Bank of America agrees to take up to 49.9% of Jio Credit for 182.7 billion rupees

Bank of America agreed to acquire up to 49.9% of Jio Credit, the lending arm of Jio Financial Services, through a joint venture worth 182.68 billion rupees, or about $1.9 billion. The company's announcement describes a preferential allotment of shares and warrants, with the American bank taking 26.5% initially and rising to 49.9% when the warrants are exercised, subject to regulatory approval. The Economic Times reported that Jio Financial shares rose about 3% on the news, though the stock closed up 0.83% at 255 rupees.

Jio Credit has built assets under management of 306.67 billion rupees, roughly $3.2 billion, in about two years of operation. CNBC noted that the deal follows a run of foreign capital into Indian lenders, including Mitsubishi UFJ's investment in Shriram Finance, Emirates NBD's purchase of 60% of RBL Bank, and Sumitomo Mitsui's stake in Yes Bank.

The corporate results underneath were also strong. Tata Motors shares jumped 6% after first-quarter net profit rose 83% year on year to 25.6 billion rupees on revenue up 19% to 206.67 billion rupees, helped by mark-to-market gains (accounting gains from revaluing its holding at the current market price) on its Tata Capital holding. Nomura upgraded the stock and CLSA kept its outperform rating. Hindustan Aeronautics gained 2% after a 15% rise in net profit, prompting several brokerages to raise price targets.

The pattern across the three is the same. Foreign institutions are buying access to Indian credit growth and Indian manufacturing at a moment when the domestic banking system is expanding faster than it can fund itself from deposits.