JM Financial

JM Financial has significantly de-risked its wholesale credit business, reducing the loan book across real estate, financial institutions, and MSME by approximately 45% from INR 7,529 crores on March 31, 2024, to INR 4,207 crores by December 31, 2024. This strategic pivot involves moving from an on-balance sheet model to syndicating transactions. The company has proactively increased the provision coverage ratio on its real estate loan book from 54% to 93% over the same period, with a target to reach 100% by March 2025, aiming for a fully cleaned-up balance sheet. Management is confident in recovering 80-90% of the provided amount from distressed assets within the next two years.

The Wealth and Asset Management businesses demonstrated strong performance. The AUM of the wealth business grew 17% year-on-year to approximately INR 1,10,000 crores. The SEBI margin finance book increased by 38% year-on-year to about INR 2,100 crores, and mutual fund AUM tripled to approximately INR 13,800 crores, with equity mutual funds crossing INR 10,000 crores. Management is in an investment phase, hiring quality talent and expanding footprint, expecting quicker asset ramp-up and above industry average growth in the coming years.

Despite some temporary impact from a misunderstood SEBI order in early 2024, the investment banking business maintains a strong pipeline and market share of 15-20% in capital markets. The company reported being #1 in QIP deals in calendar year 2024. Management expressed high confidence in the capital raising environment for the next five years, anticipating a "ridiculous amount of growth" and significant benefits for JM Financial as a leading investment bank, with continued aggressive investment in talent and resources.

The affordable home loans business continued its expansion, growing its AUM by 33% year-on-year to approximately INR 2,600 crores. The branch network has expanded to 128 branches, with a net worth of approximately INR 780 crores in this segment. The company noted that 20 out of 29 new branches opened in Tier 2 and Tier 3 cities since April 2022 are already nearing breakeven, indicating efficient scaling and a strong Third-Party Product distribution pipeline.

The Asset Reconstruction Company (ARC) business is shifting its focus away from taking turnaround risk in corporate assets. The future strategy involves a syndicated model, partnering with corporates or foreign funds with a commitment of 2.5-15%, and resolving retail NPAs. For private credit syndication, the company targets a steady-state book of INR 3,000 crores, expecting a spread of 400-500 basis points on deployed capital, translating to unlevered earnings of 13-14%.

Cash and cash equivalents increased to INR 5,840 crores by December 31, 2024, from INR 4,769 crores on March 31, 2024, while group borrowing reduced by 25% to INR 12,143 crores. The company plans to deploy its cash surplus into new business lines, targeting approximately INR 3,000 crores each for corporate syndication, loan against shares, and margin trade finance. This strategy aims to generate higher yields compared to current mutual fund holdings and bolster business growth.

JM Financial is aggressively investing in talent and digital capabilities across its businesses, including wealth, investment banking, and institutional equity. This proactive approach, initiated 2-3 years ago, aims to capitalize on market opportunities and strengthen its bench, particularly in areas like derivatives platforms and research. The company expects to see continued growth in team size and coverage breadth over the next 6 months, ensuring readiness for anticipated business expansion.