Jefferies in its latest note said Reliance Industries (RIL) should get all necessary approvals for listing of shares of Jio Financial Services (JFS) by September. JFS will commence lending activities immediately and proceed for regulatory approvals for asset management, life and general insurance, the foreign brokerage said, adding that regulatory approvals are expected to take 12-18 months.
Jefferies said RIL’s foray into financial services with JFS will open an opportunity to play in India’s consumer, commercial loans & non-lending financial (NLF) side.
It said the demerger and listing process can take six months and that the build-up of franchise may be staggered, as technology, analytics and recovery platforms may need to be built in house.
Any aggressive stance, it said, could impact players in payments such as Paytm, Phonepe and NBFCs such as Bajaj Finance, it said.
“Chairman & CEO are ex-ICICI Bank leaders. Aggressive push can impact players in consumer loans & payments. We see a value of Rs 90,000-1,50,000 crore/ Rs 134-224 per share & raise SOTP for RIL to Rs 3,100,” Jefferies said on April 1.
Jefferies said it would watch-out for build-up of team and platforms for tech, analytics, payments, recoveries, compliance that take time to stabilise and are difficult to build inorganically.
“JFS’ first port of call could be consumer lending & merchant financing. JFS’ key advantage will be low funding cost/ better access on the back of the group’s high credit rating and ownership of 6.1 per cent stake in RIL. Group also aspires to foray into NLF businesses where it can even take inorganic route & benefit from recent regulatory change that allows banks to have up to 9 insurance partners,” it said.
The payments business may be built to acquire customers, as standalone economics are quite weak, Jefferies said.
JFS may over the next few years look to raise capital to fund growth or support cash-backed M&A as need to write-off goodwill will bring down capital, it said.
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