Airtel's ₹20,000-cr NBFC Launch Sparks Competition with Jio Financial

Airtel Money Receives ₹20,000 Crore Injection from Bharti Airtel and Promoter Group

Bharti Airtel will infuse ₹20,000 crore into its newly-licensed non-bank arm, Airtel Money, a move that positions the telecom operator in direct competition with Mukesh Ambani's Jio Financial Services.

Airtel Money, incorporated in July, received a non-banking financial company (NBFC) license earlier this month. As per the Reserve Bank of India's (RBI) licensing terms, the non-bank lender will not be able to accept deposits. The company will be capitalized by ₹14,000 crore from Bharti Airtel and ₹6,000 crore from the promoter group through Bharti Enterprises Ltd.

The NBFC can leverage about five times its capital, allowing Airtel Money to build a loan book of ₹1 trillion with the current capital injection. This move is seen as an attempt by Airtel to enter the lending market, a space it had so far been left out of.

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Comparison with Jio Financial Services In contrast to Jio Financial Services, which has a wide array of businesses, including a payments bank Jio Payments Bank and non-bank financier Jio Credit, Airtel now has Airtel Payments Bank, and Airtel Money. Analysts suggest that Airtel is following the same model as Reliance and getting an NBFC license shows its push to enter the lending market.

Tighter Licensing The RBI has stuck to its stance against allowing corporates into banking, prompting many groups to turn to NBFC licenses. Large business houses such as Larsen & Toubro and Godrej Group also operate non-banking financial arms.

Revenue Upside The motivation for Airtel to move to an NBFC set-up could be a large upside in revenue from lending products such as working capital loans, credit cards, personal loans, etc. A payment bank has constraints over such offerings.

Commitment to Inclusion Airtel said that its expansion in India's fast-growing financial services sector underscores its commitment to deepening financial inclusion and empowering the underserved consumers. The company has built a strong credit engine and operated under a lending service provider (LSP) model, facilitating loans for partners without lending from its own books.

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Key Statistics

• ₹20,000 crore: Capital injection from Bharti Airtel and promoter group
• ₹14,000 crore: Capital contribution from Bharti Airtel
• ₹6,000 crore: Capital contribution from promoter group through Bharti Enterprises Ltd
• ₹1 trillion: Potential loan book size with the current capital injection
• 466 million: Number of customers in India, including 368.5 million mobile users, as of December-end
• ₹259: Monthly average revenue per user (Arpu) for Airtel
• ₹213.7: Monthly average revenue per user (Arpu) for Jio
• ₹19,049 crore: Assets under management (AUM) under Jio Financial Services' NBFC, up 4.5 times year-on-year