Jio Financial Services (5th largest financial services company)

Jio Financial was formed as a result of Demerger of Reliance’s financial companies from RIL.
JFS’s information memorandum showcases its focus on 4 verticals:

1. Retail lending - Starting with they’ll probably offer loans on consumer durables (powered by Reliance Digital, Retail), personal loans (Reliance Retail, Jio), MSME lending (Jio Payments Bank) [Source: IIFL, Reliance Earnings]
2. AMC - JV with Blackrock for passive funds at low cost
3. Insurance broking - Insurance broking for retail customers, SMEs and corporates. Company is also planning to enter Insurance Business (source: IIFL)
4. Digital payments - Jio Payments Bank (JV with SBI)

Assets:

1. Total Net worth: 28,000 Cr
2. Holding (6.1% stake in RIL): 17,000 Cr (cost)
3. Core Net worth: 11,000 Cr

Valuation:

1. RIL Holding Valuation:
   The market value of its stake in RIL is ~1 lakh Cr. Since, this is a holding company it would get the holding company discount. It can be ~40% looking at other holding companies depending on how they use these shares. Happy to receive some suggestions here

2. Core Business: Has a networth of 11,000 Cr at present. If it scales as it should, looking at peers, a reasonable multiple would be 5x P/B. Suggestions welcome.
   

Considering all the above factors, it’s currently trading a premium still but it’s a Reliance venture.

Credit penetration in India is still low, so there’s plenty of room for all players to grow. Also, lower chances of undercutting here considering cost of funds and regulatory strictness in this industry.

Future:

• They need to expand their physical footprint (not sure how to track this) for disbursement, collection
• Hire a bunch of employees (only ~9 on LinkedIn), maybe outsource some work to other companies like Adecco

Disc: Tracking. Would look to add in future