Macquarie Predicts Jio’s Financial Services Could Emerge as India’s Fifth-Largest Company Post-Demerger with Reliance 

According to a recent report by Macquarie, Reliance Jio Infocomm Ltd (Jio) has the potential to become the fifth-largest financial services company in terms of net worth after its demerger with Reliance Industries Ltd (RIL). 

Macquarie estimates that Jio Financial Services could have a net worth of Rs 1.5 lakh crore post demerger, surpassing the net worth of Bajaj Finance Ltd and HDFC Life Insurance Co Ltd.

Macquarie attributes Jio’s potential success in the financial services sector to its large customer base and strong brand name. The report suggests that Jio will likely focus on consumer and merchant lending, which are key areas for non-banking financial companies (NBFCs) like Bajaj Finance and fintech companies like Paytm.

Jio has been actively expanding its financial services business, evident from the recent launch of its digital lending platform called Jio Money. This platform serves as a white-label lending solution that enables banks, NBFCs, and other financial institutions to provide loans to their customers.

Before starting let’s see what Jio Financial Service is and what does it provide?

What does Jio Financial Services do?

Jio Financial Services, a subsidiary of Reliance Industries Limited, is a non-banking financial company (NBFC) in India that provides various financial services to its customers. It offers services like loans, insurance, and investment products. Essentially, it helps people with their financial needs. 

Whether someone needs a loan for personal or business purposes, wants to protect themselves with insurance coverage, or wishes to explore investment opportunities, Jio Financial Services is there to assist. It aims to make financial services more accessible and convenient for individuals and businesses in India.

How to sign up for Jio Finance?

If you want to sign up for Jio Finance just follow these steps:

• Visit the Jio Finance website or download the app.
• Create an account and verify it.
• Choose the financial product you want (loan, insurance, investment).
• Complete the application process by providing required information and documents.
• Wait for approval.
• Start using Jio Finance services.

RIL demerging into Reliance Strategic Investments Ltd (RSIL)

On October 21, 2023, RIL (Reliance Industries Limited) announced its plan to demerge its financial services undertaking into a separate entity called Reliance Strategic Investments Ltd (RSIL), which will subsequently be renamed Jio Financial Services Ltd (JFSL). The company intends to list JFSL on the stock exchanges.

RSIL is a wholly owned subsidiary of RIL and is registered with the Reserve Bank of India (RBI) as a non-deposit-taking systemically important non-banking financial company (NBFC).

As part of the demerger, RIL’s investment in Reliance Industrial Investments and Holdings Ltd (RIIHL), which is a component of its financial services undertaking, will be transferred to JFS. RIIHL currently holds a 6.1% stake in RIL through its interest in Petroleum Trust and Reliance Services and Holdings Ltd, making it the ultimate beneficiary.

According to a report by Macquarie, assuming that the 6.1 percent stake in RIL is realized over time, JFS could become the fifth-largest financial services firm in India with a net worth of Rs 1 trillion.

KV Kamath Joins Reliance Industries Board, Boosting Growth Prospects for Jio Financial Services

Reliance Industries announced on November 4 that KV Kamath, a seasoned banking veteran and chairman of the National Bank for Financing Infrastructure and Development, has been appointed as an independent director on its board for a five-year term. Kamath will also join the board of RSIL.

Kamath, who began his career at ICICI in 1971, has a remarkable track record of identifying new markets and opportunities. With his expertise, Macquarie expects JFS to take an aggressive stance and expand its business verticals. Kamath’s appointment adds a compelling dynamic to the future growth of JFS.

How will the Jio Financial Service impact the NBFC market in India?

Jio Financial Services, a subsidiary of Reliance Industries Limited, is a non-banking financial company (NBFC) in India. It was established in 2019 to offer financial services such as loans, insurance, and investments to the Indian market. Here’s how its entry into the NBFC market could impact the industry:

1. Vast customer base: Jio Financial Services has access to Reliance’s huge customer base of over 400 million subscribers. This gives them a significant advantage in terms of reaching and attracting customers.

2. Strong financial position: Reliance is a financially stable company, which provides a solid foundation for Jio Financial Services. This financial strength will support its growth and expansion in the NBFC market.

3. Emphasis on technology: Jio is known for its focus on technology. This tech-driven approach enables Jio Financial Services to leverage advanced tools and systems to deliver financial services efficiently.

The entry of Jio Financial Services is expected to intensify competition within the NBFC market. This could benefit consumers by potentially leading to lower interest rates and improved customer service. However, it may also result in some existing NBFCs struggling or exiting the market.

RIL’s Extensive Network and NBFC License

With a vast network of over 15,000 stores across various formats and a massive customer base of 400 million in telecom and 200 million in retail, Reliance Industries (RIL) has a significant advantage. 

Macquarie believes that RIL can capitalize on this network to drive growth in its financial services business. Furthermore, RIL’s NBFC license opens doors for substantial consumer and merchant lending, potentially posing a threat to fintechs and NBFCs, especially Bajaj Finance and Paytm.

According to Macquarie, banks can breathe a sigh of relief as they possess the ability to conduct a wide range of business activities at a lower cost of funds, giving them a competitive edge. While Reliance Industries’ (RIL) foray into financial services has the potential to shake up the industry, Macquarie highlights the importance of de-risking the path to profitability. 

The note further suggests that RIL should adopt a focused capital allocation strategy, prioritizing energy transition and digital infrastructure themes. This would not only ensure a clearer road to success but also make the journey more captivating for stakeholders.