Equity Research INDIA

August 3, 2022
BSE Sensex: 58351
JM Financial BUY
ICICI Securities Limited Maintained
is the author and
distributor of this report Pre-payments drag growth, stress pool subsides;
Platform AWS and ARC weigh on earnings Rs63
Q1FY23 results review,
TP and earnings JM Financial’s (JMF) Q1FY23 result was characterised by: 1) Investment in
revision franchise and limited IPO financing opportunities dragging Platform AWS
business earnings by 52% QoQ / 23% YoY (to Rs70mn). 2) Modest recoveries of
Financials Rs1.3bn led to muted earnings in alternative and distressed credit business. 3)
Earnings of mortgage lending were broadly stable QoQ. 4) This was offset by 8%
Target price: Rs122 QoQ / 16% YoY rise in investment bank business. 5) Higher than normal pre-
payments dragged wholesale mortgage book down by 4% and chunky loan
Earnings revision repayment pulled bespoke financing down by 15% QoQ. 6) With resolutions from
(%) FY23E FY24E SMA-2 pool as well as NPA, mortgage lending GNPAs settled at 5.6% and overall
PAT ↓ 3 - stress pool (GNPAs+SMA-2) came off to 8.4% (from 9.9% / 8.6% / 7.6% in
Q4/Q3/Q2). Earnings of investment bank were better than expectations offsetting
Target price revision below expected Platform AWS and distressed credit business earnings. All in all,
Rs122 from Rs125
consolidated PAT settled better than expected at Rs1.7bn (down 5% QoQ/16%
Shareholding pattern YoY), translating to consolidated RoA of 3.2% and RoE of 8.8%.
Dec Mar Jun
'21 '22 '22 Though not on the expected lines in Q1FY23, we are closely monitoring the
Promoters 55.3 55.4 55.4 management guidance’s oriented towards balance sheet scale up and improved
Institutional
investors 31.1 30.6 29.9 RoE profile: 1) Doubling the mortgage lending portfolio to Rs150bn by FY24
MFs and others 9.5 8.7 8.7
FIs/Banks 0.0 0.0 0.0
(Rs120bn of wholesale mortgages and Rs30bn of retail mortgages) with targeted
Insurance 0.1 0.1 0.1 RoEs of 15%; 2) contain net NPA + SMA-2 at less than 5%; 3) drive investment
FIIs 21.5 21.8 21.1
Others 13.6 14.0 14.7 bank business RoEs towards high-teens (from 14.8% in FY22), 4) target RoEs of
Source: BSE 25% (vs 12.3% in FY22) in Platform AWS business (focused on retail clients) by
leveraging technology/digital infrastructure; 5) scale up mutual fund AUM to
Price chart Rs250bn by FY25 (vs Rs23bn in FY22). Maintain BUY with a revised SOTP target
140 price of Rs122 (earlier: Rs125).
120
 Resolutions lead to decline in stress pool to 5.7% vs 7.4% QoQ: With
100
80
resolutions from SMA-2 pool as well as NPA, consolidated GNPAs in % terms fell to
(Rs)

60
3.5% (vs 4.3%/ 4.4%/ 2.3%/3.5% in Q4/ Q3 /Q2 /Q1FY22) and SMA-2 pool too
40 declined to 2.2% (3.1%/ 2.5%/ 4.5%/ 5.0% in Q4/ Q3 /Q2 /Q1FY22). Consolidated
20 stress pool, as a result, fell to 5.7% (vs 7.4%/ QoQ). It created specific provisions on
0 incremental stress of Rs320mn and with the release of provisioning and write-offs,
cumulative provision came off to 4.5% of the consolidated loan book (vs 5.8% QoQ
Feb-20

Feb-21

Feb-22
Aug-19

Aug-20

Aug-21

Aug-22

and 6.0% YoY). Restructured pool stands at 0.45% (vs 0.81%/ 0.91% /0.87%
/0.62% in Q4/ Q3/ Q2/ Q1FY22). The company is monitoring under-construction
projects closely. We expect credit cost to subside with resolutions in coming quarters
and lower incremental stress.
Market Cap Rs59.8bn/US$758mn Year to Mar FY21 FY22 FY23E FY24E
Research Analysts:
Reuters/Bloomberg JMSH.BO/ JM IN Revenues (Rs mn) 21,158 27,982 31,333 35,990
Kunal Shah Shares Outstanding (mn) 954.4 PAT (post MI) (Rs mn) 5,900 7,733 9,477 11,353
kunal.shah@icicisecurities.com
+91 22 6807 7572 52-week Range (Rs) 103/58 EPS (Rs) 6.2 8.1 10.0 11.9
Renish Bhuva Free Float (%) 44.6 % Chg YoY -4 31 23 20
renish.bhuva@icicisecurities.com FII (%) 21.1 P/E (x) 10.6 8.1 6.6 5.5
+91 22 6807 7465
Daily Volume (US$'000) 1,051 P/BV (x) 0.9 0.8 0.7 0.7
Chintan Shah
chintan.shah@icicisecurities.com Absolute Return 3m (%) (10.9) Net NPA (%) 2.0 0.1 0.6 0.5
+91 22 6807 7658 Absolute Return 12m (%) (37.7) Dividend Yield (%) 0.4 0.8 1.5 1.9
Sensex Return 3m (%) 3.2 RoA (%) 3.7 4.0 4.6 5.2
Sensex Return 12m (%) 9.7 RoE (pre MI) (%) 9.2 9.9 10.8 12.1

