Independent Director and Non Executive Chairman, Jio Financial Services Limited (JFSL), KV Kamath and Chairman Bombay Stock Exchange (BSE), Subhash S Mundra pose for a picture ahead of the listing ceremony of JFSL at the Bombay Stock Exchange in Mumbai, India, August 21, 2023.
Image: Reuters/Francis Mascarenhas
Jio Financial Services (JFS), the demerged entity of Reliance Industries (RIL), ended trading on stock markets debut day at a 5 percent lower circuit. Shares closed at Rs251.75, after getting listed at Rs265 per share on the BSE. On the NSE, shares were listed at Rs262, closing at Rs 248.9 apiece. Discovered price of the stock was at Rs261.85, with a rough market capitalisation of Rs1.66 lakh crore.
According to Prashanth Tapse, research analyst, Mehta Equities, the Street was already aware of the selling pressure on the stock via exchange traded funds (ETF). “We believe the stock would face short-term selling pressure as the Street assumes the fair value of share price Rs150-180 apiece on stake valuations,” he adds.
The stock was maintained in both the indices BSE and NSE at a constant price of Rs261.8 per share which is the difference between closing price on July 19 and open price discovered during the special pre-open session (SPOS) on July 20. Subsequently, Jio Financial Services will be dropped from both Sensex and Nifty indices at the last traded price after end of the third day of its listing, which in this case is August 24.
In case, during the first two of these three days, the spun-off entity hits the price band (upper or lower) on both days, then the exclusion date will be deferred by another three days. After observing two consecutive days of the spun-off entity not hitting the price band, the spun-off entity will be removed after the third trading day of such observation. If on such a third day, the spun-off entity again hits the price band, the exclusion of such stock will not be deferred any more.
“Nifty index passive trackers could sell around 90 million shares which is equivalent to approximately $290 million. Alongside, Sensex index trackers could sell 55 million shares which is equivalent to around $175 million,” says Abhilash Pagaria, head, Nuvama Alternative & Quantitative Research.
Jio Financial Services, formerly known as Reliance Strategic Investments, is a (non-depositing systematically important) NBFC-ND-SI. It will convert to a core investment company (NBFC-CIC) within six months. JFS, as a CIC, will operate its financial services business through its consumer-facing subsidiaries via Reliance Retail Finance, Reliance Payment Solutions and Jio Payments Bank. In July, the company has signed a joint venture agreement with BlackRock for asset management in India. Also read: How Mukesh Ambani is aiming to strengthen his businesses for the next decade—from telecom to retail and financial services
“JFS will be the holding company for financial services businesses, likely benefiting from the reach of RIL’s various businesses and technical capabilities. The focus will be to digitally deliver a range of financial products, which include consumer loans, merchant and MSME loans, payments solutions, along with the existing payments bank, insurance broking and asset management,” say analysts at Kotak Institutional Equities.
According to analysts at Kotak Institutional Equities, JFS’s businesses will likely leverage the strengths of the group—technology-first approach underpinned by group tech capabilities, Jio’s reach, relationships with vendors and individual customers and on tapping borrowers who access high-interest informal channels.
“To begin with, the focus is on consumer durable loans, likely through the network of Reliance Digital. The consumer durable finance market is largely dominated by Bajaj Finance and is a customer acquisition engine for most players. The overall market is not very large; we estimate consumer finance disbursements at Rs1.35 trillion in FY23; outstanding book may be much lower as most loans have a short tenure. Even for Bajaj Finance, this business is less than 10 percent of the loan book,” analysts at Kotak Institutional Equities elaborate.