The Call at a Glance

The stock sits barely 5% above its 52-week low and has underperformed the broader market by 21% over 12 months, which explains why Motilal Oswal frames the quarter as an entry point rather than a disappointment.

A Quarter of Two Halves

Above the operating line, Jio Financial beat the house comfortably. Net interest income rose 165% to Rs 680 crore, 18% ahead of the estimate, as lending scaled. Below it, the picture soured. Other income fell 28% to Rs 442 crore, including investment income of about Rs 160 crore against Rs 180 crore a year earlier, while operating costs jumped 91% to Rs 548 crore, 14% above forecast. Employee expenses climbed 55% to Rs 150 crore.

Context matters here. The year-ago quarter carried a large dividend receipt, so on the house's like-for-like basis, which excludes that dividend, operating profit grew 85% to Rs 570 crore and pre-tax profit rose 51% to Rs 490 crore. Associate losses of Rs 43.9 crore also widened from Rs 19.1 crore. Reliance Services and Holdings is now fully consolidated rather than booked as an associate.

Jio Credit: The Book Is Loading Fast

The lending arm remains the heart of the investment case. Assets under management rose 22% sequentially to Rs 37,300 crore, while disbursements grew 98% year on year to Rs 13,100 crore. Net interest income reached Rs 300 crore, up about 115%, and profit after tax climbed roughly 140% to Rs 120 crore. Funding costs barely moved, at 7.08% against 7.07%, and more than 70% of the book is floating-rate, so rate changes pass through quickly.

The book is fully secured and split almost evenly between home loans and business lending, though fresh flows lean heavily toward corporate and SME credit.

The Bank of America catalyst: In August, Bank of America signed a joint-venture agreement to acquire up to 49.9% of Jio Credit. Motilal Oswal expects the infusion to widen capital headroom and now values only JFSL's 50% stake in the lender. For the lending arm alone, it models AUM compounding at 89% and profit at 190% a year over FY26-FY28, with return on assets of 2.4% and return on equity of 8.8% by FY28.

Distribution Reach

The Rest of the Ecosystem

The payments unit is deliberately shedding low-quality volume to lift its net processing margin to 14bp, from 9bp a year ago. Investors beyond the top 30 cities supply 40% of the AMC's retail AUM, a GIFT City global fund is due this quarter, and Jio Allianz General Insurance is in advanced stages of regulatory approval and a life-insurance venture is under a non-binding agreement.

Valuation: One Large Star, Seven Planets

The Rs 300 target is a September 2028 sum-of-the-parts, and one component dominates it. The 6.1% stake in Reliance Industries, valued at the house's own target for that stock less a 10% holding discount, contributes Rs 181 a share, or 60% of the total. Jio Credit, at 2.5 times book, adds Rs 59. Insurance manufacturing, wealth, broking and marketplace businesses are assigned no value because they remain in incubation.

The concentration cuts both ways. Investors buying Jio Financial at 0.9 times FY27 book are, in large part, buying a discounted wrapper on Reliance, with an option on a fast-growing lender attached.

What Changed in the Forecasts

The FY27 cut reflects heavier provisioning; the FY28 upgrade reflects a richer interest-income run rate. Overall, Motilal Oswal models consolidated profit compounding at 54% between FY26 and FY28, from Rs 1,530 crore to Rs 3,630 crore, with earnings per share rising from Rs 2.4 to Rs 5.3 and consolidated return on equity recovering from 3.3% in FY27 to 6.7% in FY28. Book value per share is projected at Rs 255 by FY28.

Risks Worth Watching