Please refer to important disclosures at the end of this report

JM Financial, August 3, 2022 ICICI Securities

 Higher repayments/pre-payments drag wholesale mortgages down:

Consolidated gross loan book was up 14% YoY, but declined 3% QoQ to Rs126bn
primarily due to run-offs in wholesale mortgage (down 4% QoQ) and bespoke
financing (down 15% QoQ). This was partially offset by 9% QoQ uptick in retail
mortgages. Endeavour would be to scale up FI financing by 5-7x from current
levels, retail mortgages by 3x and effectively tap the opportunities for bespoke
financing.
Wholesale mortgages, due to higher than normal level of pre-payments,
moderated (down 4% QoQ / 21% YoY) to Rs60.1bn. Residential sales in all
geographies and across all ticket sizes have been robust. There is rapid
consolidation in the sector whereby the amount of sales done by top developers
as a percentage of overall sales is increasing gradually and significantly.
Management highlighted that with strengthened origination and monitoring
processes, it will look to capitalise the opportunities to grow the wholesale
mortgage book.
Overall, company’s guidance of Rs120bn by FY24 remains intact.
 Retail mortgage disbursements down QoQ due to seasonality; AUM grew
12% QoQ / 105% YoY: Key focus will be on building scale in retail mortgage
through technology-driven sourcing, monitoring and client servicing. Retail
mortgage lending book grew 12% QoQ / 105% YoY to Rs9.2bn supported by
disbursements of Rs1.45bn (vs Rs2.23bn/ Rs1.5bn/ Rs1bn/ Rs0.3bn in Q4/ Q3/
Q2/ Q1FY22). It plans to expand its retail network from 64 branches to 75
branches by Oct’22 and almost 100 branches by Mar’23. The focus here is on
affordable housing and self-employed segments.
 Investment bank earnings supported by provisioning write-back: Investment
bank business revenue was up 8% QoQ but down 3% YoY to Rs3.08bn. The
stress in investment bank related lending book normalised and hence, there was
provision write-back to the tune of Rs180mn (vs Rs10mn/ Rs290mn/ Rs420mn in
Q4/ Q3/ Q2) that supported sequential 8% QoQ rise in PAT at Rs1.05bn. This
business is carrying a loan book of Rs45.0bn (vs Rs45.9n QoQ and Rs32.3bn
YoY), of which, 47% is bespoke financing available for its institutional clients, 21%
is capital market lending originated for Platform AWS clients, 13% is wholesale
mortgage that will run-down gradually, 8% is retail mortgage and the balance is
financial institution financing for portfolio purchases. JMF has deployed 91.5% of
private equity fund II investments and with the initial close in Dec’21, the targeted
corpus for fund III is Rs10bn (with green shoe of Rs5bn).
Investment bank is the cornerstone of JMF’s franchise catering to institutional,
corporate and government and will provide institutional coverage to ultra HNI
clients and entrepreneurs. It will expand the depth and the breadth of its current
client base and expects to add digital companies as well. It will expand its
syndication platform and deliver on franchise enhancing lending with consistent
risk management.
 Platform AWS - investing in franchise resulted in elevated cost: Platform
AWS’ revenue (down 15% QoQ/ 9% YoY) and earnings (down 50% QoQ/ 42%
YoY) were adversely impacted by limited IPO financing opportunities and elevated
cost structure due to investment in franchise. AUM of private wealth management
business was up 1% QoQ to Rs616.6bn as run-off in debt funds was offset by rise

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JM Financial, August 3, 2022 ICICI Securities
in equity and liquid funds. Number of relationship managers in private wealth AUM
reduced to 28 from 36 in Mar’22. Retail wealth management witnessed 3% QoQ /
17% YoY growth to Rs207bn and elite wealth management after crossing Rs10bn
mark fell to Rs9.7bn (vs Rs10.3bn/ Rs8.8bn / Rs7.9bn / Rs6.6bn in Q4/ Q3 / Q2 /
Q1FY22). Number of relationship managers in elite AUM has increased to 100
from 92 in Mar’22.
It has expanded PMS team size to 23 as of Jun’22 (from 18 as of Mar’22 and 9 as
of Jun’21) and with expansion almost done, it is now in a position to accelerate the
growth of the PMS business. Due to new hires, cost to income spiked to as much
as 95.2% from 70.5% QoQ and 78.0% YoY. Average MF AUM rose >33% QoQ to
Rs30.6bn vs Rs23.2bn QoQ. In a bid to grow its AUM and folio base, the company
has on-boarded senior hires across functions such as the Investment Team,
Products, Sales, Risk, Operations and Technology and over the last one year has
recruited 24 people in the AMC business. It targets to scale up mutual fund AUM
to Rs250bn by FY25E.
 Alternative and distressed credit – muted quarter as recoveries were limited:
Recoveries during the quarter were Rs1.2bn (vs Rs4.51bn/ Rs2.04bn/ Rs3.15bn/
Rs10.7bn in Q4/ Q3/ Q2/ Q1FY22) backed by recovery from restructured
accounts, sale of assets and the NCLT process etc. Cumulative recovery stood at
Rs119.02bn which comprises 34% towards settlement, 33% towards restructuring,
22% towards sale of asset and 11% from NCLT. Security Receipts (SRs) of
Rs0.69bn (Rs1.79bn/ Rs1.42bn/ Rs2.1bn/ Rs2.2bn) were redeemed. It acquired
assets worth Rs5.4bn as well and outstanding SRs rose a tad to Rs114bn (from
Rs109bn/ Rs107bn /Rs109bn/ Rs111bn as of Q4/ Q3 /Q1FY22/FY21). In the
absence of any chunky resolution, PAT of this business was muted at Rs20mn vs
Rs100mn QoQ and Rs650mn YoY. With expertise built in this niche business, it
will create value in certain portfolio companies. It will follow the co-investment
model with strategic partners / financial investors including distressed funds and
focus on annuity revenue streams.

