Shares of this smallcap company crashed more than 15 percent in Wednesday’s trading session after RBI restricted lending against shares and debentures. The shares have delivered a poor return of negative 25 percent to its shareholders in one month.
With a market capitalization of Rs. 7,619 crores, the shares of JM Financial Ltd started Wednesday’s trading session on a lower note at Rs. 78.95 compared to its previous close of Rs. 95.45. During the trading session, the shares hit a low of Rs. 77.55, making a loss of around 17 percent and are currently trading at Rs. 80 apiece.
On March 5, RBI barred one of JM Financial’s units, JM Financial Products Ltd (JMFPL) from giving loans against shares and debentures, including sanction and disbursal of loans against the IPO of shares, with immediate effect.
India’s Central Bank observed that the company repeatedly helped a group of its customers bid for various IPO and NCD offerings by using loaned funds. Besides other observations, the RBI also found serious governance issues on the part of the company.
Announcing the above-mentioned decision, the RBI said the action has been taken after observing certain serious deficiencies in the financial services firm’s loan process. More importantly, the central bank highlighted that there are serious concerns about the governance issues in the company, apart from violation of regulatory guidelines
JM Financial issued a clarification stating that “After careful and detailed review of the order issued by the RBI on the action against JM Financial Products, we strongly believe that there have been no material deficiencies in our loan sanctioning process. Further, the company has not violated applicable regulations. We also wish to reaffirm that there have been no governance issues whatsoever and we conduct all our business and operational affairs in a bonafide manner.”
Earlier, the Reserve Bank of India has recently taken action against various financial services companies, including HDFC, Paytm, IIFL Finance, and now JM Financial.
Coming onto the company’s financial statements, the revenue increased marginally by 3 percent from Rs. 1,197 crores during the September quarter to Rs. 1,236 crores in the December quarter. On the other hand, the net profits zoomed by 56 percent from Rs. 206 crores to Rs. 322 crores during the same period.
Furthermore, the loan book increased from Rs. 1,504 crores in Q2FY24 to Rs. 1,759 crores in Q3FY24 and the branch network stood at 112 branches. Moreover, the AUM of the mutual fund business increased by 51 percent to Rs. 4,816 crores and the AUM of equity schemes grew 4 times to Rs. 2,818 crores during Q3FY24.
Headquartered in Mumbai, JM Financial Ltd is an integrated and diversified financial services group. Its primary businesses include mortgage lending, distressed credit, and asset management. It is also engaged in investment banking and the management of private equity funds.
Written By Vaibhav Patil
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