Jio Financial shares rally after company announces JV with BlackRock

Jio Financial Services’ plan to step into wealth management and stock broking business in partnership with global asset manager BlackRock got a thumbs up from investors, with its stock rallying as much as 5 per cent on Tuesday. After paring some gains, the stock ended at Rs 362.7, up 2.4 per cent over its previous day’s close.

Billionaire Mukesh Ambani’s Jio Financial’s foray into the two new segments comes at a time when the industry is adding nearly three million new demat accounts every month and the demand for wealth management is pegged to explode amid the rise of the rich investor population in the country. The Reliance spinoff and the US-based asset manager have already announced a joint foray in the over Rs 50-trillion mutual fund (MF) business, which is currently awaiting regulatory approvals.

The incorporation of a brokerage firm by the joint venture will follow the launch of its wealth management company.

Institutional platforms manage over 50 per cent of the $1-1.2 trillion of financial assets owned by India’s high net-worth individuals (HNIs), as per a report by Jefferies.

Industry experts said that Jio Financial’s efforts would be to capture new customers in the rising HNI class in India. However, some are of the opinion that the new venture may not bring any price disruption—a strategy used during Reliance Industries’ (RIL’s) foray into the telecom space.

Already intense competitiveness, ultra-low pricing models, and strict regulatory architecture in both the two new business segments provide little scope for further disruption, industry players add.

However, Jio Financial will be able to leverage the parent company’s extensive reach across the country and BlackRock’s expertise in the investment management space. BlackRock—the world’s largest asset manager overseeing assets worth over $10 trillion—has a strong brand pull and digital prowess in the investment management space.

The newly formed joint venture may compete with well-established private wealth management firms such as 360One, Nuvama, Kotak Wealth, and Avendus.

In the stock broking business, the joint venture may face competition from the discount brokers, which account for nearly two-thirds of active clients.

Jio Financial Services, demerged from RIL last year, currently offers personal loans, insurance broking, and bill payment services. Following a 54 per cent rally so far this year, Jio Financial is valued at Rs 2.3 trillion at present.

The board of the company will meet on Friday to approve the financial results for the quarter ended 31 March 2024.

First Published: Apr 16 2024 | 8:30 PM IST