Table 1: JMF valuations primarily led by IWS and lending businesses

(Rs mn, year ending March 31)
Businesses Parameter Rs mn Multiple Valuation Stake Value to JMF Per share
IWS (Includes part of NBFC) Earnings 7,564 11.0 83,204 100.0% 83,204 87
Mortgage lending Net worth 51,106 1.02 52,007 50.6% 26,294 28
- Wholesale mortgage Net worth 48,103 1.00 48,103 46.7% 22,455 24
- Retail mortgage Net worth 3,003 1.30 3,904 98.4% 3,840 4
Distressed credit Net worth 20,489 0.8 16,391 63.6% 10,425 11
AMC AUM 1,15,867 6.0% 6,952 59.5% 4,139 4
Excess capital, investments Net worth 4,600 1.0 4,600 100.0% 4,600 5
Total 1,63,154 1,28,662 135
Holdco discount (10%) 16,315 12,866 13
Total 1,46,839 1,15,796 122
Source: Company data, I-Sec research

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JM Financial, August 3, 2022 ICICI Securities
Table 2: Q1FY23 result review
(Rs mn, year ending March 31)
Q2FY22 Q3FY22 Q4FY22 Q1FY23 YoY (%) QoQ (%)
Consolidated P&L
Interest Income 5,051 4,905 4,225 4,634 7 10
Net gain on derecognition of financial instruments -31 1 25 - NA -100
Total Interest Income 5,020 4,905 4,249 4,634 7 9
Interest Expenses 2,874 2,834 2,500 2,607 -0 4
Net Interest Income 2,146 2,071 1,750 2,027 18 16

Fees and Commission Income 2,006 2,200 1,857 1,643 -22 -11
Brokerage Income 804 817 867 691 -15 -20
Net gain on fair value changes 1,443 1,262 820 658 -100 -100
Other Operating Income 318 335 303 286 16 -6
Other Income 73 126 296 145 115 -51
Non-interest Income 4,644 4,739 4,143 3,423 -39 -17

Total Income (net of interest expenses) 6,790 6,811 5,893 5,450 -26 -8
NA
Employee benefits expense 1,454 1,427 974 1,478 -9 52
Depreciation expense 94 93 96 96 1 -1
Net loss on fair value changes - - - - NA NA
Other expenses 930 1,049 1,102 962 6 -13
Total operating expenses 2,478 2,569 2,173 2,535 -3 17
NA
PPoP 4,312 4,242 3,720 2,915 -38 -22
Impairment on financial instruments 1,139 754 504 323 -70 -36
PBT 3,173 3,487 3,216 2,592 -28 -19
NA
Current tax 1,305 722 835 412 -68 -51
Deferred tax -412 158 90 198 -145 119
Tax adjustment of earlier years (net) - NA NA
Total tax expenses 893 880 925 609 -29 -34
NA
PAT 2,280 2,608 2,291 1,983 -28 -13
Share in profit / (loss) of associate 3 1 -7 1 -61 -117
Net Profit after tax & profit / (loss) of Associate 2,283 2,609 2,284 1,984 -28 -13
Minority Interest 538 441 497 284 -60 -43
PAT after minority interest 1,745 2,169 1,787 1,701 -16 -5
Lending Business
Gross Loan Book (Rs mn)
Wholesale Mortgage 65,770 66,880 62,860 60,140 -21 -4
Retail Mortgage 8,550 9,920 11,700 12,710 68 9
Bespoke 27,370 25,120 42,870 36,520 111 -15
FI Financing 1,030 1,080 4,400 4,610 284 5
Capital Market 8,000 9,400 8,340 12,080 47 45
Total 1,10,720 1,12,400 1,30,170 1,26,060 14 -3

Yields (%) 13.9 13.3 12.7 12.9 10 20

COF (%) 9.3 9.0 8.8 8.5 -20 -30
Spreads (%) 4.6 4.3 3.9 4.4 30 50
NIM (%) (RHS) 7.3 7.0 6.6 6.9 30 30

Asset quality YoY (bps) QoQ (bps)

GNPA (%) 2.3 4.4 4.3 3.5 194 -80
NNPA (%) 1.4 2.8 2.7 2.3 55 -40
PCR (%) (RHS) 39.1 36.4 37.2 34.3 3,016 -292

SMA2 (%) 4.5 2.5 3.1 2.2 382 -90

Return Ratios YoY (bps) QoQ (bps)

RoA (%) [annualised] 3.0 3.3 3.2 3.6 -210 40
RoE (%) [annualised] 7.4 7.8 8.3 9.4 -720 110
CRAR (%) 42.9 44.5 39.4 42.3 480 290
Source: Company data, I-Sec research

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JM Financial, August 3, 2022 ICICI Securities
Q4FY22 earnings call takeaways

