Daybreak - How the $17 billion-worth Jio Financial is gearing up to disrupt India's NBFC space

Episode Date: October 4, 2023

It took Bajaj Finance over 15 years to become the most valued NBFC in the country. And then came along Jio Financial Services Ltd (JFSL) and took the no. 2 position in a span of just two months. It is currently valued at more than $17 billion.Its all set to take the top space. Currently, the company is on a serious hiring spree and it seems to have taken a particular liking to former ICICI Bank employees for its key executive roles. After all, a lot of its future success will depend on the team it builds.But this is not the first time Reliance has tried its hands in the finance sector. The last time it did, things didn't really take off. What's different this time?Tune in.Free ReadA job with McKinsey, Bain, or BCG trumps everything. Or it used toDaybreak is produced from the newsroom of The Ken, India's first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories 

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Do you know which is the most valuable non-banking finance company or NBFC in India? It is Bajajj Finance. And number two, geofinancial services limited.

And here is what is striking about this. It took Bajaj finance over 15 years to be where it is. And Gio Financial Services? Just two months. I'm serious. It is currently valued at over $17 billion. So it is not surprising why everybody's eyes in the finances market is on the reliance-owned company. And we all know how Gio likes to play.

It likes to disrupt every sector that it enters, be it telecom or, streaming or now finance. In fact, Geofinancial Services Limited or JFSL is already the hottest employer in the market. Some of you who spend a lot of time on LinkedIn probably know this already. Geofinancial Services is on a hiring spree. Because after all, the success of the newly minted NBFC will depend a lot on the kind of team that it builds. Take Bajaj finance, for example. A big reason behind its success as India's top NBFC is because of the solid team that the late Nanupamnani, the former chairman of Bajaj Fincerf and Rajiv Jain, the managing director of Bajaj Finance, got together. This team had what it took to build a leading financial institution

in a market like India. So Giofinance too is going for the best of the best. And there is one thing common between all of its top recruits. The ones who are being chosen for the key key. executive positions, I mean. All of them at some point in the past have worked with ICICA Bank, the country's second largest lender. And of course, all those being hired are being paid way above the industry standards. But if you look behind this shiny newness, you realize that actually this is not the first time that Reliance is venturing into the sector. The last time that it did, the business did not really take off. So, despite start, Starting out with a net worth of more than $14 billion, its success is not guaranteed.

The market now is highly competitive and also regulations are only tightening. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Das Sharma, and I don't chase the news cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Wednesday, the 4th of October. Geo Financial Services Limited or JFSL was demurged from Reliance Industries Limited, and it was listed on the Indian Stock Exchanges in August this year.

Now, JFSL is the holding company which will have all the different subsidiaries and joint ventures handling different verticals. The retail and merchant payments business will fall under Geo Payments Bank and Geo Payments' bank and Geo Payment Solutions Limited. The insurance business will come under Geo Insurance Broking Limited. And the asset management division will be under Geo BlackRock, which is a joint venture. But out of all of these, the most interesting is Geo's entry into retail lending. This lending business will be under Geo Finance Limited.

But there is a catch. Like I said, this is not the first time that Reliance has ventured into financial. Its lending business, for example, was formerly known as Reliance Retail Finance. It was operational for 20 years and it had $442 million worth of assets as of March 2023, which, as you can tell, is not much to boast about. Similarly, the retail and merchant payments business was earlier called Reliance Payment Solutions. The insurance business was formerly known as Reliance Retail Insurance Business. broken. So is it just shiny new repackaging with the same old stuff that did not really take off

in the past? Or is Reliance really here to win the game this time? My colleague, the Ken reporter Gorov Norona, decided to find out. Going by the hiring spree that it is on, it looks like it is here for the top position. And a glimpse at the names who have been tapped for the C-suite rolls actually proves how crucial the lending vertical is for JFSL this time. To find out, stay tuned for the next segment, but before that, my colleague Akshya has something to tell you. Google Sundar Pichai, Ilmobi's Navin Thawari and Zomato's Dipindar Goyal. Very different leaders running very different companies at very different scales. But one look at their resume and you'll realize they share something in common.

They've all worked at one of the big three consulting firms at some point in their career. McKinsey, Boston Consulting Group and Bain & Co. It's not just Pitchai, Tiwari or Goyal. Many top graduates from IITs and IIMs really gravitate towards consulting companies. Why? Simple. They offer the highest paying job on the block. But recently, the tables have turned.

