JFSL profit fails to enthuse Street, stock dips 2%

JFSL profit fails to enthuse Street, stock dips 2%

Jio Financial Services’ strong showing in the second quarter of FY24 failed to enthuse investors, with the stock seeing a 1.7% decline on Tuesday.

The company on Monday reported a net profit of Rs 668 crore for the second quarter of the current financial year — zooming 101% from the previous quarter. This was the company’s first quarterly results announcement since making its stock market debut in August.

“Given that Jio Fin has not yet started its core operations, the market is in a wait-and-watch mode. The growth was largely from financial operations. The company is expanding its network and has significant plans in its pipeline, but it could take six months before we start seeing results,” said Deven Choksey, founder of KRChoksey group.

It was an interesting quarter, given that net profit surpassed total income of the company. Sequentially, its revenue saw a jump of 48% to Rs 608 crore, with dividend income accounting for Rs 217 crore.

The strong earnings growth was largely a factor of the dividend income of Rs 217 crore received through its 6.1% stake in Reliance Industries, according to Sonal Gandhi, research analyst, Centrum Equity Research.

“JFSL enjoys strong brand equity and has an experienced board and management team, a strong capital base and access to a large customer base/ in-house stores through group companies. For arriving at adjusted net worth, we deduct the value of equity and preference share investments in associate companies. Our calculation suggests that at a 20% discount to its stake in RIL, JFSL is trading at 3.1x P/BV (price to book value),” she added.

Market players are of the view that once the business takes off, investor confidence will be visible, especially in light of the firm’s tie-up with BlackRock and impending launch of the mutual fund business. The two firms had in July announced a 50:50 joint venture with an initial investment of $150 million each.“The stock has witnessed a slide from the peak zone of 260-levels, thanks to profit-booking, and has got the major support zone of 208-levels, below which the trend could turn weak. For the bias to improve, the stock need to move past the near-term resistance zone of 235, with chances of a further rise to 246-levels if the strength is sustained,” said Vaishali Parekh, vice-president (technical research), Prabhudas Lilladher.