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Updated January 16th, 2024 at 09:51 IST

Jio Financial Services shares falls after profit drops 56% in Q3

In the third quarter of the fiscal year 2024, Jio Financial Services saw 45 per cent quarter-on-quarter increase in net interest income (NII).

Abhishek Vasudev
Jio Financial-BlackRock apply for mutual fund licence
The company witnessed a decline of around 66 per cent in other Income | Image:Freepik
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Jio Financial Services shares fall: Shares of Mukesh Ambani-backed Jio Financial Services dropped as much as 6.25 per cent to hit an intraday low of Rs 250 on Tuesday, a day after the company said its consolidated third-quarter profit fell 56 per cent sequentially.

In the third quarter of the fiscal year 2024, Jio Financial Services saw 45 per cent quarter-on-quarter increase in net interest income (NII), reaching Rs 270 crore compared to approximately Rs 190 crore in the previous quarter. This growth was primarily attributed to a rise in average interest-earning assets.

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However, the company witnessed a decline of around 66 per cent in other Income, amounting to Rs  150 crore. The decrease was primarily due to the absence of dividend income, which stood at approximately Rs 220 crore in the second quarter of the current fiscal year. Additionally, there was a decline in net gain on fair value changes, mainly related to the redemption of specific money-market instruments.

Operating expenses witnessed a significant 38 per cent quarter-on-quarter increase at Rs 98.7 crore. This rise was attributed to increased employee expenses resulting from hiring manpower and building the management team. Moreover, other operating expenses incurred one-time costs associated with capability building and corporate social responsibility (CSR) activities.

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Despite the growth in net interest income, the profit before tax (PBT) for the third quarter declined by approximately 49 per cent quarter-on-quarter to Rs 380 crore. Net profit also fell 56 per cent quarter-on-quarter, amounting to approximately Rs 290 crore as against Rs 670 crore in the previous quarter. The consolidated PAT for the first nine months of the fiscal year 2024 stood at approximately Rs 129 crore.

Jio Financial Services has strategically focused on building capabilities for both unsecured and consumer durable lending. The company has completed the technology stack for personal loans, consumer durable loans and initiated the development of risk and underwriting models for these products. Additionally, Jio Financial Services is venturing into secured products, planning to launch its leasing business and supply chain finance. The company envisions opportunities in lending against shares and mutual funds, leveraging the growing depth of retail capital markets, analysts at brokerage firm Motilal Oswal said in a note.

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Jio Financial has conceptualised an operating lease model called "Device as a Service" (DaaS), offering AirFibre, Phones, and Laptops on lease to end consumers. This initiative is expected to create new markets, with lower risk for the company due to asset ownership, analysts said.

In the non-lending segment, Jio Financial continues to expand its insurance broking entity, increasing tie-ups to 27 insurance companies. The company is making progress in the payments segment by revamping its digital savings account, launching virtual debit cards, implementing dynamic QR across the ecosystem, and enabling Jio Bharat phones with UPI, the Mumbai-based brokerage said.

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The company has also undertaken significant efforts in capability building, regulatory compliance, and governance. JFSL has filed applications with the Reserve Bank of India (RBI) for the conversion from an NBFC to an NBFC-CIC (core investment company) and with the Securities and Exchange Board of India (SEBI) for the Asset Management Company (AMC) license.

Overall, Jio Financial Services aims to strengthen its presence across various financial services, leveraging its technological capabilities and strategic initiatives, Motilal Oswal said.

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Published January 16th, 2024 at 09:51 IST

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