Lending
 Loan book up 19.9% YoY for FY22. Wholesale mortgage constitutes 48% of
loan book (down 12% YoY), capital markets at 6.4% of loan book at Rs
8.34bn (down 2% YoY), bespoke financing loanbook at 33% which is Rs
42.87bn (up 105% YoY), retail mortgage at 9% which is Rs 11.7bn (up 57%
YoY), financial institution loan book at 3.4% at Rs 4.39bn (entire growth in
FY22)
 SMA 2 numbers increased from 3.31% QoQ to 4.17%
 Company is very sure of collateral, but can’t say on the timeline especially if it is
into litigation for resolution and recoveries
 Company does very less of distribution for other housing finance lenders
 Q3 was one of the best quarters for IPO funding while Q4 saw low IPO
funding
 For Q3, there was IPO funding of Rs 75-80bn for almost 3 weeks on which
company earned spread of 200-300bps and this was quite low in Q4 which
resulted in lower interest income QoQ
 Slippages from Q4 were largely from mortgage and there were hardly any
from bespoke book
 Current cash balance in JMF Credit solution at Rs 16bn which is due to a lot
of refinancing and repayments from current book and company has
consciously not grown its book in the next 2-3 years. However, this trend is
unlikely to continue and real estate lending is likely to pick up in coming
quarters.
 Escrow collections at very high levels due to strong sales seen in Mumbai,
Bangalore and Pune
 Contracted repayments at Rs 13bn for FY23 and sanctioned disbursements is Rs
11bn for FY23
 Mortgage lending vertical book size target of Rs 150bn by FY24 (Rs 120bn
wholesale and Rs 30bn Retail)
 Long-term RoE target of >15% by FY24 wherein Retail would be lower and
wholesale would be higher
 Target of Net NPA and SMA 2 well below 5%
 Historically, wholesale lending business always has high SMA-2 number

Affordable housing
 Wholesale mortgage is more city centric while retail lending is in outskirts of city
with ATS of Rs 1.1mn
 Currently has 55 branches and will add 20 branches by Nov and 100
branches in a year.
 Advantage for company is that it has lower cost of borrowings as compared
to peers
 Completely tech enabled. Running on extremely tight cost to income.
 90-95% loans are towards completed homes

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JM Financial, August 3, 2022 ICICI Securities
 During the year, company would like to make a detailed presentation on this
business prospects
 Company is looking to gradually reduce reliance on real estate business

Platform AWS
 Significantly expanded its PMS team size to 18 from 7 a year ago with senior
hiring.
 Elite Wealth 92 advisors across 8 locations and crossed Rs10bn.
 Retail Wealth – 7300 active independent distributors, 22.3% Y0Y growth
 JMF MF serves nearly 135k investors and close to 16.7k distributors across India
through its 12 MF schemes, 10 branches and 81 service centres
 Wealth management total AUM stood at Rs 612bn
 Consolidation in investment banking space seems to be done.
 Online trading has increased to 63% from 52%
 Investment banking business sustainable target growth of 15-20%. Investment
Bank pipeline is robust at 100+ transactions – cross-selling machine will fire
across corporation, ultra HNI or institutional clients need.
 Integrated investment bank RoE should be pushed towards 18-19% (high
teens) from 15%.
 Platform AWS – internet assets and digital infrastructure – focused on
individual clients through technology led platform – 25% targeted RoE
 MF AUM target is Rs250bn by FY25.

PWM and PMS to be merged into holdco

 Scheme of demerger of JM Financial Services approved by Board – PWM and
PMS businesses have synergies with institutional clients and equities/AIFs. Hence
is will be merged into holding company as Investment Bank business.

Miscellaneous
 ARC business - reduced debt to equity to appx 1.2x and now the company is
quite comfortable
 Long term borrowing as a proportion of total borrowing stood at ~78% and short
term borrowing as a proportion of total borrowing stood at ~22%. Short term
borrowing also includes working capital loans / borrowing for brokerage business.
 IPO Funding/distribution contribution to earnings was Rs 1.2bn in FY22 –
will be adversely impacted due to regulatory changes and will go down to
zero.

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JM Financial, August 3, 2022 ICICI Securities

Q2FY22 earnings call takeaways

In Q2FY22, consolidated revenues grew 20% YoY to Rs9.7bn and consolidated

PAT at Rs1.77bn.
Landing book GNPAs have come down to 2.3%, net NPA 1.4% and SMA-2 4.5%
Investment Bank

 This business has vintage of decade and is one of the key segments
 Have executed several primary and secondary trades
 Robust pipeline of products – capital market, private equity and advisory
 Institutional fixed income is the youngest business -
 Real estate book in investment bank – taken that provisions on mortgage
book of Rs350mn.
 Bespoke loan book Rs20.8bn that is to its investment bank clients.
 Steering at multi-decade opportunity with focus on depth, high quality execution
and gain market share.
 Will consistently generate free cashflows for the group
 Institutional equities – 250 stocks; beefed up research coverage with strong
knowledge base. Strengthening derivatives platform.
 Private equity fund III raise underway. Fund II of Rs5bn, 80% deployed.

