Jio Financial Services (JFS) has delivered impressive financial results for the June quarter, with its profit after tax soaring by 156% year-on-year to Rs 830 crore. This significant growth has led Motilal Oswal Financial Services (MOFSL) to reiterate its 'Buy' recommendation for the stock, projecting a substantial 34% upside.
Robust Q1 Performance Fuels Optimism
During the June quarter, JFS reported a total income (excluding dividends) of Rs 1,496 crore, marking a 141% increase compared to the previous year. The company's pre-provisioning operating profit (PPOP, ex-dividend) also saw a healthy rise of 38% year-on-year, reaching Rs 505 crore.
MOFSL highlighted that both Jio Payments Bank and Jio Payment Solutions are now past their initial investment phase and are contributing positively at the unit economics level. Furthermore, Jio Credit, a key business segment, is scaling up effectively, with its assets under management (AUM) surpassing Rs 30,000 crore.
MOFSL's Outlook and Target Price
Despite strong performance, MOFSL noted that operating expenses remained elevated due to ongoing investments in incubating new businesses and expanding existing operations. This led the brokerage to slightly reduce its FY27 and FY28 earnings per share (EPS) estimates for JFS by 4-6%.
However, MOFSL remains bullish on JFS's long-term prospects. The brokerage firm maintains its 'Buy' rating with a target price of Rs 315, based on its March 2028E Sum-of-the-Parts (SoTP) valuation. This target implies a 34% potential upside from current levels. MOFSL's valuation model does not yet incorporate the potential value from businesses still in their incubation phase, such as insurance manufacturing, wealth management, broking, and marketplace ventures.
Strategic Investments and Future Growth
Jio Financial's management confirmed continued investments in strategic partnerships, including the BlackRock asset management venture and the Allianz insurance joint ventures, alongside its wealth management and broking businesses. The focus for Jio Credit is on responsible loan book scaling while maintaining stringent credit underwriting standards to ensure asset quality as the portfolio matures.
MOFSL anticipates a strong earnings momentum for Jio Credit, projecting an AUM Compound Annual Growth Rate (CAGR) of 85% and a Profit After Tax (PAT) CAGR of 145% over FY26-FY28E, with an expected Return on Assets (RoA) of 1.9% and Return on Equity (RoE) of 10.4% by FY28E.
During the quarter, JFS also received the second tranche of Rs 5,934 crore from its promoters through a preferential warrant issuance, bringing the cumulative capital infusion to Rs 9,890 crore. An additional Rs 6,000 crore is expected to be infused in the coming quarters, further strengthening the company's capital base to support its ambitious growth plans.