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Jio Financial Services – Doubling Q2 Profits

Jio Financial Services

Jio Financial Services

On Monday, Jio Financial Services, backed by Reliance Industries Ltd, announced a net profit of ₹668.2 crore in its latest financial report. This profit represents a significant doubling from the previous quarter, primarily driven by increased income from its operations.

Notably, this marks the company’s maiden financial report following its listing on the stock exchanges on August 21. After the demerger of the financial services division from Reliance Industries, Jio Financial Services has ambitious plans to enter the realms of consumer finance, asset management, and insurance.

In the September quarter, the company’s total revenues reached ₹608 crore, demonstrating a notable 47% increase compared to the previous quarter. While interest income in Q2 was somewhat lower than Q1, the injection of ₹217 crore in dividend income during the September quarter contributed to the total revenue growth.

However, the company’s total expenses also increased by 33% quarter-on-quarter, amounting to ₹71 crore. This uptick was largely attributed to higher employee expenses, as the company actively builds a dedicated team to drive its operations. Mukesh Ambani, Chairman, and Managing Director of Reliance, emphasized the importance of creating a “highly motivated leadership team” during the virtual annual general meeting in August.

Jio Financial made a significant announcement on Monday, appointing AR Ganesh, a former executive from ICICI Bank, as the group’s Chief Technology Officer. Ganesh brings 13 years of experience, having held the role of Chief Information Security Officer (CISO) with oversight on cybersecurity at ICICI Bank.

The company clarified that it is recognized as a systemically important non-deposit-taking non-banking financial company (NBFC) registered with the Reserve Bank of India (RBI).

In the notes to its accounts published on Monday, it was mentioned that RBI had required the company to meet eligibility criteria for a core investment company and apply for conversion to NBFC-CIC when granting approval for the change in the shareholding pattern and control under the demerger scheme. This transition is expected to occur within the specified timeline.

A core investment company, according to RBI, is an NBFC engaged in the acquisition of shares and securities and holds not less than 90% of its net assets in the form of investments in group companies, including equity shares, preference shares, bonds, debentures, debt, or loans.

While Jio Financial is poised to disrupt the financial services industry, it faces stiff competition in a highly regulated environment where established players, such as banks, non-banks, and insurance companies, have entrenched themselves over the years.

Mukesh Ambani, in his August announcement, emphasized the company’s mission to democratize financial services for India’s 1.42 billion people. The goal is to provide them with access to simple, affordable, innovative, and intuitive financial products and services.

On the stock market, shares of Jio Financial Services on BSE closed at ₹224.85 each on Monday, representing a 0.27% increase from the previous close.

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