Wholesale mortgages
 Wholesale mortgage book has reduced 8% QoQ to Rs66bn. 1-2 large
accounts repaid. Rs4-5bn collections every quarter. Developers are focused
on sales.
 Strong tailwinds in the sector – next 3-6 months book would see growth as it is
sitting on excess liquidity.
 Confidence on meeting timelines of resolution was high last time but second wave
impacted it. Some accounts impacted and there was delay in resolution. It took 6
months more to previously assumed timelines of 18-24 months.
 70-80% of resolution will be through further construction activity and DCCO
benefit.
 Origination team is also focused on resolution efforts to ensure collections and
keep asset quality pristine.

Retail mortgages
 Retail financing is the youngest business. Invested heavily building right talent and
franchise.
 3Cs philosophy: strong collection focus, collateral management, robust credit
underwriting.
 Rs5.07 retail book is granular and spread across 8 states. HL 75%, LAP 18%,
educational institutional at 8%
 GNPAs less than 1% and collection efficiency of 99%

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JM Financial, August 3, 2022 ICICI Securities
 Right talent, expand branches (51), Rs1.5bn disbursements targeted for next 2
quarters.
 There is consolidation in the sector whereby the amount of sales done by top
developers as a percentage of overall sales is increasing gradually and
significantly. JM however works with mid-sized and large developers and has
robust pipeline. It is cautiously evaluating opportunities across geographies and
will look at gradually increasing the lending book.
 Lot of small developer projects have restarted and will add to sales
momentum.

Alternative and Distressed credit

 Key player in the industry with 12 years of experience. Co-investment model
with strategic and financial investors.
 Higher focus on recoveries and resolutions yielded results and recoveries
during quarter were about Rs3.15bn (vs Rs10.7bn in Q1FY22) and security
Receipts of Rs2.1bn (Rs2.2bn) were redeemed.
 Acquired loans of two companies during the quarter.
 Outstanding Security Receipts thereby came down to Rs107bn (from
Rs109bn/Rs111bn as of Q1FY22/FY21).
 The contribution of JM ARC towards the SRs stood at Rs31.4bn
 Couple of accounts facing challenges – Unitech facing legal issues. Have made
adequate provisions as SC has appointed new Board for amicable solutions.

Platform AWS
 First 6 months have been particularly good. 50% growth in average broking
volumes. Average daily trading volume of retail stood at Rs125bn (vs
Rs115bn QoQ).
 Increasing online transaction to 55% (39% last year).
 Focus on acquiring clients digital and give them seamless journey.
 AUA of private wealth management business was up 6% QoQ/18% YoY to
Rs638bn (excluding custody assets). Retail wealth management witnessed
6.5% QoQ/25.7% YoY to Rs188bn and elite wealth management also seeing
scale up (now AUM stands at Rs7.9bn vs Rs6.6bn). Focusing on online and digital
capabilities. Also received corporate broking license for insurance distribution.
 Average MF AUM declined 2% QoQ to Rs20.9bn. Next couple of years several
initiatives will be taken – strengthening leadership team, research coverage.

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JM Financial, August 3, 2022 ICICI Securities
Chart 1: Consolidated gross loan book was up 14% YoY, but declined 3% QoQ
Lending Book - Gross Loan Book
100
8 7 7 8 6 10
90 0 1 1 1 3
4
19 16
80 25 22
7 33 29
70 7
8 9
60
9 10
(%)
50
40
66 69
30 59 60
48 48
20
10
-
Q4FY21 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23
Wholesale Mortgage Retail Mortgage Bespoke FI Financing Capital Market
Source: Company data, I-Sec research

Chart 2: Stress pool (GNPA+SMA2) declines to 5.7% from 7.4% QoQ

Lending business - Asset quality
5.0 60
48 50 54
4.5 46 46
4.0 44 50
39 37
3.5 36 34 40
3.0
2.5 30
2.0
1.5 20
1.0 16 10
1.6
1.4

1.7
1.1

1.8
1.2

1.7
1.1

1.2

2.0

1.9

1.4

2.8

4.3

3.5
1.8

3.5

3.5

2.3

4.4

2.7

2.3
0.5
- 0
Q3FY20

Q4FY20

Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22

Q3FY22

Q4FY22

Q1FY23
GNPA (%) NNPA (%) PCR (%) (RHS)
Source: Company data, I-Sec research

Chart 3: Spreads improve supported by yields as well as cost

Lending business - Yields & Margins
16.0 4.6 5
14.0 5
4.4 4.4 4.4 4.4
12.0 4.3 4.3
4.2 4
10.0 4.1
4.0 4
8.0 3.9
4
6.0
4.0 4
14.0

14.3

14.1

14.3

14.1

13.9

13.3

12.9
10.3

14.5
10.1

14.3
10.0

12.7

2.0 4
9.9

9.9

9.9

9.7

9.3

8.5
9.0

8.8

- 3
Q3FY20

Q4FY20

Q1FY21

Q3FY21

Q4FY21

Q2FY22

Q3FY22

Q4FY22
Q2FY21

Q1FY22

Q1FY23

Yields (%) COF (%) Spreads (%)

Source: Company data, I-Sec research

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JM Financial, August 3, 2022 ICICI Securities
Chart 4: Investment bank constitutes more than one-third of revenues
Segment wise consolidated revenue break-up
100%
90%
30 33 34 32 32 34
80% 38 37 35
70%
60%
50% 30 32
43 36 36 36
37 29 34
40%
30%
9 23 13 9 10
20% 14 11 14 7
10% 15 15 20 14 19 19 18 15
12
0%
Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23
AWS Alternative and Distressed Credit Mortgage Lending Investment Bank
Source: Company data, I-Sec research

