Mukesh Ambani-led Reliance Industries announced on July 8 that it will demerge its financial services arm Jio Financial Services with a view to unlocking value. Reliance’s shares have risen by 8% since the announcement. Reliance Industries will begin the demerger process on Thursday through a “price discovery” session conducted by the local stock exchanges for the first time.
Five analysts estimate that the value of Jio Financial Services’ shares will range between 160 to 190 rupees each. However, in the pre-open call auction session held on Thursday between 9:00 a.m. to 10:00 a.m. IST, the market price of Jio Financial Services (JFSL) shares came out to be Rs 261.85 per share on the National Stock Exchange (NSE).
During the pre-open call auction session, the reference price for Reliance shares was set at 2,841.85 rupees, which will serve as the basis for determining a constant share price for Jio Financial Services. By calculating the difference between Reliance’s last closing price and the settling price of JFSL at the end of the special session, the constant share price of JFSL was derived.
Following the successful valuation, Jio Financial Services’ stock will be included in major indices like the benchmark Nifty50. However, it will not be tradable until it is officially listed, which is expected to take place in the next 2-3 months, with the exact date likely to be announced at Reliance’s forthcoming Annual General Meeting.
Reliance Industries has revealed that its post-demerger acquisition cost for Reliance Strategic Investments Limited, which will be renamed as JFSL, is 4.68%. Based on Wednesday’s closing price of 2,840 rupees on the Bombay Stock Exchange (BSE), the cost of acquisition is calculated at 133 rupees.
JFSL’s total outstanding shares amount to 676.6 crore, resulting in a total market capitalization of Rs 1.77 lakh crore on NSE. Today’s valuation exercise surpassed all brokerage estimates, which previously ranged between Rs 160 to 190 per share.
The demerger process entitles all Reliance shareholders, as of the trading day on July 19, to receive JFSL shares in a 1:1 ratio. This means that for every 100 Reliance shares owned, shareholders will be awarded 100 JFSL shares.
The National Stock Exchange will temporarily add Jio Financial Services to various indices, including Nifty50, Nifty100, Nifty200, Nifty500, and others, by creating a dummy symbol for the stock. JFSL will remain part of these indices at the constant price determined during the pre-open session until its official listing on the exchanges.
With this move, Reliance Industries aims to unlock the true potential and value of its financial services business, setting the stage for a promising future for both entities. The demerger will create greater opportunities for shareholders and investors, further solidifying Reliance’s position as a market leader in India’s corporate landscape.
About Reliance Industries Limited (RIL):
Reliance Industries Limited, headquartered in Mumbai, is a diverse Indian multinational conglomerate with interests in energy, petrochemicals, natural gas, retail, telecommunications, mass media, and textiles. Boasting the highest market capitalization and revenue among Indian public companies, it also holds the 100th position among the largest global corporations. Reliance plays a crucial role in India’s economy as the largest private tax contributor and exporter, responsible for 7% of the country’s total merchandise exports.
In 2022, Reliance secured its spot as the 100th company on the prestigious Fortune Global 500 list. By generating 7% of India’s total merchandise exports, the company significantly contributes to the government’s revenue from customs and excise duty. Moreover, it stands out as the leading private sector income tax payer in India. Despite these achievements, Reliance faces challenges with limited free cash flow and substantial corporate debt.