Buy Jio Financial shares; target Rs 290, says KRChoksey as it initiates coverage on stock

KRChoksey Shares and Securities has initiated coverage on Jio Financial Services Ltd (JFS) with a 'Buy' rating and a target of Rs 290 per share. On Thursday, the JFS stock was trading 1.3 per cent higher at Rs 237.50. KRChoksey's target price suggests 22 per cent upside potential on the stock over the prevailing price.

Jio Financial Services, KRChoksey said, aims to increase financial services penetration with the acceleration of its strategy of being a digital-first financial solution company. The NBFC will leverage its strong brand equity, which would support building a robust customer base across all its businesses through cross-selling, KRChoksey said,

"The NBFC’s strong capital base is sufficient to cater to the growth strategy of the Company and also act as an adequate cushion for any contingencies going ahead. We expect the lending business to report an AUM of Rs 4,600 crore in FY24E, with a ramp-up in the product pipeline that is in line with consumer requirements," it said.

KRChoksey said the increased use of mobile apps and push towards UPI-based payments will enable JFS to witness robust traction in volumes given the strong customer base of the parent group, which has above 45 crore telecom subscribers as well as 25 Mn retail customers as of FY23.

"With the partnership with Blackrock for the AMC business, we expect the AUM in FY24E post-license approval and product launch to be around INR 23.3 Bn given the industry opportunities, brand equity, attraction towards the capital market, and the right choice of product basket," it said.

KRChoksey assigned price to adjusted book value multiple of 2 times to JFS, with a Holdco discount of 20 per cent.

To recall Jio Financial Services Ltd, erstwhile, Reliance Strategic Investments, is a systemically important non-deposit-taking NBFC registered with the RBI. It is a holding company and operates financial services business through its consumer-facing subsidiaries namely Jio Finance, Jio Insurance Broking and Jio Payment Solutions. It also has a joint venture namely Jio Payments Bank.

KRChoksey expects Jio Financial to get all the required approvals and licenses in next 6 months, which will help to ramp up the businesses faster.

"We expect the lending business to see an AUM of around Rs 4,600 crore considering the expected the industry AUM of Rs 38,00,000 crore in FY24E. This will be led by the upcoming product pipeline of the NBFC which includes business and merchant loans for self-employed individuals, sole proprietors, and small business entities; auto loans; home loans; and loans against shares," it said.

KRChoksey said the NBFC’s focus on operational execution, bolstered by its banking correspondent and merchant network would allow it to offer a wide array of financial products through various distribution channels and pursue crosssell opportunities. Co-branding opportunities will also help JFS to expand its product offering for its customers, it said.

In July 2023, JFS announced a joint venture with its partner BlackRock and committed an initial investment of up to $150 million each towards this joint venture. Over the last couple of months along with its partner, JFS was focusing on the preparatory work towards this business launch, including all new regulatory approvals, KRChoksey said.

Sebi's latest processing status report on mutual fund applications suggested that the application by JFS and BlackRock Financial Management dated October 19, 2023 was under consideration of getting an in-principle approval.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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