financial Services is entering into financial services with big pockets. This research will help readers to understand what exactly they are planning to do in financial services.

1. Introduction to Jio Financial Services (JFS):

JFS is a financial services conglomerate of Reliance Industries Group which is entering the market during a period of significant economic growth in India. The nation is expected to reach a $10 trillion US dollar economy by 2035. This growth is driven by various factors, including a shift toward consumption and digitization, presenting substantial opportunities for broad-based economic growth.

Source : JFS Investor Presentation

2. Demerger and Name Change:
In November 2022, Reliance Industries Limited announced its intention to demerge its financial service business. This led to the formation of Jio Financial Services Limited, which was previously known as Reliance Strategic Investments Limited (RSIL). JFS became the holding company for the entire financial services business.

As part of the demerger, four licensed entities were demerged as subsidiaries of RSIL. These included an NBFC (Non-Banking Financial Company), a payment bank (a joint venture with State Bank of India), a payment aggregator entity, and an insurance broking entity.

After obtaining the necessary statutory approvals, the demerger was completed, and the name of Reliance Strategic Investments Limited was officially changed to Jio Financial Services, in line with the scheme. Following this, the company was successfully listed on August 21, 2023.

3. Board Reconstitution and Leadership Appointments:
The board of Jio Financial Services Limited underwent reconstitution under the leadership of Mr. KV Kamath, who was appointed as the Chairman. Independent directors, including Mr. Sunil Mehta, Mr. Bimal Tanna, and Mr. Rajiv Mehrishi, were also appointed.

Isha Ambani and Mr. Anshuman Thakur are expected to join the board as non-independent directors.

The Management team is led by Mr. Hitesh Sethia, President & CEO, Mr. Charanjit Attra, Group Chief Operating Officer

4. Business Integration:
In parallel to the demerger and the listing of Jio Financial Services, various steps were taken to integrate the different businesses. This included the integration of the payment bank, payment aggregator, and insurance broking entities into the Jio Financial Services Group.

Currently, JFS has approximately 449 employees across all its subsidiary entities.

5. Business Strategy:
 Jio Financial Services' overarching strategy is to democratize financial services across India by providing simple, innovative, and intuitive digital products. These products will cater to the needs of two primary customer categories: consumers and merchants.

The company aims to offer financial services across four key spectrums: borrowings, investment needs, transactional requirements, and insurance needs. Each of these businesses within the JFS group will operate based on four key principles: reputation and trust, regulatory adherence, return of capital, and return on capital.

6. Borrowing Services (Jio Finance Limited):

Jio Finance Limited (JFL), the NBFC under JFS, is set to offer an array of unsecured and secured loan products.

JFL's approach leverages state-of-the-art technology, devoid of any legacy technology debt, as it was established in 2023. This ensures a cost-effective and modern back-end and front-end technology stack.

The product roadmap for JFL includes direct-to-customer distribution through digital channels or at points of sale, embedded in the customer journey including through My Jio App.

The key differentiators will be the technology edge, the advantages of the Jio brand, robust underwriting, and a risk management approach focused on risk-adjusted return on capital.

Risk management functions will incorporate alternate data points, ensuring compliance with the Personal Data Protection Act of 2023. Additionally, an emphasis will be placed on collection frameworks, integrating preemptive and curative collection processes through behavioural analytics.

Over the last few months, Jio Finance Limited has worked on the launch of two products in a sandbox environment: consumer durable loans and personal loans. As of September 30, 2023, these products are available in 300 Points of Sale (POS).

7. Digital Services:
JFS aims to leverage its digital capabilities to meet the transacting needs of customers. Payment capabilities are expected to serve as vital fulfilment tools for all products offered across its subsidiaries.

The company will continue to offer savings and current account products through its payment bank business.

Insurance products will also be available through its insurance broking entity, catering to the needs of both consumers and merchants.

8. Investment Services:
JFS has taken the first step toward addressing the investment needs of its customers by establishing an asset management company. In partnership with BlackRock, an initial investment of up to $150 million each has been committed to this joint venture.

Over the last couple of months, significant efforts have gone into the preparatory work for this business launch, including obtaining the necessary regulatory approvals.

9. Financial Structure and Subsidiaries:

JFS is identified as a systemically important non-deposit taking Non-Banking Financial Company registered with the Reserve Bank of India.

The consolidated financial statements encompass the financial results of the company as a holding company and its subsidiaries, which include Jio Finance Limited, Jio Insurance Broking Limited, Jio Payment Solutions Limited, and others.

 Additional entities such as Reliance Industrial Investment Holdings Limited, Jio Infrastructure Management Services Limited, Jio Information Aggregator Services Limited, and Reliance Strategic Holding Limited are also part of the consolidated financial statements.

Jio Payment Bank Limited, a joint venture, offers financial services including payment banking facilities and retail banking facilities, adhering to guidelines issued by the Reserve Bank of India.

Source : JFS Investor Presentation

10. Alignment with Jio Brand
To strengthen the Jio brand's presence, the names of all consumer-facing entities have been aligned with the Jio brand.

It's essential to note that the figures of the previous year are not strictly comparable, given the significant changes and transformations that have taken place within the JFS group.

11. The financials summary of Jio Financial Services:




12. Key Ratios