Jio Financial incorporates subsidiary for distribution of financial products; stock gains nearly 2%

Shares of Jio Financial Services Ltd (JFSL), a part of Mukesh Ambani-led Reliance Industries, rose up to 2% on Friday after the company announced the incorporation of a wholly owned subsidiary, Jio Finance Platform and Service Limited, on August 14, 2024. The subsidiary has been established to focus on distribution of financial products and allied services. The development comes nearly a month after JFSL received approval from the Reserve Bank of India (RBI) for the conversion of the firm from a non-banking financial company (NBFC) to a core investment company (CIC).

“The company will invest an amount of ₹1 lakh towards initial subscription of 10,000 equity shares of face value ₹10 each,” JFSL said in an exchange filing on August 15.

The certificate of incorporation was received from the Ministry of Corporate Affairs, on August 15, 2024, the release noted.

Snapping two sessions losing streak, Jio Financial shares rose as much as 1.7% to ₹325.50 on the BSE. Early today, the NBFC heavyweight opened higher at ₹324, up 1.2% against Wednesday’s closing price of ₹320.05.  The largecap stock has fallen nearly 3% in the past two sessions.

At the time of reporting, JFSL shares were trading marginally higher by 0.14% at ₹320.50, paring most of the early gains. The market capitalisation stood at ₹2.04 lakh crore, with more than 7 lakh shares changing hands over the counter.   

At the current level, JFSL shares trade 18% lower than its 52-week high of ₹394.70 touched on April 23, 2024, while it surged over 55% from its 52-week low of ₹204.65 hit on October 23, 2023. The NBFC stock has risen 29% in the last 12 months; 18% in six months; and 37% in the calendar year 2024. In the past one month, the stock has corrected nearly 7%.

In July this year, JFSL got the Reserve Bank of India (RBI) approval for the conversion from a NBFC to a core investment company (CIC). On November 21, 2023, it had submitted an application to the central bank for the conversion for granting CIC status.

JFSL is a holding company for operating a set of financial services businesses through its subsidiaries Jio Payment Solutions Ltd, Jio Payments Bank and Jio Insurance Broking Ltd, Jio Finance, and Jio Leasing. As a CIC, the company looks to get into the business of retail lending, merchant lending, leasing, payments bank operations, payments solutions and insurance broking. The company has also entered into a joint venture with BlackRock to foray into the asset management business and has sought in-principle approval from SEBI for the same.

As per the RBI norms, it is mandatory for JFSL to undertake the conversion exercise while changing the shareholding pattern and control of the company following the demerger from parent, RIL, in July 2023.

For the first quarter ended June 30, 2024, the country’s third largest listed NBFC, after Bajaj Finance and its holding company Bajaj Finserv, reported 6% year-on-year decline in its net profit at ₹312.63 crore as against ₹331.92 crore in Q1 FY24. Sequentially, the profit increased by 0.6% from ₹310.6 crore in the March quarter of FY24.

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