Jio Financial Services Ltd

NSE:JIOFIN

Earnings Call Analysis

Jio Financial Services Q1 FY '25 Performance Highlights

In Q1 FY '25, Jio Financial Services consolidated profit after tax rose slightly to INR 313 crores from INR 311 crores in the previous quarter. Income remained stable at INR 418 crores. The company launched the Jio Finance app and commenced its operating lease business for AirFiber devices. Standalone profit after tax was INR 72 crores. Total income decreased to INR 134 crores, while expenses dropped from INR 103 crores to INR 79 crores due to the end of one-time setup costs. Future efforts will focus on further leveraging technology for efficiency.

Jio Financial's Strategic Milestones

Jio Financial Services Limited (JFSL) has marked significant developments this quarter. The launch of the Jio Finance app on May 30, 2024, stands out as a major milestone. This app, available on iOS and the Play Store, consolidates the offerings of the JFS Group into a single, user-friendly digital platform. Complementing this is the merchant app launched in December 2023. Together, these apps have garnered approximately 0.5 million downloads, creating a vital digital channel for reaching target customers. The company has also initiated home loans in beta mode and introduced loans against mutual funds.

Financial Performance Overview

For the first quarter of fiscal year 2025, JFSL reported a consolidated profit after tax of INR 313 crores, slightly up from INR 311 crores in the previous quarter. Total income for the period remained steady at INR 418 crores. Notably, treasury income saw a decrease due to the maturity of high-yielding fixed deposits, which were reinvested in money market and liquid mutual fund investments. However, net gains on fair value changes helped balance the treasury income to INR 380 crores. Total expenses decreased to INR 79 crores from INR 103 crores in Q4 FY '24, attributed mainly to one-time expenses in the previous quarter.

Operational Highlights and Market Expansion

JFSL has made considerable progress in its various business entities. For instance, Jio Leasing Services Limited (JLSL) commenced operations after securing shareholder approvals and has initiated leasing activities within the GIFT City SEZ. The payments bank, boosted by a digital revamp, now boasts over 1 million CASA accounts. In addition, the company received approval to convert from an NBFC to a Core Investment Company (CIC) from the Reserve Bank of India, allowing better resource allocation and enhanced group performance.

Innovations and Product Launches

JFSL continues to innovate with new product launches. The company has beta-launched home loans and loans against mutual funds on the JFS app. The operating lease business has also commenced, starting with AirFiber devices. The payments division, now revamped, facilitates rapid digital savings account openings and offers a virtual RuPay platinum debit card. The bank plans to expand its physical distribution through 16,000 new business correspondent outlets.

Advancements in Insurance and Asset Management

Jio Insurance Broking Limited has secured regulatory approvals to sell insurance policies online, enhancing its portfolio to include life, non-life, auto, and health insurance products from over 30 companies. The company has also developed a modern technology stack to enable digital tie-ups with insurance partners, allowing for a wider range of products to be offered to customers. Jio's asset management company, in partnership with BlackRock, is making strides in integrating advanced technology to deliver superior asset management services, with ongoing regulatory approval processes.

Future Prospects and Strategic Vision

Looking forward, JFSL is focused on expanding its product suite across its banking, NBFC, and insurance verticals. The digital channels like the Jio Finance app and merchant app will continue to evolve based on customer feedback. Additionally, JFSL aims to deepen its market presence by leveraging its digital distribution channels and expanding its physical outlets. The company remains committed to enhancing customer experience through seamless, integrated financial solutions, leveraging its wide ecosystem efficiently and within regulatory norms.

Earnings Call Transcript 2025-Q1

[Jill Deviprasad, executive]

Good evening, everyone. My name is Jill Deviprasad, and I'm the Head of Investor Relations for Jio Financial Services Limited. On the declaration of the results for the first quarter ended June 30, 2024 for FY '24, '25, it gives me immense pleasure to welcome the analysts, investors and our colleagues to this virtual meeting. We have with us today our MD and CEO, Mr. Hitesh Sethia, and our Group Chief Financial Officer, Mr. Abhishek Pathak.

[Operator Instructions]

The earnings presentation is uploaded on our website, www.jfs.in and on the stock exchanges. Before I hand over the call, I would like to read out the safe harbor statement. This presentation contains forward-looking statements, which may be identified by their use of words like plans, expects, estimates or other words of similar meaning. All statements that address expectations or predictions about the future, including, but not limited to, statements about strategy for growth, product development, market position are forward-looking statements based on rationale and data. Actual results may vary materially given market circumstances. I will now hand over the call to Hitesh to discuss the business in detail.