A career with these consulting. companies is just not as popular anymore. It is no longer the ultimate job. It is simply a stepping stone to a different career. The Ken staff writer, Vanita, found some really unexpected reasons behind this and this story has now been made available for free for exactly 24 hours, just for today, the 4th of October. So go ahead, give it a read and share away with your friends before the counter runs out. I am Akshire from the Gens Newsroom. Thank you for listening to us. If you like what we do, please rate and review us wherever you get your podcasts. And now, back to Snigda.

Miraj Davan, the former managing director and chief executive of credit reporting firm Experian India, will be taking the reins as the president and CEO of the geo-lending entity. We also found out that Ranjit Saha, a career banker and a former head of risk analytics and digital lending risk management at ICICI Bank has been appointed as the chief risk officer. Meanwhile, Garima Nahar, the former chief compliance officer at the troubled assets investment firm 8th Capital is going to be the general council. Now, aside of their proven expertise in each of their own fields, there is one thing that they have common in between all of them.

ICICI Bank, the country's second largest lender. They've all worked with it before. So clearly, for those who are looking to secure a leadership position with JFSL, there is one factor that could mean a clear advantage, a stint with ICICI Bank. Actually, a majority of the top employees at JFSL, including the president and CEO, Hitesh Setia, have worked with ICICABank in the past. The Ken has also learned that Sanjay Choghulay, the former group chief internal auditor at ICICI Bank, is now working with GFSL in a compliance role. And there are many, many similar examples.

But it is not like Gio is just poaching ICICI-CIF folks left right and center. There is also a strong pull factor for senior ICICI bank talent. And that is the opportunity to work again with the banking veteran KV Kermit, the former ICICIMD and CEO who was appointed independent director and non-executive chairman of JFSL. For many, joining JFSL is about being in the right place at the right time and the opportunity to build an institution from scratch. But those who manage to get through have a huge task ahead. And with a past in which the parent company has already tried and not been successful, it is going to be even more challenging. Coming up next, I take you back a few years to show you what really happened the last time Reliance tried its hands at the finance sector.

It was 2015. The annual shareholders meeting was going on. The chairman of Reliance Industries Limited, Mukeshambani, announced that Geo Money, the Payment Gateway and Digital Wallet business, would play a crucial role in digitizing payments in India. Reliance Geo eventually launched the digital wallet almost a year later in 2016. This was before UPI gained traction. A former Gio Money executive told us, and I'm quoting,

they, that as Gio, had invested about 2,000 crore rupees, which was about $300 million at the time in buying tech services and building the payment stack to integrate merchants. End quote. The payment gateway business scaled with integrations across the Reliance ecosystem, including Omni-Channel platform Reliance Digital, online fashion brand ad geo and mobile recharges. Its wallet app scaled to about 30 million users within three years. The teams for the payments business, which included Geo Money and Geo Payments

Bank, was set up within Reliance in 2015. But guess what? Geo Payments Bank only started operations three years later in 2018 and faced even more delays. It had not even managed to launch a consumer-facing product until as late as the end of 2021. A former Geopayments Bank executive explained to us why this may have happened. They said that the payments business failed to take off because Reliance's promoters were focused on telecom, retail, e-commerce and the entertainment businesses. They said, and I'm quoting, within Reliance, the promoters, Ambani and Manoch Modi, have to be closely involved in the business for it to get large investment. end quote. And even though it did grow, Geo Money was lagging far behind its larger digital

wallet competitor, PayTM. It kind of failed to capitalize on the post-demonotization digital payments wave. And then came UPI and we all know how it took over digital payments in India. Geo Money was taken off the app store and payment features were added to the MyGeo Super app containing all of Geo's digital offerings. But things are. seem to be moving quite differently now. For starters, JFSL has a new office and it is not at headquarters at Reliance Corporate Buck. The 30-odd employees of JFSL and its various financial services arms and joint ventures now work from Tower Noembe-Nobani Knowledge City in Navi Mumbai. It is about 4 kilometres away from the headquarters. And according to an employee, this is to maintain an arm's length

distance from the parent RIL or Reliance Industries Limited. And of course, Reliance is putting all of its might into being the top NBFC in India this time, especially now that the telecom streaming and retail businesses are up and running. And the rest? Well, it depends on the employees checking into Tower No. 25. Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories,

newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.