How Kamath will mould his ambitions in a new-age JFSL

Oil-to-telecom behemoth Reliance Industries Ltd recently announced that it was appointing Kamath as a director on its board as well as the non-executive chairman of its repurposed financial services arm, Jio Financial Services Ltd. After a short hiatus, Kamath is back to his core competence: setting up new institutions or scaling up existing shops into meaningful institutions.

After growing ICICI Bank from a term-loan focused development financial institution into one of the country’s largest commercial banks, Kamath was selected by the government as the founding chairman of new multilateral development bank, New Development Bank, popularly known as the BRICS Bank. Back home, the government once again reached out to him for setting up its proposed infrastructure financing company, the ₹20,000-crore National Bank for Financing Infrastructure and Development. In all these start-ups, he had to decide the strategic roadmap, design the governance structure, finalise the business plan, handpick the leadership team and oversee execution and balance-sheet growth.

He is being called upon to reprise his act, with one exception: this time it is for JFSL, a private company with a vastly different shareholding structure. Yet, some of his key action points may remain unchanged and, based on his past record, it is perhaps possible to somewhat predict what his critical touchpoints are likely to be in JFSL.

It might be instructive to start with JFSL’s business focus. The press release announcing the setting up of JFSL states: “JFSL and its subsidiaries (“JFS”) will leverage the technology capability of Reliance and focus on digital delivery of financial products to democratize financial services access for 1.4 billion Indians. Reliance has been developing and fostering a vibrant digital led-financial services platform through various digital applications. Reliance has developed best-in class applications having high customer engagement metrics and differentiated value propositions in their respective categories. The current footprint touches more than 20 million consumers. JFS plans to launch consumer and merchant lending business based on proprietary data analytics to complement and supplement the traditional credit bureau-based underwriting.”

JFSL marks a sharp escalation in RIL chairman Mukesh Ambani’s financial services ambitions. The group has been toying with a financial services model only at the fringes so far and JFSL now represents a determined and focused attempt to grow the business and acquire a leadership status in the industry. This is also evident from JFSL’s business model, which rests on two key prongs: one, focus on consumer and merchant lending business leveraging RIL’s and Jio platform’s enormous customer database and, two, focus on digital delivery of financial products. In essence, the business model will focus on growing book size while keeping origination, distribution and administration costs low. This is also likely to inform Kamath’s strategy for JFSL.

Kamath was known in ICICI Bank for his unrelenting appetite for acquiring market share, with a special focus on consumer and merchant financial services, even if that meant some balance-sheet erosion initially. Whether it was credit cards or house loans, whether fixed deposits or small loans to shopkeepers, Kamath pushed hard and set aggressive targets for his teams. This is likely to remain the dominant leitmotif for even JFSL which seeks to acquire market share and leadership ranking.

His focus initially will be building an organisation structure which will have an innovative, robust digital engine under its hood. Everything in the organisation will be premised on this condition, given that JFSL’s main focus will be using its in-house data-base, artificial intelligence and robotics to manufacture financial products, originate them, deliver them to end-customers and monitor the repayment record during their life-cycle.

This will also then drive the team selection strategy. Kamath hand-picked a team of young executives in ICICI Bank and empowered them with targets and teams early in their career graph. Many of them delivered and many perished by the wayside. This time there will be a key difference: he will probably be zeroing in on financial professionals with digital banking experience, but hungry to grow the balance-sheet, even if that means acquiring third-party businesses. The JFSL umbrella is also expected to house insurance (both vanilla and micro insurance), digital broking, payments platforms and asset management.

Capital is unlikely to be a constraining factor for Kamath’s over-arching ambitions: JFSL starts with a market listing and 6.1% shareholding in RIL, in addition to some other liquid assets which are likely to be finalised later and transferred to the company. It is also quite likely that JFSL will also leverage Kamath’s rich past experience to add some strategic physical distribution touchpoints to enhance and enrich the company’s digital network.

It will be interesting to see how Kamath reconfigures his ambitions in a new-age company like JFSL, where he will necessarily have to dress up his innate drive for growth and market share in digital haute couture.