Chart 5: Investment bank provide delta to earnings

Segm ent wise consolidated PAT break-up
100 2 5 10 13 8 12 18 15 17
80
46
39 43 37
60 46
60 46 54
62
(%)

40 12 17
28
39 14
25 14
24 32 4 17
20
12 5 16
4 20 18 6
13 8 10 11 8 1
- - 4 4
Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23
AWS Alternative and Distressed Credit Mortgage Lending Investment Bank Unallocated
Source: Company data, I-Sec research

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JM Financial, August 3, 2022 ICICI Securities

Financial summary
Table 3: Profit and loss statement (consolidated)
(Rs mn, year ending Mar 31)
FY19 FY20 FY21 FY22 FY23E FY24E
Interest Income 23,649 22,813 19,085 20,818 23,666 26,307
Interest Expenses 14,462 13,859 11,109 12,513 13,450 14,504
Net Interest Income 9,205 9,134 8,043 8,848 10,629 12,237

Fees and Commission Income 5,768 6,463 6,285 9,606 10,044 11,531
Brokerage Income 1,902 2,027 2,566 3,632 3,951 4,298
Net gain on fair value changes 2,448 1,760 3,119 1,475 1,111 1,042
Other Operating Income 1,221 1,083 853 1,254 1,402 1,571
Other Income 203 215 292 3,165 4,196 5,311
Non-interest Income 11,543 11,547 13,115 19,133 20,704 23,753

Employee benefits expense 4,216 3,954 4,408 4,495 4,988 5,462

Depreciation expense 271 410 398 644 682 722
Other expenses 3,082 3,044 3,116 5,868 7,044 8,269
Total operating expenses 7,569 7,409 7,922 11,007 12,714 14,453

PPoP 13,179 13,272 13,236 16,975 18,619 21,537

Provisions & contingencies 351 2,337 2,568 3,494 2,467 1,447

PBT 12,828 10,935 10,668 13,480 16,153 20,089

Total tax expenses 4,463 3,160 2,608 3,572 4,196 5,194

PAT 8,365 7,775 8,061 9,908 11,957 14,896

Share in profit / (loss) of associate 6 4 21 20 15 15
Net Profit after tax & profit / (loss) of
Associate 8,370 7,780 8,082 9,928 11,972 14,911
Minority Interest 2,649 2,330 2,182 2,195 2,495 3,557
PAT after minority interest 5,722 5,450 5,900 7,733 9,477 11,353
Source: Company data, I-Sec research

Table 4: Balance sheet (consolidated)

(Rs mn, year ending Mar 31)
FY19 FY20 FY21 FY22 FY23E FY24E
Loan book - Steady state Financing 1,39,990 1,13,070 1,03,580 1,30,100 1,52,042 1,79,881
Distressed asset book 41,940 36,860 39,150 37,085 43,129 47,341
Cash and cash equivalents (CCE) 17,370 34,120 53,510 31,119 26,456 30,620
Other Investments 8,420 7,510 14,590 34,146 12,760 14,196
Arbitrage and trading book 3,120 2,190 6,920 7,266 7,629 8,011
Property, Plant and Equipment 3,720 3,980 3,710 3,896 4,090 4,295
Trade Receivables 6,850 3,240 4,990 5,683 6,380 7,452
Other assets 4,420 5,960 6,770 10,028 12,070 14,400
Total Assets 2,25,830 2,06,930 2,33,220 2,59,322 2,64,557 3,06,196

Shareholders’ Funds 50,790 55,860 69,470 76,707 85,227 95,389

Non-Controlling Interest 21,500 24,070 26,050 28,245 30,741 34,298
Share of security receipt holders 4,840 890 710 710 710 710
Borrowings 1,39,910 1,17,560 1,23,690 1,42,827 1,34,812 1,60,927
Trade Payables 4,170 4,400 7,650 6,082 7,521 9,006
Other Liabilities and Provisions 4,620 4,150 5,650 4,751 5,546 5,866
Total Equity and Liabilities 2,25,830 2,06,930 2,33,220 2,59,322 2,64,557 3,06,196
Source: Company data, I-Sec research

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JM Financial, August 3, 2022 ICICI Securities
Table 5: Key metrics (consolidated)
(Rs mn, Year ending Mar 31)
FY19 FY20 FY21 FY22 FY23E FY24E
Wholesale Mortgage 1,01,310 80,520 71,582 62,860 75,432 90,518
Retail Mortgage 5,810 7,440 8,601 11,700 17,550 26,325
Capital Market 10,780 4,650 7,350 8,340 9,500 11,000
Corporate 23,170 22,700 21,020 47,200 49,560 52,038
Gross Loan Book 1,41,070 1,15,310 1,08,553 1,30,100 1,52,042 1,79,881

Yields (%) 13.3 14.1 14.3 13.1 13.9 13.5

COF (%) 9.2 10.0 10.0 9.4 9.7 9.8
Spreads (%) 4.1 4.1 4.3 3.7 4.2 3.7
NIM (%) 6.0 6.6 5.3 5.6 6.3 6.3
GNPL (%) 0.7 1.7 3.5 0.6 3.3 3.2
NNPL (%) 0.6 1.1 2.0 0.1 0.6 0.5

Return ratios
RoA 4.2 3.7 3.7 4.0 4.6 5.2
RoE (pre MI) 14.4 10.4 9.2 9.9 10.8 12.1
RoE (post MI) 11.9 10.2 9.4 10.6 11.7 12.6
Leverage (Asset/equity) 3.1 2.6 2.4 2.5 2.3 2.4

