Jio Financial rallies 8%, hits new high on heavy volumes in weak market

Shares of Jio Financial Services (JFS) hit a new high of Rs 359 as they rallied 8 per cent on the BSE in Monday's intraday trade, amid heavy volumes, in an otherwise weak market.

The stock of the non-banking finance company (NBFC) surpassed its previous high of Rs 348 touched on February 26. In the past two months, the stock price of JFS has appreciated by nearly 50 per cent. In comparison, the S&P BSE Sensex was down 0.64 per cent at 73,643 at 03:02 PM.

The counter saw huge trading volumes today as compared to average trading volumes in the past one week. A combined 117 million equity shares had changed hands on the NSE and BSE till the time of writing of this report, the exchange data shows.

JFS is a systemically important non-deposit-taking NBFC registered with the Reserve Bank of India (RBI). It is a holding company and 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).

JFS has also submitted an application to the Reserve Bank of India for conversion to a core investment company (CIC) from an NBFC. JFS, through its subsidiaries, and will be involved in the business of retail lending, merchant lending, payments bank operations, payments solutions and insurance broking.

JFS shifted its focus from an unsecured loan portfolio to secured loans. This decision came after the RBI's changed regulation with respect to the increase in the risk weights on unsecured loans. However, the company will continue to scale up and offer diverse loans in the unsecured segment as well but will have a more vigilant approach towards this segment. The company aims to foray into supply chain financing by launching it in Q4FY24 to address the working capital requirements of the suppliers. It has successfully completed its sandbox for consumer durables and personal loans.

Analysts at KRChoksey Shares and Securities believe JFS will continue to benefit from the wide customer base of Reliance Industries through its telecom and retail segments. Thus, JFS, as a part of secured loan financing, has planned to launch DaaS (Device-as-a-Service) which includes financing and operating leases of airfibre, phones, and laptops.

"The company also mentioned its upcoming pipeline, which includes loan against securities (LAS) and home loans. Through these products, the company will be building capabilities for unsecured and durable consumer durable products. Coming to the other businesses, JFL is in a continuous process of growing other businesses in addition to the lending business," the brokerage firm said in its Q3 result update.

JFL started its operations in fiscal 2024 and has launched consumer durable loans and personal loans in a sandbox environment.

The entity plans to provide consumer finance, through unsecured and secured loans, merchant lending (including trade credit, personal loans, store improvement loans, and unsecured business loans) and lending to micro, small and medium enterprises (working capital funding for suppliers and distributors). The focus in the medium term will be on building a secured lending book.

As the loan book grows, JFL’s operating income is expected to contribute significantly to the consolidated operating income of the JFS group. Further, the capitalisation profile of JFL is expected to eventually benefit from robust liquidity of the JFS group and the 6.1 per cent stake in RIL as investments held by JFS through its wholly owned subsidiary Reliance Industrial Investments and Holdings Limited (RIIHL), CRISIL Ratings said on JFL.