RIL financial business demerger positive, but no firecrackers for D-Street

Firstly, this business’ contribution to

’s consolidated topline is negligible and therefore, it is unlikely to reap any major benefits in the immediate future, analysts said.

The turnover of the financial services business as on March 31, 2022, was Rs 1,387 crore or 0.3% of the total turnover of RIL.

“Going ahead, as the lending business picks up, these revenues may accelerate. But capitalization of 6.1% of treasury shares may lead to dilution and limit value unlocking,” BofA Securities said in its report.

Secondly, while the new entity Jio Financial Services has an NBFC license, the entire regulatory approval process for the demerger could take multiple quarters, analysts said.

The demerger, nevertheless, will allow RIL to create a platform for consumer and merchant lending by leveraging its digital and retail strengths, said global investment bank JPMorgan Chase.

The move is positive as RIL shareholders will have a direct play on India’s fast-growing digital fintech market through an entity which would be able to leverage RIL’s vast footprint across telecom and retail arena.

Jio Financial Services plans to acquire liquid assets to provide adequate regulatory capital for lending to consumers, merchants.

According to BofA Securities, Jio Financial would likely focus on the “high ticket, low frequency” category and compete with traditional players like

rather than fintech firms such as , Zest, Simpl, among others.

Jio Financial will still fall under the fintech bucket given its digital business.

But JPMorgan is of the view that this demerger is not a precursor to the potential demerger of the consumer businesses.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)