MUMBAI: Jio Finance Ltd., a shadow lender owned by Asia’s richest businessman Mukesh Ambani, is in talks with several lenders to mark its first foray into the local currency debt market, according to people familiar with the matter.
The company plans to tap the market, either through a loan or a bond offering, as early as the January-March quarter of 2025 – a typically busy period for credit growth in India. The borrowed funds are expected to be on-lent to industries, said the people, who requested anonymity as the discussions are private.
While the exact size and terms of the borrowing are yet to be finalised, the move signals Jio Finance’s strategy to capitalise on its strong credit profile.
The timing of this debut aligns with tighter rules by the Reserve Bank of India (RBI), which have made it increasingly difficult for shadow lenders, also known as Non-Banking Financial Companies (NBFCs), to secure local currency bank loans.
Among these measures, the RBI raised risk weights on bank loans to NBFCs by 25 percentage points in 2023. This change means banks must allocate more capital for such loans, effectively increasing their cost and limiting NBFCs’ access to funding.
Additionally, the RBI has mandated that NBFCs diversify their borrowing sources, requiring at least 25 per cent of borrowings to come from the capital markets, such as bonds and commercial papers, rather than relying primarily on bank loans.
These rules have prompted a shift, with many NBFCs turning to alternative financing avenues, including offshore debt markets, to meet their funding needs.
High rating, a plus
However, Jio Finance plans to rely on the local debt market first, leveraging its top-tier credit rating. Crisil Ratings has assigned the company’s various debt facilities a coveted AAA rating with a stable outlook, a ranking higher than most Indian NBFCs.
“Jio Finance’s strong credit profile gives it a unique position in the local debt market,” said one of the people familiar with the matter.
The shadow lender has a dedicated non-banking focus, offering a broad range of financial products, including mortgages, loans against property, life and health insurance, and corporate lending.
It operates as a subsidiary of Jio Financial Services Ltd. In September, Jio Finance embedded its app within the MyJio consumer app to expand its digital financial offerings, capitalising on India’s burgeoning digital growth.
Jio Finance declined to comment on the development when contacted by Bloomberg.
This planned borrowing underscores the broader challenges facing NBFCs amid evolving regulations and their efforts to adapt to a more restrictive domestic funding environment.
