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KRChoksey Research Report
We initiate coverage on Jio Financial Services Ltd. with a 'Buy' rating and target price of Rs 290 per share, with a 23.2% upside from current levels and assigning a price/adjusted book value multiple of 2.0 times with a Holdco discount of 20.0%.
Jio Financial Services aims to increase financial services penetration with the acceleration of its strategy of being a digital first financial solution company.
The non-banking financial company will leverage its strong brand equity, which will support building a robust customer base across all its businesses through cross-selling. 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 assets under management of Rs 46 billion in FY24E, with a ramp-up in the product pipeline that is in line with consumer requirements.
The increased use of mobile apps and push towards UPI-based payments will enable Jio Financial Services to witness robust traction in volumes given the strong customer base of the parent group, which has above 450 million telecom subscribers as well as ~250 million 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 Rs 23.3 billion given the industry opportunities, brand equity, attraction towards the capital market, and the right choice of product basket.
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