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DRChoksey Research Report
Jio Financial Services Ltd. experienced muted results in Q1 FY25, with a decrease in interest income due to the maturity of high-yielding fixed deposits, a decrease in treasury income, and a prompt investment of the matured funds in liquid instruments. Meanwhile, the profit after tax growth remained stable due to lower operating expenses. The operating expenses for the quarter decreased QoQ on the high base in Q4 FY24 on account of higher investment to set up new businesses.
Looking ahead, the management is fully committed to expanding its range of secured lending products, with a strategic focus on the launch of new products. Jio Financial Services is poised for substantial traction across all business segments, leveraging the robust backing of its parent company and its extensive customer base.
The NBFC anticipates maintaining strong capital adequacy, providing vital support for its growth endeavors, and acting as a crucial buffer for any unforeseen circumstances.
Nevertheless, we anticipate that earnings will continue to fluctuate until Jio Financial Services obtains all approvals and progresses into the ramp-up phase.
We value the NBFC based on its June 2024 book value of Rs 219.5 per share. Applying a price/book value multiple of 2.0 times, we further discount the value by 20% for the Holdco to arrive at a revised target price of Rs 350 per share (earlier Rs 395). Given the 3.9% upside over current market price, we maintain our “Hold” rating on the shares of Jio Financial Services.
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