Discovering JM Financial
JM Financial stands as a multifaceted financial services conglomerate, offering integrated solutions across various sectors. Our core operations encompass Investment Banking, Mortgage Lending, Asset Reconstruction, Alternative Credit Funds, Asset Management, Wealth Management, and Securities businesses.
Throughout our journey, we’ve forged strategic partnerships with leading Indian and international corporations, earning their trust and confidence. Our commitment to excellence has been recognized through numerous national and international awards, highlighting our prowess in providing insightful advice and executing financial transactions with precision.
As a responsible corporate citizen, we are dedicated to giving back to society. Our initiatives span across education, healthcare, skill development, entrepreneurship promotion, disaster relief, and animal welfare, aligning with our ethos of corporate social responsibility.
Established in Mumbai in 1973, JM Financial & Investment Consultancy Services Pvt. Ltd. (NSE: JMFINANCIL) laid the foundation for the JM Financial Group’s enduring legacy in the financial services industry. Over the past five decades, we have solidified our reputation as a trusted partner, embodying integrity and excellence in all aspects of our operations.
RBI Scrutiny: Challenges and Considerations for JM Financial
On Mar 05, the Reserve Bank of India, exercising its authority under section 45L(1)(b) of the Reserve Bank of India Act, 1934, has issued a directive to JM Financial Products Limited (JMFPL or ‘the company’) to immediately cease and desist from engaging in any form of financing against shares and debentures. This includes the sanctioning and disbursement of loans against Initial Public Offering (IPO) shares and debenture subscriptions. However, the company is permitted to continue servicing its existing loan accounts through regular collection and recovery procedures.
This regulatory action has been prompted by significant deficiencies identified in the loans extended by the company for IPO financing and NCD subscriptions. The RBI conducted a limited review of the company’s books based on information provided by the Securities and Exchange Board of India (SEBI).
During this review, it was noted that the company facilitated a group of customers in bidding for various IPO and NCD offerings using borrowed funds. The credit underwriting process was found to be inadequate, and financing was granted against minimal margins. Furthermore, the company operated the application for subscription, demat accounts, and bank accounts using a Power of Attorney (POA) and a Master Agreement obtained from these customers, without their direct involvement in subsequent operations. Consequently, the company effectively acted as both lender and borrower, also arranging for the opening and operation of bank accounts using the POA. These actions not only contravened regulatory guidelines but also raised significant governance concerns detrimental to customer interests.
The RBI will conduct a special audit to address these issues and, upon the rectification of deficiencies to its satisfaction, will review the imposed business restrictions. It’s important to note that these restrictions do not preclude any additional regulatory or supervisory actions that may be initiated by the RBI against the company.
JM Financial's Reply to RBI Directive: Addressing Regulatory Concerns
JM Financial affirmed that its IPO financing offering is of short-term nature and inherently self-liquidating. They justified the practice of obtaining Power of Attorney (POA) as a standard risk mitigation measure, asserting its widespread adoption across the industry and legality. A representative for JM Financial reiterated confidence in the company’s protocols and adherence to regulatory frameworks. They underscored JM Financial’s commitment to conducting business in a lawful manner and affirmed the absence of any governance concerns.
Ashu Madan's statement
JM Financial Group has been in the business of financial services over the last five decades. We take pride in our reputation in the financial services industry.
— Ashu Madan (@ashumadan4) March 5, 2024
After careful and detailed review of the order issued by the RBI on the action against JM Financial Products Ltd, we…
Financial Performance and Share Price Implications
The share price of JM Financial experienced a significant decline of over 19% during the initial trading session on Wednesday, following the Reserve Bank of India’s (RBI) decision to prohibit JM Financial Products Ltd from providing loans against shares and debentures due to identified regulatory and governance deficiencies. JM Financial’s shares dropped by as much as 19.29%, reaching ₹77.10 per share on the BSE. The share price also bounced back of 12% during the end of the trading session.
At the close of December, JM Financial possessed a capital market loan portfolio valued at ₹978 crore, representing approximately 6% of its total loan portfolio amounting to ₹15,111 crore.