[Hitesh Kumar Sethia, executive]

Thank you, Jill. Good evening, and a warm welcome to all joining this call today. We are delighted to discuss the exciting developments of the first quarter of FY '24, '25 in the backdrop of what continues to be a robust economic growth and a positive outlook for our country. Over the last 3 full quarters of Jio Financial Services as a listed company, we've made -- we have been working on multiple fronts, importantly, setting the governance and policy framework in line with the highest regulatory standards, hiring and integrating the right talent at all levels across all our operating entities and setting a modern fit-for-purpose, cost-effective technology and data architecture to enable product launches at pace and in distribution at scale. While strengthening these pillars will continue to be an ongoing journey, I'm happy to note that on the back of these foundational blocks that have been established, we have reached certain critical milestones in Q1 of FY 2025.

Key -- amongst these milestones was the launch of the Jio Finance app in a beta version on May 30, 2024, on the iOS and Play Store. This app consolidates the offerings of the JFS Group, setting a digital, simple and unified platform to distribute our products to the consumers. This consumer app is in addition to the merchant app, which was launched in December 2023. With both these apps in place, we believe now we have created a vital digital channel to reach our target customers. I'm happy to update that as on date, we have approximately 0.5 million downloads.

In addition to the app launch, as mentioned in our earlier calls, we have also been working towards accelerating our secured lending proposition. And to this effect, we have launched loan against mutual fund for our customers from our NBFC. We have also launched home loans in a beta mode, which will be generally available to our consumers in due course.

Thanks to the overwhelming approval from our esteemed shareholders on our postal ballot for the related party transactions, we were able to commence our operating lease business with AirFiber devices. On our payments bank, the digital revamp undertaken over the last quarters has led to over 1 million CASA accounts in the bank underscoring our commitment to provide simple and robust digital banking solutions. Before we move to each of the businesses, I would like to mention 2 more points: firstly, I would like to express our deepest gratitude to our shareholders who have voted on our postal ballot resolutions. I'm very pleased to announce that 99.9% of our shareholders have voted in favor of our postal ballot notice dated May 23, 2024, demonstrating strong shareholder confidence in our initiatives.

Amongst other items, as mentioned earlier, this shareholder approval has indeed enabled us to commence the operating lease business in the first quarter of this financial year. Second, and very importantly, we have also received the final approval from the Reserve Bank of India on our application for converting Jio Financial services from an NBFC to a core investment company, or a CIC. This completes a very important milestone for JFSL from a regulatory perspective.

Before we get to the various businesses, a quick overview about our unified app. This app has various payment features, including UPI, our digital bank account, where the account opening can be done end-to-end online in just a few minutes, and auto insurance offering from our partner insurance companies and loan against mutual funds from our NBFC. This app is modular and parts or whole of the app can be embedded in other apps such as MyJio app to offer an embedded experience to our customers. We will continue to expand our product suite in the coming quarters with a few more launches across all our business verticals, the bank, the NBFC and the insurance solutions and also build interesting engagement layers to keep our customers' experience best-in-class while solving for their financial needs.

In line with our philosophy of being customer first, we have launched the app in a beta version and will evolve the app into a world-class offering with active participation and support of our customers.

Turning to our subsidiaries and starting with Jio Finance Limited. Our nonbanking financial entity has strategically positioned itself to capitalize on opportunities in the lending market. Recently, we successfully launched loan against mutual funds following an extensive beta testing phase. This is now available to our consumers on our JFS app.

In parallel, the vendor financing business, which was kick-started earlier, continues to add customers, which fit our risk and return criteria. In this quarter, we've also introduced enterprise solutions for providing device finance solutions to the employees of our customers. We are progressing with home loans, which is currently in a sandbox and slated for consumer launch post our beta phase.

Moving forward, our focus remains on expanding secured lending products such as loan against securities and loan against property. In all the areas, we will leverage the vast ecosystem in which we operate, certainly on an arms length basis and within risk and regulatory [ card rates ]. During the last quarter, and as mentioned earlier, thanks to the approval from our esteemed shareholders on the postal ballot, we have kickstarted the operating lease business with Airfiber devices. This, an innovative solution, is actually an integrated offering for our customers with a single interface across device charges, connectivity and content. This not only enhances convenience but also expands affordability for our customers.

For Jio Leasing Services Limited, or JLSL, this gives us access to potentially a large customer base at low acquisition and collection costs, while at the same time, mitigating risks given that asset ownership is with our leasing company, the necessary leadership, management and tech stack have all been put in place to scale this business.

