Reliance has founded Macquarie, India’s fifth- largest financial service provider
Reliance has founded Macquarie, which is now India’s fifth-largest financial services provider.
Reliance Industries Ltd.’s plans to demerge its financial services sector and list the company, per a study by Macquarie Capital Securities, might result in the creation of the financial services company with India’s fifth-largest net worth.
On October 21, RIL announced that it intended to demerge its financial services division into Reliance Strategic Investments Ltd. (RSIL), brand it Jio Financial Services Ltd. (JFSL), and list it on stock exchanges.
RSIL, a non-banking financial company that is systemically important but does not accept deposits and is registered with the RBI, is wholly controlled by RIL (NBFC). RIL’s stake will be transferred to JFS by Reliance Industrial Investments and Holdings Ltd.
(RIIHL), a section of Reliance Industries’ financial services business. According to the Macquarie analysis, RIIHL is the ultimate owner of 6.1 per cent of the shares of RIL through its ownership of Petroleum Trust and Reliance Services and Holdings Ltd.
If the 6.1 per cent ownership in RIL is realized over time, it added, “JFS may be the fifth-largest financial services community in India with a net worth of Rs 1 trillion.”
RIL network
Reliance Group’s network of more than 15,000 outlets in different formats (supermarkets, digital stores, etc.) and its customer bases of more than 400 million in the telecom industry and 200 million in retail can be utilised to grow the financial services sector claims Macquarie.
Reliance Industries may advance, especially in consumer and merchant lending, according to Macquarie, by making use of its NBFC license. It believes that this could pose a threat to NBFCs and fintech, with Paytm and Bajaj Finance being the most exposed.
Jio Financial Services’ ability to work a lot more business at a lower cost of capital will have a reasonable impact on banks, according to Macquarie.
“The financial services sector could be quite shaken by RIL, but the road to profitability needs to be extremely de-risked. “We would prefer a more focused approach to allocating funds to the energy transition and digital infrastructure issues,” the email continued.
KV Kamath
KV Kamath, the chairman of the National Bank for Financing Infrastructure and Development and a seasoned banker, was selected by Reliance Industries on November 4 to be an independent director and serve a five-year term on the company’s board. Kamath was further selected to sit on the RSIL board.
Kamath began working for ICICI in 1971. Before returning to the ICICI in 1996 to take on the role of managing director and CEO, he stayed at the Asian Development Bank for a spell after joining in 1988. He was ICICI Bank’s MD and CEO after the company merged with that association.
Macquarie expects that JFS will behave aggressively with Kamath in charge. Kamath can expand JFS’s business verticals, and based on his past performance. He has a history of finding new markets and opportunities..”
Investors
Since Reliance Industries Ltd. announced last month that Jio Financial Services Limited would list on the stock exchanges, investor interest in the company has increased. Thanks to secular growth drivers, the Indian financial services sector is organised for a digital transformation.
The market is important, underdeveloped, and growing, especially for product categories targeted at retail and small companies. According to a stock exchange filing made by RIL in October, JFSL and its subsidiaries would focus on delivering digital financial products and make use of Reliance’s technology skills to democratize access to financial services for 1.4 billion Indians.
According to Macquarie’s analysis of Jio Financial Services, which is expected to become India’s fifth-largest financial services company, Paytm shares fell to a record low on Tuesday.
Investors expected a substantial disruption for Paytm, which has its headquarters in Noida, and as a result, the company’s shares dropped 11% on the BSE to close trading at Rs. 475 per share. HDFC Bank, State Bank of India, ICICI Bank, and Axis Bank are the top four companies in the sector. The balance sheet of JFS has a lot of space for expansion. “
According to Suresh Ganapathy, Aditya Suresh, and Param Subramanian’s study, JFS would rank as the fifth-largest financial services company in the country if it eventually acquires a 6.1 per cent stake in Reliance Industries Ltd. and has a net worth of Rs 1 trillion. The report claims that the Reliance firm has the potential to change the payments industry and poses a threat to other fintech models.
According to Macquarie, Jio Financial Services plans to improve and supplement the present credit bureau-based underwriting by launching a consumer and merchant lending business based on its own data analytics.
According to Macquarie, the focus seems to be on consumer and merchant lending, which forms the basis of NBFCs like Bajaj Finance and fintech companies like Paytm. NCLT has given its approval to Jio’s acquisition of Reliance Infratel.
The National Company Law Tribunal (NCLT) granted permission to Reliance Projects and Property Management Services, a Reliance Jio subsidiary, on Monday to reach Reliance Infratel (RITL), the owner of Reliance Communications’ tower and fiber assets.
The NCLT has asked Jio to deposit 3,720 crores into an escrow account at the State Bank of India to finalize the purchase of RCOM’s tower and fiber assets (SBI).
Jio sought the tribunal to hasten the takeover of Reliance Infratel earlier this month. It asked for authorization from the tribunal to “deposit the whole resolution payment in an account with SBI” to implement the resolution plan and provide the applicant ownership and management of RITL by the resolution plan.
On November 6, Jio asked that to complete the purchase of RITL, which is through an insolvency resolution process, 3,720 crores be placed into an escrow account.
Jio proposes to purchase RCom’s assets
Back in November 2019, the Mukesh Ambani-run Jio company submitted a bid of 3,720 crore rupees to purchase the debt-ridden Reliance Communications division’s tower and fiber assets.
The Committee of Creditors already unanimously approved the Jio resolution plan on March 4, 2020. According to a proposal made by Jio subsidiary Reliance Projects and Property Management Services, the resolution plan’s implementation has been delayed due to ongoing legal proceedings regarding the money’s distribution and the issuance of a “no dues” certificate.
It alleged last month that the delay has seriously affected the interests of both Jio, the corporate debtor, and the resolution applicant (Reliance Infratel). Jio claims that if the purchase of RITL assets is postponed due to inter-creditor issues, the value of the assets could fall. RITL is the owner of 43,540 mobile towers and over 1.78 lakh route kilometres of fiber. RITL is the holding company for the tower and fiber assets owned by RCOM.
Reliance Project & Property Management Services Limited, the successful resolution applicant for Reliance Infratel Ltd (RITL), submitted a fresh application at the NCLT Mumbai to complete the acquisition process. The settlement funds will be distributed among the lenders after the inter-creditor disagreement regarding their distribution is resolved.
Edited by Prakriti Arora