Revenues 20,748 20,681 21,158 27,982 31,333 35,990

PAT (post MI) 5,722 5,450 5,900 7,733 9,477 11,353

Per share data (Rs)

No. of shares 840 841 951 951 951 951
EPS (pre MI) 11.3 9.4 8.5 10.4 12.6 15.7
EPS (post MI) 6.8 6.5 6.2 8.1 10.0 11.9
BVPS (pre MI) 86.1 95.0 100.4 110.3 121.9 136.3
BVPS (post MI) 60.5 66.4 73.0 80.6 89.6 100.3
DPS 1.0 0.2 0.3 0.5 1.0 1.3
P/E (x) 9.6 10.1 10.6 8.1 6.6 5.5
P/B (x) 1.1 1.0 0.9 0.8 0.7 0.7
Source: Company data, I-Sec research

Table 6: JM Credit Solutions – financials

(Rs mn, year ending Mar 31)
FY19 FY20 FY21 FY22 FY23E FY24E
Ownership 50.0% 46.7% 46.7% 46.7% 46.7% 46.7%
Loan book 80,160 71,760 68,307 73,479 71,283 85,540
Net worth 29,093 32,913 36,499 39,422 43,051 48,103

NII 6,811 7,178 6,821 5,859 6,884 7,953

PPoP 6,423 6,800 6,636 6,173 6,781 7,644
PBT 6,264 5,350 4,785 3,927 4,886 6,789
PAT 4,064 3,823 3,588 2,891 3,635 5,058
PAT (post MI) 2,032 1,785 1,675 1,349 1,697 2,361

Key ratios (calculated)

Yield (%) 14.2% 14.8% 13.4% 12.0% 14.7% 14.8%
Cost of borrowing (%) 9.5% 10.1% 8.7% 8.6% 8.7% 9.0%
NIM (%) 9.0% 9.4% 9.7% 8.3% 9.5% 10.1%
GNPA (%) 1.1% 2.1% 4.2% 0.0% 5.7% 5.5%
NNPA (%) 0.9% 1.5% 1.3% 0.0% 1.0% 0.9%
Prov cov(%) 18.6% 29.2% 70.4% 70.4% 82.5% 83.2%
Credit cost (%) 0.2% 1.9% 2.6% 3.2% 2.6% 1.1%
Cost to Income 8.3% 10.7% 7.6% 9.3% 9.5% 9.4%
RoA (%) 5.1% 4.6% 4.1% 3.2% 4.3% 5.8%
RoE (%) 17.8% 12.3% 10.3% 7.6% 8.8% 11.1%
Tier I Capital 33.6% 39.1% 0.0% 0.0% 53.4% 49.8%
Source: Company data, I-Sec research

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JM Financial, August 3, 2022 ICICI Securities
Table 7: JM Financial Home Loans – financials
(Rs mn, year ending Mar 31)
FY19 FY20 FY21 FY22 FY23E FY24E
Ownership 98.4% 98.4% 98.4% 98.4% 98.4% 98.4%
Loan book 2,014 3,053 4,243 5,495 6,855 8,569
Net worth 1,118 1,491 2,548 2,586 2,701 3,003

NII 56 312 333 473 656 921

PPoP -53 90 123 97 202 451
PBT -66 66 76 52 156 408
PAT -66 74 57 38 115 302
PAT (post MI) -65 73 56 37 114 297

Key ratios (calculated)

Yield (%) 8.2% 14.0% 13.3% 12.9% 12.7% 12.5%
Cost of borrowing (%) 7.0% 10.4% 9.3% 9.1% 8.9% 8.7%
NIM (%) 5.1% 12.3% 9.6% 7.9% 6.1% 5.4%
GNPA (%) 0.2% 1.0% 1.2% 1.5% 1.5%
NNPA (%) 0.2% 0.7% 0.8% 1.0% 1.0%
Prov cov(%) 29.2% 33.7% 33.5% 33.3% 33.3%
Credit cost (%) 0.9% 1.3% 0.8% 0.4% 0.3%
Cost to Income 162.8% 75.6% 70.8% 84.0% 76.8% 64.0%
RoA (%) -5.4% 2.7% 1.5% 0.6% 1.0% 1.7%
RoE (%) -9.2% 5.7% 2.8% 1.5% 4.4% 10.6%
Tier I Capital 76.1% 68.4% 94.0% 45.1% 29.3% 20.4%
Source: Company data, I-Sec research

Table 8: JM Financial Products – financials

(Rs mn, year ending Mar 31)
FY19 FY20 FY21 FY22 FY23E FY24E
Ownership 99.4% 99.4% 99.4% 99.4% 99.4% 99.4%
Loan book 52,553 37,349 38,766 65,169 71,453 78,233
Net worth 15,603 17,073 17,960 18,306 19,525 21,079

NII 3,317 2,623 2,446 2,262 2,901 3,310

PPoP 3,089 2,916 2,256 2,497 3,101 3,598
PBT 3,158 2,307 1,875 1,490 2,728 3,182
PAT 2,043 1,601 1,387 1,097 2,018 2,354
PAT (after MI) 2,030 1,591 1,378 1,089 2,005 2,339

Key ratios (calculated)

