Money & Banking

JM Financial to quadruple retail lending franchise from 27 locations

Our Bureau | | Updated on: Sep 03, 2020
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Financial services firm looking at co-lending space, says ICICI Securities report

To further diversify its assets and customer base, diversified financial services firm JM Financial (JMF) has plans to quadruple its retail lending franchise from 27 locations, according to a report by ICICI Securities.

JM Financial has, over the past decade, transitioned into a comprehensive corporate finance advisor-cum-provider. The financial services firm is looking at co-lending to penetrate deeper into the home-loan market and is aiming to build a retail mortgage book of ₹2,000 crore by FY23 (estimated), the report said.

The company will leverage its strengths in distribution and will securitise its asset pool, it added.

Post the IL&FS crisis, JM Financial has focussed on maintaining a highly liquid balance sheet with its cash and cash equivalents jumping two-fold in FY20. Functioning in the pandemic environment with 2.5 times leverage, more than 1.5 per cent contingency provisioning pool, higher capitalisation and superior return on assets will help the firm navigate the current cycle in a better way.

The company recently buffered ₹770 crore through a QIP as confidence and risk capital.

It will tap the emerging opportunities that the current adverse economic situation throws up, especially when the real estate cycle is close to the bottom. In the backdrop of the challenging macroeconomic scenario, weak real estate sentiments, and a non-conducive resolution environment, the earnings of mortgage lending and asset reconstruction business of JMF will remain volatile over the next two years, the report said.

JM Financial’s exposure in wholesale mortgage towards projects that are at the fag-end of completion would need restructuring as sales momentum has been disrupted, it added.

Renegotiation possibilities

In some cases, renegotiations might happen and assets revalued at lower than the estimated internal rate of return. A few assets would call for higher provisioning. As the Covid-19 crisis may increase the distressed assets acquisition opportunity, the report said, JMF will leverage its expertise in retail and build retail stressed assets as well.

Given the conducive capital market environment, investment banking, wealth management and securities (IWS) business would support the earnings momentum. A dominant market position in investment banking, advisory, securities, and capital market lending would ensure strong traction in IWS earnings in the period up to FY22E.

JMF has been in an active investment mode in the IWS business segment for the past 12-18 months. It recruited the most during the downcycle post IL&FS crisis into wealth management, AMC, etc. Besides deepening presence with HNIs, corporate promoters and institutional clients, JMF would now want to spread its wings actively in the retail segment through the franchise model and improve its contribution, the report said.

Published on September 03, 2020

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