Jio Financial: Three reasons why JFSL will succeed, explains Mukesh Ambani

Just like Reliance Industries' telecom and retail units, Reliance Retail and Jio, another subsidiary, Jio Financial Services Ltd (JFSL), will prove to be an invaluable addition to the Reliance ecosystem of customer-facing businesses, RIL Chairman and MD Mukesh Ambani said on Monday.

Addressing investors and shareholders at the much-awaited Reliance AGM 2023, Ambani listed three reasons for his confidence in Jio Financial Services:

1. The digital-first architecture of JFS will give it an unmatched headstart.

2. This is a highly capital-intensive business. Reliance has capitalised JFS with a net worth of Rs 1.2 lakh crore to create one of the world’s highest capitalised financial service platforms at inception.

3. JFS is being led by KV Kamath, a financial sector veteran, who formerly led ICICI Bank and then, later, the BRICS Bank.

The RIL Chairman also said that JFS will consolidate its payments infrastructure with a ubiquitous offering for both consumers and

merchants, further driving digital payment adoption in India.

Jio Financial will enter the insurance segment to offer life, general, and health insurance products. Speaking at the AGM, Ambani said, "Jio Financial Services will...offer simple, yet smart, life, general, and health insurance products through a seamless digital interface, potentially partnering with global players."

JFS will use predictive data analytics to co-create contextual products with partners and cater to customer requirements in a truly unique way, he said.

In a recent report, foreign brokerage CLSA mentioned that Jio already had a broking business in place with over 17 insurance partners, which can be scaled up faster. While life insurance penetration in India is in line with the world average, non-life insurance penetration is significantly behind the world average. This presents a great opportunity for JFS.

“It will be interesting to see the impact Jio can make on pricing in the industry while we believe covering more lives could be a key focus area for Jio… We believe Jio’s entry point could be corporate-relationship-driven segments such as group health and commercial insurance,” CLSA noted.

Larry Fink, Chief Executive Officer (CEO) of the global asset management company (AMC), said that JFS and BlackRock will work on introducing digital first investment solutions in India. “JFS and BlackRock together aim to transform through digital first offering and democratisation of access to affordable investment solutions throughout India," he said.

Fink also said that both companies have a shared vision to create better financial futures, and will deliver the combined expertise and scale to unlock the power of investing for millions of people in India.

“To me the last piece was the JFS articulation, which he clearly kept away from too much of focus on the lending business. You had the Blackrock partnership which was the focus, you had the insurance thing which was mentioned and then the payment platform which Mukesh Ambani spoke about innovating without having to compete. So it is disruptive at the same time complimentary to platforms existing in the Indian ecosystem. So it lays a lot of emphasis on JFS as a significant partnership led growth area, but retail is the space to watch out for,” said market expert Prakash Diwan.

JFS was listed as a separate entity on the bourses last week on August 21. Shareholders were issued one share of JFS for every one share of Reliance held, in the demerger. "It was like a mini bonus for our shareholders," Ambani added.

JFS, whose shares have been falling ever since they got listed, recovered some group ahead of the 46th RIL AGM today. The stock climbed 4.47 percent to hit an intra-day high of Rs 221.75 on BSE. At close, it settled 0.28 percent lower at Rs 211.65.

JFS shares tumbled nearly 2 percent on Friday and 5 percent each in the preceding three trading sessions. With today's gain, JFS commanded a market capitalisation of Rs 1.40 lakh crore against Rs 1.68 lakh crore at the time of listing.