Jio Financial shares hit 'fresh high' amid Paytm Bank crisis; here’s why

Shares of Mukesh Ambani-led Jio Financial Services Ltd (JFS) hit a fresh all-time high today amid speculations that the conglomerate and India's biggest private bank HDFC Bank may be eying the wallet business of fintech major One 97 Communication, the parent of Paytm, after the RBI’s diktat against Paytm Payments Bank.

The JFS stock had opened a gap up at ₹256 today from ₹253.75 on Friday. Soon after a report, the scrip surged to an intra-day high of ₹295.70 (up 14.1%), its fresh all-time high. At the current share price of ₹288.35, shares of JFS are trading 28.9% up compared to its lowest price of ₹204.65 touched on October 23, 2023.

RIL’s newly formed investment company had tied up with U.S. investment major BlackRock's India unit to form Jio BlackRock, a 50:50 joint venture (JV), to make a foray into the asset management industry in July 2023.

At the current share price, the m-cap of JFS has surged to ₹1.82 lakh crore. The JFS shares are trading above six moving averages -- five-day, 10-day, 20-day, 30-day, 50-day, and 100-day.

Since its listing in August 2023, the scrip has given a 23.61% return. In the past six months, it moved 13.66% up and surged 17.5% in the past month.

Notably, Jio Financial Services under its banner runs a joint venture (JV) called Jio Payments Bank, which was incorporated in November 2016 after requisite approvals from the RBI. The current crisis at Paytm Bank, which has been asked to close its operations like savings bank account, wallet, FASTag, or national common mobility cards, from February 29, may play well for bigger players like RIL and HDFC, say analysts.

Jio Payments Bank’s board of directors includes Vivek Bhandari as chairman, Vinod Easwaran as MD and CEO, Hitesh Kumar Sethia and Rajesh Kumar as nominee directors, and Rajendra Kumar Saraf, Praveena Kala and Achuthan Siddharth as independent directors.

Additionally, JFS and BlackRock Financial Management have also filed papers with the capital market regulator to launch a mutual fund business in India, which is currently under observation.

Jio Financial had recorded a sharp decline in profitability due to lower non-interest income. The company's consolidated Q3 profit of ₹294 crore in the October-December 2024 quarter fell 56% on a quarter-on-quarter basis. The company's net profit in Q2 FY24 was ₹668 crore, while it stood at ₹332 crore in the first quarter.

The drop was seen due to the absence of dividend income on shares held in parent Reliance (Q2 FY24 dividend income at ₹371 crore) and an increase in opex on employee addition, capacity building and CSR expenses.

The JFS-Blackrock partnership had brought a new player to the Indian asset management market, with both targeting an initial investment of $150 million each in the JV.

Shares of One 97 Communications, the parent entity of Paytm, hit a 10% lower circuit on Monday, dragging down the stock to an all-time low of ₹438.35 on the BSE. The fintech stock has declined 42% in the last three sessions, taking the Noida-based company's market capitalisation under ₹30,000 crore.

The Paytm shares have been under pressure since the RBI last week ordered Paytm Payments Bank, a subsidiary of One 97 Communications, to stop accepting fresh deposits in its accounts and wallets from March due to various violations of rules. Paytm Payments Bank is 49% owned by One 97 Communications, while the remaining 51% is held by Paytm CEO Sharma.