Bank of America (BAC.N) will acquire as much as a 49.9% stake in the non-bank lending arm of Jio Financial Services (JIOF.NS) in a 182.68 billion rupee ($1.92 billion) deal, as the U.S. lender expands its presence in India's fast-growing financial sector.
The deal extends a recent run of large foreign investments in Indian banks and non-bank lenders, which are seeing a strong demand for credit and low loan delinquency rates.
Recent deals include Japan's MUFG (8306.T) investment in Shriram Finance (SHMF.NS), Dubai-based bank Emirates NBD's (ENBD.DU) 60% stake purchase in RBL Bank (RATB.NS) and Sumitomo Mitsui Financial Group's investment in Yes Bank (YESB.NS).
Bank of America will become a joint venture partner in non-banking finance company Jio Credit through a preferential allotment of equity shares and warrants, the two companies said on Wednesday.
ACCESS TO A FAST-GROWING MARKET
The transaction, which values Jio Credit at around $3.8 billion according to a Reuters calculation, initially gives BofA a 26.5% stake, with its holding potentially rising to 49.9% after the exercise of the warrants.
Jio Credit will issue shares worth up to 66.13 billion rupees and warrants worth up to 116.55 billion rupees to BofA as part of the deal.
"By combining Jio Financial Services' scale, local expertise and customer base with Bank of America's global reach, digital experience and close to 250 years of leadership in banking, we can help expand access to financial services and support India’s continued economic growth," BofA CEO Brian Moynihan said.
Jio Credit is among India's fastest-growing NBFCs, with assets under management of more than $3 billion as of June-end, within just two years of operations.
The investment offers Jio Credit capital to support its growth while getting the expertise of a global financial firm, Bank of America said.
Non-bank credit in India is growing at a rapid pace of over 14% across segments like personal loans, gold loans and small-business credit.
JIO FINANCIAL's JV STRATEGY
Jio Financial, which listed in 2023 after a demerger from Indian billionaire Mukesh Ambani's Reliance Industries (RELI.NS), operates businesses such as digital lending, payments, insurance broking and asset management services.
The company has chosen to forge joint ventures with global firms across a number of its business lines. It offers asset and wealth management services through its joint ventures with BlackRock. It has also entered a JV with Germany's Allianz to offer general and health insurance.
($1 = 95.3300 Indian rupees)
