‘We aim to generate at least 50% of revenue from online in 7-8 yrs’

JM Financial turns 50 this year. How is the business placed today for growth?

Well, it has been a journey of sustainable value creation based on strong fundamentals through which we emerged as a diversified financial services group. We are in a wonderful phase at the moment, as our investment banking, mortgage lending and asset management, wealth management and securities (AWS) businesses are seeing strong growth momentum and activity. Our alternative and distressed credit business had reported record profitability last year on the back of strong resolutions. We continue to prioritize our focus on resolution of existing assets. As banks and other financial institutions continue to clean up their balance sheets, our asset reconstruction business will see upside. In addition, we are investing a lot, majorly in people, technology and infrastructure as part of our continued focus on tapping the multi-decade opportunity in front of us. It’s an interesting phase for the economy. After putting the pandemic and other challenges firmly behind, companies are now dealing with growth challenges. In this phase of our journey, emerging opportunities lie in real estate and capital markets which typically banks are constrained to do. At JM Financial, we are focused on real estate and capital markets. We see huge growth opportunity both in lending and advisory businesses. Real estate and capital markets are expected to grow at a higher rate than the GDP growth rate over the next decade. In fact, these sectors will emerge as the key growth drivers for the economy.

Considering the global macroeconomic scenario, how do you expect things to pan out for the Indian economy? Can India take advantage of the dislocations in the global economy?

We firmly believe this is India’s decade. Thanks to the robust gross domestic savings and lower corporate debt-to-GDP ratio, corporates are in the pink of health. With continued clean-ups, the banking and non-banking system are well-capitalized and credit growth is strong. I believe the corporate investment cycle will pick up, as the domestic market is growing at a faster pace compared to other emerging markets. Sectors like manufacturing and defence are expecting a substantial rise in exports on demographic dividends, the government’s focus on strengthening transport, communication, digital and logistics infrastructure. Having said that, growth momentum will not be limited to a certain sector, as the overall outlook is extremely robust. The economy is firmly on a growth trajectory in the medium- to long-term view, factoring in the markets and interest rate movements.

How is JM Financial looking to tap this opportunity?

There has been a sharp focus to drive sustainable growth for all our businesses. For our investment bank business, we made strategic investments in product development to enhance our product pipeline. We’ve also expanded our client base as a part of our goal to diversify our revenue generation strategy, which is not linked to one large client and it’s a well-spread-out one. As a result of our robust product development strategy, our diversified product portfolio includes debt capital markets instruments in investment grade, structured and bespoke financing and wealth management solutions for our ultra-high-net worth clients, and portfolio management services and private equity funds, apart from financial solutions for NBFCs, securitization, co-lending model, etc. We are looking to collaborating with NBFCs with strong credit profit and stable growth outlook, to leverage each other’s strengths.

Thanks to a structured approach, the investment bank business is functioning in a cohesive manner, broadening the company’s customer base by on-boarding a number of corporates, institutions and going deeper with diversified product offerings.

Mortgage lending is a big part of JM Financial. How is that business doing?

On the mortgage lending side, we have regained growth momentum. Our total mortgage lending book, wholesale and retail combined, is ₹9,500-10,000 crore and is expected to grow to ₹15,000 crore in the next 15 months. In Q2 FY23, JM Financial’s consolidated loan book stood at ₹14,670 crore, an increase of 32.50% YoY. Our retail mortgage investments continue with the expansion of JM Financial home loan to 75 branches and is expected to grow at a faster pace. We have achieved significant profitability in the mortgage lending business. Even with the impact of covid and all provisions, the business registered profitability and is expected to demonstrate stronger profitability in the next 24 months.

How is JM Financial planning to tap the digital opportunity?

We are optimistic about our AWS platform, a robust tech-led platform on which we are developing our digital backbone for broking, asset management and financial products distribution. In addition, we are working to develop a digital platform for franchise, direct and mobile broking. We have plans to digitize the distribution of all financial products and mutual funds to drive business online. We aim to generate 50% of our revenue from online in the next 7-8 years. We are planning to set up the base of the platform AWS in Bengaluru and/or Pune and the tech hub and talents of these cities will help us build a robust platform, which is a key for efficient operational and performance outcomes for the platform AWS business. We’ll continue with our strategic investments in the platform AWS segment through additional hires, development of a strong digital marketing model and a digital-friendly physical infrastructure.

2022 was a volatile year for equities. Are things looking better for the markets in 2023?

To my knowledge, a number of fund managers are in the process of raising India dedicated funds, Asia funds excluding China with 40-50% weightage to India. So, capital inflow to India will continue. So, in the next six months, the trend could reverse and foreign portfolio investors (FPIs) could become net buyers. Markets will, however, remain range bound. We are already in the mid to advanced phase of the rate hike cycle. The commodity and oil prices are showing signs of cooling off. You haven’t seen a correction because of strong domestic flows and companies in India continue to perform very well. They may guide for low profit but they are still guiding for growth. The markets are on a good trajectory. The only thing to watch out for is the CAD.

How has the Covid period changed things for you personally?

Since March 2022, we have been working in office. At the office, the atmosphere is more exciting and charged up with frequent strategic collaborations and interactions with colleagues and clients. In the post-pandemic phase, communications and meetings with the clients have become hybrid thanks to the technology-led convenience and efficiency. So, the approach towards business meetings has changed.