Additionally, JLSL also has a 50-50 JV with Reliance Strategic Business Ventures Limited in the GIFT City, and this entity is called Reliance International Leasing IFSC Limited. This entity was formed with an intent to undertake leasing in the IFSC, the International Financial Service Center, in GIFT City. This GIFT City JV has already initiated the operations of [ shop ] leasing in Q1 of FY 2025. With the revamped tech stack, the Jio Payment Bank is now able to open a digital savings account for its customers online only in a few minutes. The bank also offers a virtual RuPay platinum debit card. This digital savings account, though in its very nascent phase, has garnered over 1 million active customers till date and the customer value proposition is as follows: proliferation of UPI, as we all know, as the dominant payment method in daily use has now indeed created the need for a second daily expense account, which in turn helps customers declutter their primary bank account.

Our product road map for the payment bank here includes interest variance of the savings account and physical debit cards in the near future. In addition to our digital distribution, which I spoke about, JPBL has also been working towards expanding its physical distribution network through a network of business correspondents. To this effect, the Jio Payments Bank has received approval from the Reserve Bank of India to expand its network by about 16,000 business correspondent outlets. This rollout will be undertaken in a phased manner by leveraging the vast distribution network of our ecosystem. These outlets will primarily facilitate 3 things in the first phase, an assisted account opening, Aadhaar-enabled payment service and domestic money transfers.

This physical channel, we believe, will serve a complementary target customer segment compared to the digital channel, which I spoke about earlier. Jio Payment Solutions Limited, our payment service company is a payment aggregation platform that aims to specialize in comprehensive solutions for enterprise and delivery merchants. Our services include QR codes and point-of-sale devices integrated with payment [indiscernible] supporting over 100-plus payment options. Key innovations here include embedded payments enabling UPI solutions on existing point-of-sale devices used by large merchants, which can further enhance seamless customer experiences.

We have also piloted tailored point-of-sale solutions such as [indiscernible] POS for home delivery service merchants, ensuring secure payment processing. Further, the JioBharat phone also facilitates peer-to-peer merchant onboarding for MSMEs and unorganized retail, empowering the small businesses across the country with seamless payment solutions. Our affordability suite will offer brand EMI for white goods thereby expanding accessibility and promoting affordability. Through these initiatives, JPSL drives operational efficiencies and deliver targeted insights across its customer segments. And this, we believe, will be reflected in the growing net margin of our business.

Moving on to our insurance subsidiary. At Jio Insurance Broking Limited, we aim to establish ourselves as a key player by leveraging digital distribution channels. Our diverse portfolio today includes life, non-life, auto and health insurance products from over 30 insurance companies, catering comprehensively to the varying customer leads. In the last few months, we have worked towards obtaining necessary regulatory approvals from the insurance regulator, IRDAI, to sell insurance policies online.

In parallel, we have also established a modern fit-for-purpose technology stack essentially to create a 2-sided platform. At one end, we will now have the capability to tie up with our insurance partners digitally. And at the other end, we are able to offer to our customers a choice of insurance policies best suited for their needs. Our first offerings on the app is in the category of auto insurance. In the coming months, we will be able to expand this offering across both the dimensions, i.e., increase the number of insurance companies and the number of products to offer a full range of policies to our customers.

Given our modular technology architecture across the app, we will now have the capability to embed insurance digitally in a customer's journey, which will not necessarily be in our app. Couple of examples of embedded insurance offerings are in Reliance Digital and Metro Cash & Carry, where extended warranty and shopkeeper insurance policy, respectively, are optionally enabled to cater to the customers' requirement in the core underlying commerce transaction. In addition to laying the foundation for digital channels, we have also launched an institutional sales channel to strengthen our market presence.

Shifting gears. Our asset management company in partnership with BlackRock has made significant strides. We have identified top talent and are focused on integrating advanced technology platform solutions to deliver superior asset management services. Our process with the regulator for the necessary approvals is well under way. I take this opportunity to extend my heartfelt appreciation to all our colleagues at Jio Financial Services across our subsidiaries and partner companies whose unwavering commitment has been instrumental in building and fortifying our business foundations. Additionally, I also express our very sincere gratitude to our shareholders for their steadfast support and confidence as we advance our mission to democratize financial services across the nation.

Now I would like to invite Mr. Abhishek Pathak, our Group CFO, to provide a comprehensive overview of our financial performance. Abhishek, over to you.

[Abhishek Pathak, executive]

Thank you, Hitesh. Good evening, everyone. I'm pleased to present the financial highlights for the first quarter ended June 30, 2024, for financial year FY '24, '25. Our financial results for this period are prepared in compliance with Indian Accounting Standards as prescribed by the Ministry of Corporate Affairs. As indicated earlier by Hitesh, on July 11, 2024, we received the RBI approval for conversion to a CIC, a key milestone in our journey. This conversion will allow us to maintain strategic oversight across our businesses, leading to better synergies, improved resource allocation and enhanced group performance.

