New Delhi, Sep 19

Jio Financial Services will emerge as a disruptive force in the financial space, but the scale buildup will take time, Elara Capital said in a research.

Jio Financial is a financial powerhouse in the making, operating fintech & new-age biz. Jio Financial will transform into a NBFC-CIC. And, this will be a holding company that operates the financial services business via its consumer-facing subsidiaries.

â€œWe see it operating like a fintech & new-age, success factors, such as creating a flywheel effect: it will work on the principle of acquisition, engagement, & monetisation. Huge data and wide distribution bolster this potential,â€ the report said.

The success of a go-to-market business model is contingent on the flywheel effect. And, Jio Financial can leverage on the Group strength: more than 18,000 retail stores, over 50mn registered users, and 400mn plus customers of its telecom business. Add to this, a robust capital base, strong promoter (feeding into the credit rating), nimble tech architecture and a visionary leader with an experienced team (formation underway) provides Jio Financial a good Launchpad, the report said.

While Jio Financial has the ingredients to be a potent disruptor, in our view, the modus operandi of â€œmoney inâ€ vs â€œmoney outâ€ business is different. The lending (leverage) business has its own learning curve, and the firm will be no different; thus, it will be tough to replicate the Jio moment. While Jio Financial will be a Digital First institution, laying risk management base and establishing a collection framework will take precedence.

â€œOrganically, assuming the level of penetration, we see Jio Financial to be a disrupting force, but not to extent the markets project,â€ the report said.

â€œWe believe Jio Financialâ€™s value creation journey will be determined more by its new partnerships than pure business outcome, and valuation will be front-ended. Based on the current business model, working with a holdco discount and BV multiple looks inconclusive and this will evolve, and, in this context, capital allocation becomes key,â€ the report said.

Jio Financial will emerge as a disruptive force but scale buildup will take time, says report