2024-04-01

Is Jio Financial Services an elaborate fake?

Mukesh Ambani has convinced the RBI to designate the former Reliance Industries subsidiary as a systemically important NBFC despite the fact that it is an insignificant also-ran in all its business segments.

The only reason for floating Jio Financial as an independent entity seems to be shed a resource drain and mitigate the risk on outside investors.

Jio Financial hopes to become a leader in

• mobile-based personal loans
• consumer-durables loans
• micropayments

Personal loans involve high interest rates but the slew of suicides caused by buy-now-pay-later loan apps will cause this business segment to become highly regulated.

The consumer durables loan segment involve no-cost (zero-interest) EMI purchase options arranged by manufacturers so all profits have to come from wafer-thin processing fees.

Micropayments is already an highly competitive segment with several entrenched players. It requires years of painstaking network building. Inorganic growth can be achieved by acquiring an existing market leader. The attempted ‘leveraged buyout’ of PayTM has not panned out despite getting the RBI to suspend its license. PayTM continues to live like a vampire as another UPI-based payment processor, despite failing KYC and anti-moneylaundering requirements. The partnership with SBI payments bank may seem to be the only solid business segment but remember payments banks (a brainchild of IMF plant and former RBI governor whatshisname Rajan) also operate on wafer-thin margins.

According to the management, new business opportunities include laptop lending! It is obvious that they are clueless morons.

Jio Financial is set to face an inevitable slide in profits. Unless it finds new investors, market is bound to give it a re-rating based on actual profitability.