During the past year, our strong foundation has been laid and business teams are in place for each of our businesses. The legal entities are managed by independent boards with a robust governance structure. As part of the governance framework, the company has established comprehensive group-level compliance, audit and risk functions for effective oversight and monitoring.

During the quarter, green shoots were observed in each of our businesses, setting the stage for business growth. Our operating lease business entity, JLSL, began its operations post receipt of rated party approval from its shareholders. Similarly, RILIL, our entity established in GIFT City SEZ has also commenced operations with ship leasing transactions.

Coming back to our presentation, JFSL aims to holistically address the 4 core means of our customers: borrowing, transacting, investing and protecting through its wide area of financial services. The company is a holding company and consolidates the results of its various businesses. This includes the consumer-facing entities, namely Jio Finance Limited, Jio Insurance Broking Limited, Jio Payment Solutions Limited, Jio Payments Bank, our JV with State Bank of India, Jio Leasing Services Limited. Further, the consolidated financial statements also include the results of 3 more entities, Reliance Industrial Investments and Holdings Limited, which is an investment holding company accounted for, on a fully consolidated basis, Reliance Services and Holdings Limited, which has been accounted for as an associate, and Reliance International Leasing IFSC Limited, our entity in Gift City SEZ, which has been accounted for as a joint venture in accordance with Ind AS 110.

Moving on to the financial performance. For Q1 FY '25, our consolidated profit after tax stood at INR 313 crores as compared to INR 311 crores for Q4 FY '24. The total income for the quarter was INR 418 crores. This amount was similar to the previous quarter, that is Q4 FY '24. The total income is represented by interest income or interest-bearing investments predominantly income from our treasury book, net gain on fair value changes on money market and liquid mutual funds and fees and commission income.

On the treasury income, high yield in fixed deposits matured in this quarter and the proceeds of which were reinvested in money market and liquid mutual fund investments. This was done to ensure that liquidity was available at all times, given the evolving business needs. Therefore, there was a reduction in treasury income and a corresponding increase in net gain on fair value changes resulting in a treasury increase of INR 380 crores as compared to INR 388 crores in the previous quarter, that is Q4 FY '24. The reduction of INR 8 crores between Q1 FY '25 and Q4 FY '24 is broadly due to fall in yields in the treasury book and the overall increase in the average treasury book size during the quarter. This was offset by increase in insurance brokerage commission classified under fees and commission income.

Total expense for Q1 FY '25 was INR 79 crores as compared to INR 103 crores in Q4 FY '24. Decrease in total expenses can be attributable to expenses incurred in Q4 FY '24, which were done on account of setting up new businesses. Going forward, the stand-alone profit after tax for the company for Q1 FY '25 was INR 72 crores as compared to INR 78 crores for Q4 FY '24. The total income for this quarter was INR 134 crores compared to INR 141 crores in Q4 FY '24. As indicated earlier, the total income is represented by interest income on interest-bearing investments, net gain on fair value changes on money market and liquid mutual fund investments and fees and commission income. The total expenses for Q1 FY '25 was INR 36 crores as compared to INR 37 crores in Q4 FY '24.

Of the total expenses of INR 36 crores, INR 6 crores pertains to provision recognized on standard asset on intergroup loans. There has been a decrease in other operating expenses which can be attributable to onetime expenses incurred in Q4 FY '24 on account of new businesses set up. Our endeavor is to optimize cost to income ratios across entities by leveraging technology and efficient use of resources.

Lastly, before I conclude, I would like to reiterate our guiding principles. Our commitment to the 4 core business principles remains unwavering, prioritizing between repetition above all, adherence to regulatory compliances, return of capital and return on capital. JFS' strategic focus is on building a comprehensive product portfolio across promising financial services segments. Furthermore, the company's direct-to-consumer approach aims to leverage the group's internal ecosystem to drive low acquisition cost.

Born in the new digital era, JFSL is uniquely positioned to leverage emerging technologies and drive innovation in the financial services sector. Looking ahead, the company focus remains on expanding its digital footprint and empowering its digital infrastructure to optimize process and elevate efficiency. We are dedicated to enhancing accessibility, affordability, financial literacy and prosperity for all our customers, simplifying financial services through innovation and customer-centric solutions.

We appreciate your continued interest and support as we navigate opportunities for growth and value creation in each of our businesses. With this, I would like to hand over the call to Jill. Thank you so much for your time.

[Jill Deviprasad, executive]

Thank you, Hitesh, and Abhishek, and thank you, everyone, for joining this call. As we conclude our earnings call, we invite you to explore the detailed earnings presentation available on our website and the stock exchanges. Have a good evening.