Yield (%) 13.8% 13.1% 12.3% 11.5% 11.9% 12.1%
Cost of borrowing (%) 10.2% 11.2% 10.2% 10.1% 10.0% 10.0%
NIM (%) 5.6% 5.9% 6.6% 4.5% 4.4% 4.6%
GNPA (%) 0.1% 0.1% 0.5% 0.5% 0.8% 1.0%
NNPA (%) 0.1% 0.1% -0.2% -0.3% -0.2% -0.1%
Prov cov(%) 9.4% 36.8% 145.0% 166.5% 127.0% 107.0%
Credit cost (%) -0.1% 1.4% 1.0% 2.0% 0.6% 0.6%
Cost to Income 24.9% 24.8% 28.6% 27.8% 24.9% 23.4%
RoA (%) 3.1% 2.8% 2.7% 1.7% 2.5% 2.8%
RoE (%) 13.5% 9.8% 7.9% 6.0% 10.7% 11.6%
Tier I Capital 24.9% 31.3% 32.0% 20.1% 20.3% 20.0%
Source: Company data, I-Sec research

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JM Financial, August 3, 2022 ICICI Securities
Table 9: Distressed credit – financials
(Rs mn, year ending Mar 31)
FY19 FY20 FY21 FY22 FY23E FY24E
Ownership 59.3% 59.3% 59.3% 59.3% 63.6% 63.6%
Net worth 17,493 15,388 16,091 17,942 19,205 20,489

AUM 1,40,440 1,14,890 1,10,600 1,08,388 1,19,227 1,31,149

Capital Employed 45,001 41,895 42,955 37,893 39,466 42,778
Debt 25,191 25,665 26,089 19,181 19,441 21,408
Equity 12,652 14,500 15,204 17,054 18,317 19,601
JMC's Share 20.9% 26.2% 28.9% 30.0% 32.0% 32.0%

Revenues 5,006 4,135 3,875 5,234 4,323 4,573

PAT 1,659 467 703 1,850 1,263 1,284
PAT (after MI) 949 297 417 1,096 803 816

Key ratios (calculated)

Yield (%) 27.0% 25.1% 25.0% 25.0% 25.0% 25.0%
Cost of borrowing (%) 10.4% 10.0% 10.0% 9.2% 10.0% 10.0%
Management fees as % of AUM 1.7% 1.6% 1.5% 2.5% 1.8% 1.8%
GNPA (%) 2.8% 32.9% 50.0% 50.0% 40.0% 40.0%
NNPA (%) 0.0% 31.0% 45.5% 44.3% 32.6% 31.3%
RoA (%) 4.3% 1.1% 1.7% 4.6% 3.3% 3.1%
RoE (%) 9.8% 2.8% 4.5% 10.9% 6.8% 6.5%
Source: Company data, I-Sec research

Table 10: AMC – financials

(Rs mn, year ending Mar 31)
FY19 FY20 FY21 FY22 FY23E FY24E
Ownership 59.5% 59.5% 59.5% 59.5% 59.5% 59.5%
Capital employed 2,150 2,314 2,321 2,217 2,188 2,322

Average AUM 1,12,250 61,090 23,890 23,173 57,933 1,15,867

- Equity AUM 68% 54% 25% 30% 35% 35%

Revenues 940 630 311 213 521 985

PAT 416 174 -2 -188 -58 216
PAT (after MI) 250 107 7 -104 -29 135

Management fees (%) 0.67% 0.74% 0.70% 0.68% 0.65% 0.65%

PAT/AUM (%) 0.37% 0.28% -0.09% -0.90% -0.13% 0.17%
Cost/income (%) 39.4% 65.1% 114.2% 232.9% 119.0% 72.5%
RoE (%) 20.0 7.6 -1.0 -9.2 -3.3 8.9
Source: Company data, I-Sec research

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JM Financial, August 3, 2022 ICICI Securities
Table 11: Capital employed and net worth
Capital Employed Net Worth
As at Mar 31, As at Jun 30, As at Mar 31, As at Jun 30,
2022 2022 2022 2022
Investment Bank 24,990 24,380 24,930 24,320
JM Financial Products 17,340 18,120 17,280 18,060
JM Financial 4,950 3,570 4,950 3,570
JM Financial Institutional Securities 1,430 1,450 1,430 1,450
Overseas Entities 1,270 1,240 1,270 1,240
Mortgage Lending 39,700 40,270 18,830 19,100
JM Financial Credit Solutions 36,870 37,400 16,140 16,360
JM Financial Home Loans 2,830 2,870 2,690 2,740
Alternative & Distressed Credit 18,550 18,580 10,920 10,930
JM Financial ARC 18,340 18,370 10,710 10,720
Infinite India Investment Management 210 210 210 210
Platform AWS 7,670 7,700 6,840 6,910
JM Financial Services 2,590 2,650 2,590 2,650
JM Financial Capital 2,730 2,800 2,730 2,800
JM Financial Asset Management 2,050 1,960 1,220 1,170
Others 300 290 300 290
Others 14,820 16,830 14,830 16,830
JM Financial Money - QIP money and Surplus
12,510 14,360
Funds 12,510 14,360
JM Financial Properties & Holdings 1,820 1,950 1,830 1,950
CR Retail Malls (India) 370 400 370 400
JM Financial Trustee Co. 120 120 120 120
Total 1,05,730 1,07,760 76,350 78,090
Source: Company data, I-Sec research

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JM Financial, August 3, 2022 ICICI Securities

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