Jio Financial taking balanced approach; see limited risk for Bajaj Finance, banks: Jefferies

Jefferies in its latest note said the management of Jio Financial Services Ltd is focused on consumer loans both secured and unsecured and supply chain finance. The NBFC has expanded its client base in insurance broking to 27 and is ramping up its payments bank & payments platforms, Jefferies said adding that it sees JFS taking a balanced approach to growth. Despite initial concern about increased competition from JFS, it sees limited risk for Bajaj Finance Ltd and banks.

During the short investor call, Jefferies said, the JFS management highlighted the large opportunity in lending, led by a calibrated approach to unsecured lending. Jio Financial will focus on secured products with the launch of DaaS (Deviceas-a-Service), which involves leasing of airfiber, phones and laptops along with supply chain financing, loan against shares, and home loans, Jefferies said.

"Furthermore, in unsecured PL and consumer durable loans, capability building is largely done, with developed models of risk and underwriting," it said.

Also read: Jio Financial shares drop 6% as absence of dividend income, rise in opex hit Q3; what Centrum Broking says

Jefferies has a target price of Rs 9,470 for Bajaj Finance. The standalone entity is valued at 5.4 times March 2026 price to book value, it said. Jefferies did not offer a target for JFS but suggested Rs 3,125 as the price target for Reliance Industries Ltd. Shares of Jio Financial were trading 5 per cent lower in Tuesday’s trade. The Bajaj Finance stock was up half a per cent.

"In addition to lending, Jio Financial, as an insurance broker, tied up with three more insurers in 3QFY24, taking total partnerships to 27 across general and life insurers. In the Payments Bank division, it has revamped the digital savings bank account (within Payments Bank) and undertaken a soft launch of debit card. In payment solutions business, it has carried out a pilot launch of Jio Voice box, enabled Jio phones with UPI, and is implementing QR codes across the ecosystem," it said.

The brokerage noted that JFS has applied to Sebi for an asset management license in partnership with Blackrock and has put a management team in place. JFS has also filed an application for conversion from a NBFC to Core Investment Company (CIC). Besides, it has formed a separate 100 per cent subsidiary, JIASL, to undertake leasing operations.

Also read: Stock recommendations by analyst for January 16, 2024: JK Paper, KEC and JM Financial

Also read: Capri Global shares surge 15% to hover near one-year high; here's why