Jio Financial Services Ltd to demerge from RIL today

The National Stock Exchange (NSE) will be conducting a special pre-open session (SPOS) from 9 am to 10 am for price discovery of RIL’s shares post-hive-off of JFSL. According to the index methodology, JFSL will be included in the Nifty 50, Nifty 100 and Nifty 200, among other indices.

An SPOS is applicable for the first day of trading of initial public offering (IPO) securities, the first day of recommencement of trading of re-listed securities and for stocks having derivatives contracts on ex-date of trading after undergoing corporate restructuring, including merger and demerger processes. If an SPOS is conducted by the exchange, the demerged company is retained in the index. Additionally, the spun-off entity is included in the index at a constant price which is the difference between the demerged company’s closing price on T-1 day wherein T is ex-demerger date and the price derived during SPOS on the ex-demerger date.

On Wednesday, the shares of RIL closed at Rs 2,840 a share, up 0.62 per cent. It touched an all-time high of Rs 2,855 apiece during the intraday trades. Consider that the share price of RIL is discovered at Rs 2,500 apiece during the SPOS, following which NSE will ascribe a share price of the same amount to RIL, whereas, JFSL will be assigned a price of Rs 340 apiece, which will be the difference between RIL’s share price on Wednesday and its price discovered during the SPOS. JFSL shares will be included in all the indices where RIL is present. Once JFSL is listed, its shares will be removed from the indices after end of day on third day of listing. The listing date of JFSL is yet to be declared.

Jefferies has assigned a value between Rs 134 and Rs 224 per share for JFSL. “We value JFSL in the range of Rs 90,000-150,000 crore which implies Rs 134-224 per share in RIL’s sum of the parts (SoTP). We incorporate Rs 179 per share as base case valuation for JFS in our SoTP,” Jefferies said.

As per the Wednesday closing, RIL’s market capitalisation stood at Rs 19.21 lakh crore (around $233 billion). In its note on July 14, Nuvama Institutional Equities estimated the valuation of the demerged entity, RSIL, at Rs one lakh crore.

Reliance has been developing and fostering a vibrant digital led-financial services platform through various digital applications. JFSL plans to launch a consumer and merchant lending business based on proprietary data analytics to complement and supplement the traditional credit bureau-based underwriting.

In a recent note, Macquarie said that after the demerger Jio Financial Services (JFS) could be the fifth-largest financial services company in terms of networth. “JFS can be a real threat to fintech business models as well as NBFCs, in our view. JFS not only can offer attractive rates in merchant lending and digital unsecured lending markets, but also be reasonably competitive in the secured lending market eventually, in our view,” Macquarie said in the note.

On July 8, RSIL’s board of directors approved the appointment of Hitesh Kumar Sethia as its Managing Director and Chief Executive Officer for a period of three years, subject to regulatory approvals.

Apart from Sethia, RSIL s board approved the appointments of former finance secretary Rajiv Mehrishi, former head of Punjab National Bank Sunil Mehta and chartered accountant Bimal Manu Tanna as additional directors for five years up to July 6, 2028, subject to the approval from the RBI. They will be designated as independent directors.

The board has also recommended the appointment of Mukesh Ambani’s daughter, Isha Ambani, and Anshuman Thakur as non-executive directors.

Sethia was involved with setting up and scaling operations as a key member of the set-up team for lClCl Bank Canada, and as the first employee of lClCl Bank in Germany. He also held senior positions and country head positions for the IClCl Bank’s operations in the UK and Hong Kong. In his last role at the bank, he was Head of Transaction Banking based in Mumbai.

The company appointed former ICICI Bank Chairman K V Kamath as Non-executive Chairman last year.