In July 2023, Jio entered into a 50:50 partnership with BlackRock, the world’s largest asset management company. This joint venture is known as Jio Blackrock. By October 2023, the company had also applied to SEBI to enter the mutual fund business.
Now, news has emerged that this JV will not just focus on asset management but will also venture into wealth management and broking businesses together. This is the reason why today, on April 16, JioFin (Jio Financial Services), with a P/E ratio of 7,203.10 compared to the sector P/E of 20.63, saw a 5% increase in early trading hours.
So, will Jio Blackrock become Brokers and Wealth Managers? Let’s get into the full story
When the partnership was established in July, it was initially centered only around asset management. However, on April 15, 2024, Jio Financial Services announced that its JV with BlackRock will not only focus on asset management but will also step into wealth management and broking businesses together.
According to a report by Jefferies, wealth managers in India manage around $1 to $1.2 trillion of HNI money. Now, this company has set its sights on India’s expansive broking business. As per data from December 2023, there are 139 million trading accounts in India.
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Do you recall DSP BlackRock?
DSP BlackRock Asset Management Private Limited was a joint venture between DSP Group and BlackRock. This partnership started in 1996 when DSP Group and Merrill Lynch formed an investment management firm. Later, Merrill Lynch’s stake went to BlackRock, and in 2006, the company was rebranded as DSP BlackRock.
During this partnership, DSP BlackRock strengthened its presence in the Indian market and provided world-class investment solutions to investors investing in equity, fixed income, and alternative asset classes. This partnership however ended in May 2018. This was not the first time that a foreign MF play made in exit from India.. JP Morgan, Goldman Sachs, ING Mutual Funds, Morgan Stanley, Fidelity are few others.
Now, with Jio Blackrock coming, will it challenge this industry?
If a foreign player enters the Indian broking segment, there could be some challenges for its competitors:
- Increased Competition: The entry of a foreign player may intensify competition, requiring existing players to enhance their services and pricing to remain competitive.
- Market Share Erosion: A foreign player with a strong reputation and resources could capture market share, leading to a decrease in market share for existing competitors.
- Technological Advancements: Foreign players usually bring advanced technology and infrastructure, which helps them provide better customer service and trading experiences. Existing competitors may also need to upgrade their technological capabilities.
- Regulatory Changes: The entry of foreign players could lead to changes in the regulatory environment. Existing competitors may need to adjust to these new regulations.
- Customer Attraction: A foreign player with a strong brand image could attract the attention of existing customers. Competitors may need to increase efforts to retain their existing customer base and attract new customers.
- Cost Pressure: Increased competition may lead to higher operating costs, requiring existing competitors to adopt cost-effective strategies to remain competitive.
Also, this foreign company is entering with Jio…
Remember what Jio did in the telecom sector? It disrupted the market with aggressive pricing that competitors couldn’t match. If this happens in this sector, companies like Zerodha, Angel One can survive, but many Indian brokers and wealth management companies could suffer… This industry could become monopolistic, similar to telecom.
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SEBI is currently processing their mutual fund application, and it remains to be seen whether they will receive a license for wealth management and broking.
